APPENDICES 417 Appendix I Chairman of the Supervisory Board’s report 418
Appendix III Statement of the person responsible for the Annual Report (Document de Référence) 434
Appendix X Commission Regulation of April 29, 2004 Correspondence table 546
as well as in Article 222-3 of the AMF General Regulation (Règlement Général de l’AMF) (please refer to the table on page 548 of this Annual Report which indicates the relevant sections of this Document de Référence corresponding to the various components required under the terms of Article 222-3 of the AMF General Regulation), (ii) all the matters required to be covered in the Management Board’s Report to the AXA’s Shareholders’ Meeting to be held on April 29, 2010, established pursuant to the Articles L.225-100 and L.225-100-2 of the French Commercial Code (Code de commerce) (the relevant sections of this Document de Référence corresponding to these compulsory matters have been approved by AXA’s Management Board and are presented in the table on page 545 of this Annual Report) and
“Euronext Paris”. The Company’s American Depositary Shares and American Depositary Receipts are referred to in this Annual
March 26, 2010. AXA plans to fi le its Form 15 to deregister with the SEC on March 26, 2010 and its deregistration with the SEC is expected to become effective within 90 days thereafter.
This Annual Report includes AXA’s consolidated fi nancial statements for the years ended December 31, 2009, 2008 and 2007. AXA’s consolidated fi nancial statements, including the notes thereto, are included in Part 4 – “Consolidated Financial
IAS 39. In addition, the adoption of the new IFRS 9 standard published by the IASB in November 2009 has not been yet formally submitted to the European Union. However, the Group would not have used the earlier adoption option of the standard in 2009. As a consequence, AXA Group’s consolidated fi nancial statements also comply with IFRS as issued by the International
Euro (“Euro”, “euro” or “€”). Unless otherwise stated, all amounts in this Annual Report are expressed in Euro. The currency of the United States will be referred to as “U.S. dollars” or “USD”
or “U.S.$” or “$”. For historical exchange rate information, please refer to Part 1 – “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”,
Part 1 – “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition” of this Annual
1 THE AXA GROUP Our global business operations, recent fi nancial performance and fi nancial condition 1.1 SELECTED CONSOLIDATED FINANCIAL DATA 4
Table of principal subsidiaries with Group share of interests and voting rights percentages 10
Additional factors which may affect AXA’s business 33 1.3 ACTIVITY REPORT 41
The consolidated fi nancial statements are prepared in compliance with IFRS standards and IFRIC interpretations that are defi nitive and effective as at December 31, 2009, as adopted by the
Group does not use the “carve out” option to avoid applying all the hedge accounting principles required by IAS 39. In addition, the adoption of the new IFRS 9 standard published by the
(b) Includes investment income net of investment management costs, impairment, net realized investment gains and losses and net unrealized investment gains and losses on assets with fi nancial risk borne by the policyholders and on assets designated as at fair value through profi t & loss, including assets backing the UK with-profi ts business.
(e) An annual dividend is generally paid each year in respect of the prior year after the Shareholders’ Meeting (customarily held in April or May) and before September of that year. Dividends are presented in this table in the year to which they relate and not in the year in which they are declared and paid. A dividend of €0.55 per share will be proposed at AXA’s Shareholders’ Meeting that will be held on April 29, 2010. The dividend will be payable on May 6, 2010 with an ex-dividend date of May 3, 2010.
(for €1) (for €1) (for €1) (for €1) (for €1) (for €1)
York, which we refer to in this Annual Report as the “Euro Noon
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.352 per share for fi scal year 2005.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.424 per share for fi scal year 2006.
(d) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.48 per share for fi scal year 2007.
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.16 per share for fi scal year 2008.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 29, 2010. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. € 0.22 per share for fi scal year 2009.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on undated debt, and, in each of the past several years, with the exception of 2009, AXA has paid aggregate dividends in a general range of 40% to 50% of this amount. While management currently intends to maintain this dividend policy over the long-term, the dividend proposed by management in any particular year depends on a variety of factors (including the Company’s performance, prevailing fi nancial market conditions and the general economic environment)
AXA is a French “Société Anonyme à Directoire et Conseil de Surveillance” (a form of limited liability company with a
Management Board and a Supervisory Board) existing under the laws of France. The Company’s registered offi ce is located at 25 avenue Matignon, 75008 Paris, France and its telephone number is +33 (0) 1 40 75 57 00. For information on the principal trading markets for AXA’s ordinary shares, ADSs and ADR s, please see Part 2 – “Corporate governance, executive compensation, major shareholders and related matters”, Section 2.5 “The
Equitable Life. The Equitable Companies Incorporated, based in the United States, changed its name in 1999 to AXA Financial, Inc.
FINAXA owned the “AXA” brand which, upon consummation of the merger, became the property of AXA. This merger resulted in a simplifi cation of AXA’s shareholding structure and an increase in the proportion of its publicly traded shares.
In 2007, AXA (i) acquired a 90% stake in Kyobo Auto (now called
In 2008, AXA (i) completed the acquisition of 36.7% of the share capital of RESO, Russia’s 2nd largest P&C insurer (June 2008),
(ii) completed the acquisition of Seguros ING (subsequently renamed AXA Seguros, SA de Compañia de Valores), the 3rd largest Mexican insurer with leading positions in key markets such as Motor or Health and also active on the Life market
(July 2008), and (iii) acquired OYAK’s 50% share in AXA OYAK,
In 2009, AXA announced (i) the strengthening of its position in
Central and Eastern Europe with the acquisition of minority interests held by the European Bank for Reconstruction and Development
APH) Asian businesses while an Australian partner would acquire 100% of AXA APH’s Australia and New Zealand businesses.
For a description of signifi cant acquisitions and disposals undertaken by AXA please see Part 1 – “The AXA Group: Our global business operations, recent fi nancial performance and fi nancial condition”, Section 1.3 “Activity Report” – “Operating highlights” and Note 5 “Goodwill” to the consolidated fi nancial statements included under Part 4 – “Consolidated fi nancial statements” of this Annual Report.
December 31, 2009 of €1,015.1 billion. Based on available information at December 31, 2008 and taking into account companies engaged in the asset management business, notably banks, AXA was the world’s 5th largest asset manager (1).
Middle East, Africa, and Latin America. AXA has fi ve operating business segments: Life & Savings, Property & Casualty,
International Insurance, Asset Management, and Banking. In addition, various holding companies within the AXA Group conduct certain non-operating activities.
The diversifi cation of the AXA Group – both by geography and by business – is designed to mutualize the different types of risks to which the Group is exposed. For example, mortality risks are partly offset by longevity risks, and Life & Savings risks by
(c) Holding company that owns AXA Equitable Life Insurance Company, Mony Companies, AXA Financial Bermuda Ltd.
Financial Services AXA Bank Europe SA Magyarországi Fióktelepe (j) 100% 100%
(k) Holding company that owns AXA Assicurazioni SpA and AXA Interlife SpA.
(l) Company owned by AXA Mediterranean Holding, SA (Spain). Company that owns Quadrifoglio Vita SpA.
(n) Holding company that owns AXA Ireland Limited and AXA Insurance Limited.
(o) Holding company that owns AXA Versicherung AG, AXA Lebensversicherung AG, AXA ART Versicherung AG and AXA Krankenvezsicherung AG.
(q) Holding company that owns AXA Assurance Luxembourg and AXA Assurance Vie Luxembourg.
(v) Holding company that owns directly AXA Sun Life Holdings plc, Guardian Royal Exchange plc and Bluefi n Group Limited (formerly AXA Advisory Holdings Limited) and indirectly AXA Sun Life plc, Winterthur UK Financial Services Group Limited, AXA Insurance p lc, Bluefi n Advisory Services Limited and AXA PPP healthcare Limited .
(z) Holding company that owns AXA Life Insurance Singapore Pte Ltd. Wholly owned by AXA Asia Pacifi c Holdings Limited.
At March 16, 2010, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
AXA’s social, societal, environmental and governance performances are rated by a number of specialists, including investors, brokers and rating agencies that focus specifi cally on the socially responsible investment (SRI) market. AXA is ranked above the average for its industry and is included in the three major global ethical indices: ■ DJSI STOXX and DJSI World (based on SAM research); ■ FTSE4GOOD (based on EIRIS (1) research); ■ ASPI Eurozone (based on Vigeo research).
(1) Defi nition of Vigeo ratings: --: least advanced; - = companies in the sector; -: companies that fall below the average for their sector; =: companies that are within the average for their sector; +: active companies; ++: the most committed companies in the sector.
(a) Annual Premium Equivalent (APE): Measure of new business volume which represents 100% of regular premiums + 10% of single premiums, in line with EEV methodology. APE is group share.
(d) Adjusted earnings represent the net income (Group share) before the impact of: (i) exceptional operations (primarily change in scope and discontinued operations); (ii) integration and restructuring costs related to material newly acquired companies; (iii) goodwill and other related intangibles; and
(a) Since 2008, the net income per share takes into account interest charges and foreign exchange impacts related to undated debts classifi ed in shareholders’ equity, with retroactive impact on prior years.
Assets backing contracts with fi nancial risk borne by policyholders (unit-linked) 155,457 131,990 182,827
(b) As described in Note 1.10 of “Part 4 – consolidated fi nancial statements ”, the contribution of discontinued operations is stated in a separate line of the income statement.
Note 20 “Revenues by segment and net revenues from banking activities” included in “Part 4 – consolidated fi nancial statements ”
Gross revenues Years ended December 31, Gross insurance of which Australia and New Zealand (c) 1,532 3% 1,719 3% 1,384 2% 8,694
Fees and charges relating to investment contracts with no participating feature 547 662 740
The nature and level of competition vary among the countries in which AXA operates for all the types of individual and group
The table below presents the main Life & Savings insurance markets in which AXA operates ranked by worldwide gross revenues in 2008, along with AXA’s estimated ranking (by market share):
(a) Source: Swiss Re, Sigma report 2009 “World Insurance in 2008”.
(g) Considering all companies part of the Group of Public Insurers independently.
For additional information on markets, see section “Insurance and Asset Management Markets” included in “Part 1.3 – Activity
Withdrawal Benefi t (GMWB) ; ■ Pure savings products, which provide investment return to policyholders, while AXA bears the investment risk; ■ Universal savings products, which is the same as universal life but has no signifi cant death benefi t component. See below for a description of universal life products.
(unit-linked), in which the investment risk (and reward) is generally borne by the policyholder while the issuing company earns fee income from managing the underlying assets.
AXA also aims to reuse across markets successful products and experiences developed for individual country markets.
Of which: Contracts with fi nancial risk borne by policyholders (unit-linked) 13,167 24% 18,435 33% 21,529 37% 159,774
(c) The assets and liabilities of the Australian and New Zealand operations (including local holdings) are classifi ed as held for sale separately from other assets and liabilities in the consolidated balance sheet, but are included in the following table as gross insurance liabilities for € 8.7 million.
Non-exclusive channels include brokers, independent fi nancial advisors, aligned distributors or wholesale distributors and partnerships.
Salaried sales forces are salespeople employed by a single insurance company (or an affi liated company) to sell the company’s products exclusively.
Distribution partnerships are generally structured as sales agreements between an insurance company and another
believes that the diversifi cation of its distribution channels through the development of new channels improves opportunities for increased penetration and more frequent contact with AXA’s target customer base.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2009 and 2008, is presented below: BASED ON GROSS REVENUES IN 2009
For most Life & Savings products, fees and revenues are accrued over time, while costs to the issuing company in the fi rst year are higher than costs in subsequent years due to fi rst year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate”, plays an important role in profi tability. The majority of individual Life
& Savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual Life & Savings products issued by AXA have front-end charges to the policyholder (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges (charges assessed in the case of early surrender). Both front-end charges and surrender charges are intended to offset a portion of the acquisition costs.
Total surrenders and lapses for 2009, and the ratio of surrenders and lapses to gross surrenderable insurance reserves at the beginning of the periods indicated are presented below: SURRENDERS AND LAPSES
(c) In 2007, Mediterranean & Latin American Region consisted of Spain, Italy, Portugal, Morocco, Greece and Turkey. In 2008, it also included Mexico.
AXA’s Property & Casualty Segment offers a broad range of products including motor, household property and general liability insurance for both personal and commercial customers, targeting mainly small to medium sized companies. In certain countries, Health products are classifi ed as Property & Casualty products (1). The Property & Casualty segment accounted for €26.2 billion, or 29% of AXA’s consolidated gross revenues for the year ended December 31, 2009 (2008: €26.0 billion or 29%).
The table below summarizes AXA’s Property & Casualty consolidated gross revenues (after inter-segment eliminations)
and gross insurance liabilities by geographic region for the periods and at the indicated dates.
(1) Some countries classify health activity in the Property & Casualty segment, while other countries classify it in the Life & Savings segment. AXA chooses to follow local classifi cation.
Gross revenues - Years ended December 31, Gross insurance liabilities at December 31,
(a) In 2007, Mediterranean and Latin American Region consisted of Spain, Italy and Portugal, Greece, Morocco and Turkey. In 2008, it also included Mexico and the Gulf Region.
Central and Eastern Europe as well as in Canada, Asia (notably
(a) Source: Swiss Re, Sigma report 2009 “World insurance in 2008”.
(d) Gulf Region: includes Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Oman.
(f) Considering all companies of the Group of Public Insurers independently.
AXA’s Property & Casualty insurance operations offer a broad range of products including motor, household, property and general liability insurance for both personal and commercial customers (targeting mainly small to medium sized companies) and, in certain countries, health products. In addition, AXA offers engineering services to support prevention policies in companies.
The tables below sets forth gross revenues and gross insurance liabilities by major product for the periods and as at the dates indicated: PROPERTY & CASUALTY SEGMENT
AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, brokers, salaried sales forces, direct sales and banks and other partnerships, including car dealers.
AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the
AXA’s Property & Casualty operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks, in order to protect Group Solvency and reduce volatility on key fi nancial indicators. A growing portion of AXA’s Property & Casualty insurance exposures are ceded internally to AXA Cessions, which organizes external reinsurance programs. total gross premiums ceded by AXA’s Property
& Casualty operations to third party reinsurers in 2009 amounted to €1,356 million (2008: €1,343 million).
AXA Corporate Solutions Assurance include coverage to large national and international corporations mainly relating to property damage, third party liability, marine, aviation and transport, construction risk, fi nancial risk, and directors and offi cer liability. In addition, AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty runoff portfolios including risks underwritten by Colisée Re (ex AXA
RE) for all periods prior to and including 2005 when Colisée Re’s
AXA Cessions is an intra-group reinsurance company. Most of the companies within the AXA Group cede internally some of their major claims and catastrophic exposure to AXA Cessions which analyzes structures and places reinsurance programs for these risks with third-party reinsurers. It also provides advice in risk management and purchase of reinsurance cover to AXA
AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios. This entity manages the internal run-off portfolios of
AXA UK, AXA Germany and AXA Belgium, as well as a number of stand-alone run-off companies in the “Other International
AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in run-off, notably managing a book of reinsurance contracts of variable annuities.
The table below summarizes AXA’s consolidated gross revenues and gross insurance liabilities (gross of reinsurance) for the International
AXA Corporate Solutions Life Reinsurance 71 2% 75 3% 82 2% 489
AXA Corporate Solutions Assurance. The competitors in the global risks market are acting at a worldwide level with multinational clients placing their risks far beyond their countries of origin via international programs or in key global marketplaces.
AXA Corporate Solutions Assurance provides global insurance programs to large international corporations that require coverage for all their worldwide locations. AXA Corporate Solutions
Also, in 2009, approximately €981 million of premiums were placed externally by AXA Cessions on behalf of AXA’s insurance subsidiaries (2008 €818 million), mainly for Property & Casualty business but also increasingly in Life & Savings.
AXA has asset management specialists’ teams in each of its major markets: Western Europe, the United States and the Asia-
Assets backing contracts with fi nancial risk borne by policyholders 74,588 60,955 95,225
AllianceBernstein provides diversifi ed Asset Management and related services globally to a broad range of clients including: ■ D iversifi ed investment management services through separately managed accounts, hedge funds, mutual funds, and other investment vehicles to private clients (such as high net worth individuals, trusts and estates and charitable foundations) ; ■ M anagement of mutual funds sponsored by AllianceBernstein, its subsidiaries and affi liates, for individual investors; ■ M anagement of investments on behalf of institutional investors; and
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset Management business. AXA IM provides its clients with a wide range of global products and expertise via mutual funds and dedicated portfolios. AXA IM’s clients include
AXA Bank Europe is a subsidiary of AXA Holdings Belgium. It offers a complete range of banking products and services: daily banking, loans, short-term savings for retail customers. AXA
Bank products and services in Belgium are mainly distributed by a network of 910 tied but independent bank agents. AXA Bank
Europe is ranked sixth on the Belgian banking market where the four major banks represent approximately 85% of the market.
France clients through its distribution network. AXA Banque also manages direct clients through internet banking relationships.
The commercial activity of AXA Bank in Czech Republic was launched in February 2010. The bank’s product offer consists of a savings account to which a loyalty bonus may be added. This product is distributed by existing AXA sales networks and over the internet through a new internet site that offers customers a unique entry point to AXA’s banking and insurance products in the Czech Republic.
The commercial activity of AXA Bank in Switzerland was launched in January 2009 as a branch of AXA Bank Europe. The bank’s product offer consists of term account, deposit account and pension savings accounts. This product is distributed through existing AXA sales networks, tied agents and a direct channel.
Offi cer of AXA Financial (United States) and member of AXA’s
Management Board, will assume Group-wide responsibility on an international level for the Group’s Life & Savings and Health businesses.
For information relating to certain additional matters that may affect AXA’s business, see the “Risk factors” Section included in
Part 3, and Part 4 “c onsolidated fi nancial s tatements” included in this Annual Report.
Paris, France, this supervision is based to a signifi cant extent on European Union (“EU”) directives, discussed more fully below, and on the French regulatory system. The AXA Group’s principal regulators in France are the Autorité des marchés financiers (“AMF”), which is the French fi nancial market regulator, and the Autorité de Contrôle des Assurances et des Mutuelles
While many of these initiatives revolve around common themes and attempts are being made to coordinate and harmonize these reforms internationally, management believes that the multitude of reform initiatives under consideration may ultimately result in the enactment of a series of technically incoherent and inconsistent measures across the various jurisdictions where the Group does business, with broad potential implications for the Group and its business. Management believes that these reforms are likely to revolve around the following areas and themes, among others: ■ Potential r eforms to r egulatory s tructures and s chemes
• Various proposals designed to optimize regulatory structures and coordination with respect to supervision of the largest
Insurance and Occupational Pensions Authority and establishing a European Systemic Risk Board,
• the move towards the establishment of a systemic regulator in the US, together with increased capital, leverage and liquidity requirements on those fi nancial institutions deemed to be systemically signifi cant by virtue of a combination of their size, leverage and interconnectedness.
• Move towards a federal level “Offi ce of National Insurance”
and/or an optional or mandatory Federal charter for insurance companies in the US.
• Increased responsibilities of Boards and Board Committees to specifi cally identify and address fi nancial incentives that may lead to “excessive” risk taking by an institution with broad potential implications for fi duciary duties and liabilities of directors.
• Increased restrictions on, and new disclosure requirements with respect to, off-balance sheet arrangements.
• Regulation of ratings agencies and redefi nition of the relationship (including compensation relationship) between agencies and issuers.
• Regulation of hedge funds, mortgage brokers, non-bank lenders and other participants in the “shadow” fi nancial systems.
Management believes that 2010 is likely to see signifi cant additional regulation in some or all of these areas, among others, and that the massive injection of government funds into a number of major fi nancial institutions during 2008 and 2009 has broad potential implications, the full extent of which is not clear yet, for those institutions (and for the fi nancial services sector more generally) in terms of the extent and nature of continuing government infl uence and control. The Group will continue to monitor the evolution of these initiatives and their potential impact on our business closely over the coming months.
Financial institutions such as AXA, that have not received any form of government support or backing, fi nd themselves increasingly competing directly against government supported or controlled fi nancial institutions in many of their principal markets. This is an unprecedented situation with broad potential implications for the competitive landscape going forward.
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. As at December 31, 2009 the
April 29, 2010). The Company’s year-end 2009 solvency margin is signifi cantly higher than its consolidated solvency margin at
December 31, 2008 (127%) but is lower than the consolidated solvency margin ratios published by certain of the Company’s principal competitors.
Ratings agencies also take into account the Company’s consolidated solvency margin and the regulatory capital position of its insurance subsidiaries in assessing its fi nancial strength and credit ratings. Ratings agencies may make changes to their internal models from time to time that may increase or decrease the amount of capital the Company must hold in order to maintain its current ratings. To the extent that the Company regulatory capital levels are deemed insuffi cient to meet rating agency criteria, its fi nancial strength and credit ratings may be downgraded.
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or, in extreme cases, putting a company into rehabilitation or insolvency proceedings. A failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements may also result in the Company having to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position. For further information, please see Section 3.1
“Risk Factors – Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, result of operations and fi nancial position”.
UK and other European jurisdictions and are founded on the “home country control” principle, according to which the ongoing regulation of insurance companies, including their nonhome country insurance operations (whether direct or through branches), is the responsibility of the home country insurance regulatory authority. The home country insurance regulator monitors compliance with applicable regulations, including regulations governing solvency, actuarial reserves, investment of assets, statutory accounting principles, internal governance and periodic reporting requirements. In France, ACAM monitors compliance with applicable regulations, the insurer’s capital base and actuarial reserves, as well as the assets of the insurer that support such reserves. For example, in 2009, ACAM undertook a review of Variable Annuity products sold in France as well as the
French Variable Annuity products with French legal requirements and certain aspects of AXA France’s statutory reserving methodology for its Variable Annuity business. Discussions with
AXA Group insurance subsidiaries in different EU jurisdictions ; ■ A 2002 EU directive, implemented into French law in 2005, concerns the regulation and supervision of fi nancial conglomerates and provides for the assessment of fi nancial conglomerates capital requirements at the consolidated Group level, the supervision of risk concentration and intra-group transactions, and the prevention of double-leveraging of the capital of a parent holding company, i.e. once at the holding parent level and a second time at the subsidiary level (“double gearing”). Although the AXA Group is not currently deemed a fi nancial conglomerate
Belgian insurance regulator and it is possible that other European subsidiaries of the AXA Group may also be deemed fi nancial conglomerates by local regulators thereby subjecting them to the requirements of this law; ■ The European Commission ( “Commission”), jointly with Member
project) that has updated the existing life, non-life, reinsurance and insurance groups directives. Its principal objective is to establish a solvency system that is better matched to the true risks of insurers, enabling supervisors to protect policyholders’
European Parliament and the European Council agreed on a compromise text for the Solvency II Framework Directive that was adopted by the European Parliament in April. The fi nal text of the Solvency II Directive regarding the “taking-up and pursuit of the business of insurance and reinsurance” was adopted by the European Council in November 2009 and includes rules regarding, among other things, valuations, own funds, minimum capital requirements and investments. Following adoption of the Level 1 Directive, the Commission is preparing the said “Level 2” Directive that shall specify the implementing measures of the Directive, based on the technical opinion s of the Committee of supervisors (CEIOPS). These opinion s of
Member States is expected in the 2012-2013 time frame; ■ Switzerland has adopted a new directive concerning solvency margin requirements for insurers and insurance groups pursuant to the Insurance Supervision Act adopted in 2005 and associated regulations issued in 2008 by the
Solvency Test” is designed on the basis of on a risk-based capital approach and is legally applicable since 2008. The capital requirements resulting from the Swiss Solvency Test will be applicable from January 1, 2011.
While a criminal indictment of a corporate entity may not pose material fi nancial risk, it has broad potential implications for a regulated fi nancial institution like AXA both from a reputation point of view and from a regulatory perspective because a criminal conviction can have potentially far- reaching negative implications for other Group companies engaged in regulated businesses around the world including for their ability to obtain and/or maintain licenses to engage in certain types of regulated business activities; ■ A number of countries in Europe are currently considering legislation that would authorize class action litigation and/or other forms of redress for consumers. For example, in the UK, the Finance Services Bill, which is currently at the committee stage in the House of Lords, seeks to introduce a new ability for the regulator to require authorised fi rms to establish and operate consumer redress schemes and also to introduce collective actions into the UK legal system. Under the proposed legislation, the regulator could, if there appeared to have been a widespread or regular failure by a fi rm which caused loss or may cause loss to a consumer, require the fi rm to establish a consumer redress scheme. It is currently proposed that the collective actions would operate on “opt in” or “opt out”
companies in their jurisdiction by imposing prohibitions (or strengthening existing restrictions) on intra-group transactions between local subsidiaries and foreign parent (or other affi liated) companies that may be in fi nancial diffi culty.
In the United States, regulation of the insurance business remains principally at the state level, with AXA’s insurance operations being subject to regulation and supervision by various states and territories. Within the US, the methods of regulation vary between the different states but generally has its source in statutes that delegate regulatory and supervisory powers to a state insurance commissioner. While the extent of regulation varies by jurisdiction, most jurisdictions have laws and regulations governing approval of policy forms and rates, sales practices and business conduct, the standards of solvency that must be met and maintained (including risk-based capital measurements), the establishment and levels of reserves, the licensing of insurers and their agents, sales practices by agents, the nature of and limitations on permitted investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefi t of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, and the form and content of reports of fi nancial condition and results of operations to be fi led.
AXA Equitable Life Insurance Company (“AXA Equitable”), and certain life insurance policies and annuity contracts offered by them are subject to regulation under the Federal securities laws administered by the SEC and under certain state securities laws. The SEC conducts regular examinations of the operations of these companies, and from time to time, makes requests for information from them. The SEC, other governmental and regulatory authorities, including state insurance and securities regulators, and the Financial Institutions Regulatory Authority
(“FINRA”) may institute administrative or judicial proceedings which may result in censures, fi nes, the issuance of cease-anddesist orders, the suspension or expulsion of a broker-dealer or member, its offi cers or employees or other similar sanctions.
Over time, AXA Financial’s broker-dealer subsidiaries and its other subsidiaries have provided and, in certain cases continue to provide, information and documents to the SEC, FINRA, state attorneys general and other regulators on a wide range of issues.
(statutory capital and surplus plus asset valuation allowance and other adjustments) that a life insurance company should have for regulatory purposes and that takes into account the risk characteristics of the company’s investments and products. AXA
Representative Barney Frank have recently each proposed similar legislation that, if enacted, would signifi cantly impact the current US fi nancial regulatory landscape. While the legislative proposals differ in a number of respects, in general they would, in addition to enhancing consumer protection for various types of fi nancial services and increasing regulation of broker-dealers and derivative transactions, provide for an inter-agency oversight body with power to designate any “fi nancial company” (potentially including foreign companies such as AXA) as systemically signifi cant based on certain enumerated criteria. Such institutions would in turn be subject to heightened prudential standards, including with respect to capital requirements, leverage, liquidity and risk management and may become subject to regulation as bank holding companies. These legislative and regulatory proposals may also result (1) in stricter regulation of consumer fi nancial products through the creation of a separate agency
(4) increased regulation of compensation arrangements for employees of fi nancial institutions and (5) the establishment of a federal insurance offi ce.
Although the US federal government generally does not directly regulate the insurance business, the fi nancial reform bill recently passed by the US House of Representatives would create a Federal
Services Oversight Council that it designate an insurer, including its affi liates, as an entity subject to stricter standards; (5) assist the US Secretary of the Treasury in administering the Terrorism
January 1, 2010, assuming retroactive application withstands any constitutional challenge. Elimination of or reductions in the estate tax would likely have an adverse impact on life insurance sales since a signifi cant portion of our life insurance sales are made in conjunction with estate planning. Conversely, a continuation or an increase of the estate tax would likely benefi t sales and persistency.
The tax advantages of cash value life insurance and annuity products would favorably increase in the event of higher income and capital gains tax rates but would be reduced by lower tax rates.
Book includes proposals which if enacted, would affect the taxation of life insurance companies and certain life insurance products. In particular, the proposals would change the method used to determine the amount of dividend income received by a life insurance company on assets held in separate accounts established to support variable life insurance and Variable
Other Proposals. The US Congress may also consider proposals for, among other things, the comprehensive overhaul of the
Federal tax law and/or tax incentives targeted particularly to lower and middle income taxpayers. For example, there may be renewed interest in tax reform options, which could present sweeping changes to many longstanding tax rules.
The other jurisdictions in which AXA operates, including those in the Asia-Pacifi c Region, also have comprehensive regulatory regimes with which AXA must comply. In general, insurance laws and regulations grant supervisory authorities broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations or to revoke an insurer’s license to operate. Consequently, AXA’s insurance subsidiaries operating in the Asia-Pacifi c Region could be subject to regulatory orders limiting, restricting or terminating their regulated business activities in the event they fail to meet local regulatory requirements. In addition to licensing requirements, AXA’s insurance operations in these jurisdictions are also generally regulated with respect to currency, policy terms and language, amount and types of security deposits, amount and type of reserves, amount and type of local investment and the share of profi ts to be paid to policyholders on participating policies. In certain jurisdictions, regulations governing constitution of technical reserves and similar regulations may prevent payment of dividends to shareholders and/or repatriation of assets.
As in other regions of the world, regulators in the Asia-Pacifi c
AXA Japan reviewed several hundred thousand life insurance payments over the prior 5 years to determine whether benefi ts had been paid correctly. The investigation uncovered a limited number of incidents, which have since been fully addressed, and the FSA decided not to pursue any administrative action against AXA Japan. In addition, in the fourth quarter of 2008 the FSA launched a formal investigation into the circumstances surrounding the collapse of an independent agent that was a distributor of AXA Life Japan products. The agent is alleged to have engaged in certain fraudulent and illegal sales practices over a period of several years and the FSA requested that AXA Life submit a detailed report describing its relationship with the agent, whether AXA Japan and its personnel had any knowledge of the agent’s sales practices and proposed improvements to AXA Life
Japan’s internal controls and procedures to more closely monitor and quickly detect questionable sales practices by independent agents that distribute its products. This investigation, with which
AXA Japan fully cooperated, has now been concluded, and is periodically monitored. In 2008, the Government of Japan also enacted a new Insurance Law which is expected to become effective in 2010. The main intent of the law is to further protect policyholders’ interest and to increase transparency for the policyholders. AXA Japan is preparing for the introduction of the law and developing means to minimize the potential adverse impact on its business. The Japanese solvency regime is also being revised. The local supervisor (FSA) released a draft of the revised solvency rules in late 2009. The revision is intended to be part of a roadmap to an economic solvency margin and the new solvency margin ratio is to be published by insurers from the fi scal year ending March 2011 and will become effective from
Each of AllianceBernstein’s US mutual funds is registered with the SEC under the US Investment Company Act of 1940 (the
Group insurance companies (and other types of transactions between these companies), are subject to various insurance laws and regulations in the various jurisdictions where these insurance company clients are domiciled. These regulations generally require that the terms of transactions between the investment manager and its client be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to unaffi liated clients for similar services or, in certain cases, which include ancillary service agreements, based on cost reimbursement. In addition, the US Congress is currently considering legislation that could impact the activities of these entities, particularly broker-dealers who might be required to owe the same fi duciary duty to their clients as registered investment advisors.
independence requirements (including prohibitions on auditors furnishing certain types of non-audit services), (5) numerous corporate governance requirements (including independence requirements for Audit Committee members), (6) certifi cation of certain public reports by AXA’s Chief Executive Offi cer and Chief
Standards Board (IASB). Note 1.2 to the Company’s consolidated fi nancial statements for the year ended December 31, 2009 included in Part 4 of this Annual Report summarizes the signifi cant amendments and interpretations of the Standards effective in 2009. There are continuing discussions at the IASB concerning possible modifi cations to the Standards and certain of these modifi cations may have potentially signifi cant impacts on insurers and other fi nancial institutions, including AXA, that prepare their consolidated accounts in accordance with the Standards. These modifi cations include, among others, the following: ■ Financial assets and liabilities held by the AXA Group are recognised and measured under IAS 39 which is currently the subject of major potential amendments. Mandatory adoption dates range from 2013 to 2014. Optional adoption by issuers may be applicable in 2010 (depending on endorsement by the
EU). These amendments, which relate primarily to classifi cation of fi nancial assets and liabilities, impairment and hedge accounting principles, may have potentially signifi cant impacts on the Company’s future fi nancial statement presentation, shareholders equity and earnings and may also affect prior year comparatives depending on the adoption date; ■ Insurance contracts - Phase II (IFRS 4 amendment) and
II which amendments may signifi cantly affect policyholders liabilities and related assets such as Deferred Acquisition
European takeover directive, implemented into French law in 2006, provides a more uniform takeover regime within the EU, and the European directive relating to cross-border mergers, which was implemented into French law in 2008, considerably simplifi es the regulatory framework applicable to these mergers.
In 2009, unit-linked contracts represented 13% of premiums, as investors favored general account contracts (87%). In this context, AXA overperformed the market (+16%), and ranked 3rd.
The market growth in Health was +8% (vs. +6% for AXA) and
United States (2). 2009 presented a diffi cult sales environment for the Life insurance and Annuity industry: ■ I n the Life insurance market, total sales were down 20% for the period as compared to last year. Industry Variable Life product sales declined by 55% as a result of uncertain equity markets.
Industry universal life sales declined by 27%, partly attributable to price increases across the industry. Whole Life insurance sales increased by 1% and term insurance sales decreased by 2%; ■ I n the Annuity market, total sales declined by 8%. Variable
In Life, AXA ranked 13th with a 2.6% market share. In Variable
than 2008, with market share (5) up to 8.4% (7.3% in 2008). The strong performance has been driven by further development of the AXA Protection Account products and new distribution agreements for SunLife Direct. The UK Wealth management market decreased by 34% (5) mainly as a result of the diffi cult economic conditions. Despite these, AXA’s Wealth Management
Fund Supermarkets and Wrap platforms continued to attract advisers and investors alike, and the AXA Distribution Services
Wrap platform, Elevate, was starting to see encouraging growth in volumes after being successfully introduced to the UK platform market earlier in 2009. The UK Corporate Pensions business decreased by 16% (5) as pay and recruitment freezes limited opportunities to drive up volumes from existing schemes. AXA’s volumes were broadly in line with the market trend (-15%) (3).
Japan. The Life insurance market experienced a decline of 4.7% in terms of premiums (6) due to lower Variable Annuity sales following turbulent market conditions. Bancassurance sales continued to suffer as several major Variable Annuity players exited the market due to insuffi cient pricing. Term products with tax deductibility also showed the same declining trend as demand notably from small and medium entreprises was signifi cantly impacted by the economic slowdown. Medical sales remained stable and competition intensifi ed with entry of both life & nonlife insurers in this market. AXA had a market share of 2.7% and ranked 8th based on premiums (7th in Medical business) (7).
Germany (8). The Life & Savings market increased by 4.8% in 2009 (9) with a 45% increase in single premiums. Short-term and medium-term investment products, which compete directly with banking products, continued to grow strongly in 2009 (+117%
for single premiums contracts) (10). The core Retirement products declined by 21% in terms of regular premiums (10). In the “Riester”
business, the regular premiums declined by 50% due to the exceptional fi scal incentive in 2008 (10). German Private Health insurance market grew by 4% (9) . In 2008, AXA ranked 6th in the
Switzerland. The Life insurance market was under pressure and negatively impacted by the effects of the fi nancial and
(4) Annual Premium Equivalent (APE) is new regular premium plus 10% of single premiums.
AXA ranked 3rd in the market by revenues with a market share of
Life & Savings insurance market was down 5% (13). Greece. The market decreased by 6% (14) mainly due to lower production in bancassurance channel. Morocco. The market evolution in 2008 showed a 12% (15) growth mostly from bancassurance channel.
Portugal 8th, in Greece 9th, and in Morocco 5th. (Italy and Morocco as at December 2008, all other entities as at September 2009).
AXA ranked 6th for new annual premium and in-force annual premium (20).
The wealth management market in New Zealand only decreased by 5.9% (21) driven by a strong growth of KiwiSaver products.
Hong Kong. Hong Kong remained a very attractive Life insurance market with high savings ratios and a +2% continued growth despite the impact of the fi nancial crisis. The Life insurance market is relatively concentrated with the top 10 players accounting for about 80% market share (23). AXA ranked 4th in inforce business and increased its market share by 0.7% from 7.1% in 2008 to
(3) Source: FINMA (Swiss Financial Market Supervisory Authority, Market share 2008)
(8) Source: Italian Association of Insurance Companies: ANIA as of December 2009.
(9) Source: Istituto per la vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP) as of September 2009.
(14) Source: Hellenic Association of Insurance Companies as of Sept 2009.
Thailand. Life insurance market with a relatively low Life insurance penetration rate of 3% (1), continued to grow strongly by 26% (2) in terms of new business. AXA outperformed the market and ranked 6th (3) compared to 7th in 2008. Singapore market recorded a decrease in new business sales by 33% (4) in 2009 mainly due to a 50% (5) decrease in single premium products.
The pace of growth in the L ife insurance industry slowed down in 2009 with the total premium increasing only by 11% (8). AXA
Central and Eastern Europe. Due to the fi nancial market conditions, Life market decreased by 25% in Poland (with a -20% decrease in short Term products), by -13% in Hungary and increased by +2% in Czech Republic and in Slovakia.
AXA’s market share in the region increased by 0.5 pt to 2.9%.
Poland. In the Pension Funds market, AXA’s position improved; AXA ranked 1st in Slovakia, 2nd in Czech Republic and 5th in
France (11). In 2009, premiums grew by 1% compared to +2.5%
In the domestic market, Individual business has declined, while corporate revenues have held up. AXA remains 2nd in the
Ireland, AXA ranked 5th overall with a market share of 11% (14) or 2nd in its core market of Motor with a market share of 18% (14).
Germany (15). In 2009, market increased by 0.2%, impacted by the economic slowdown (16). Personal and Commercial Motor lines fell by 2% in the context of an intense price competition (16).
Belgium (19). The Property & Casualty market, negatively impacted by the economic slowdown, showed a slower growth of 2%
(2) Source: TLAA statistics report as at at December 31, 2009.
(3) Source: TLAA statistics report as at at December 31, 2009.
(14) Based on data from Irish Financial Regulator’s “Insurance Statistical Review”.
(19) Source: Assuralia (Belgian Professional Union of Insurance companies). Derived from the nine months ended September 30, 2009 fi gures.
In Spain, market decreased by 3% (2). Car sales were -18% below last year (3). In Mexico, market increased by 6% (4), excluding one large outsourcing insurance contract. In Turkey, despite
driven by the increase in premiums in Motor line. In Morocco, the market increased by 11% (8) driven by (i) an increase in number of cars, and (ii) Group compulsory health insurance. In the Gulf Region, the global fi nancial crisis had adversely affected expatriate population and UAE car sales.
In Italy, AXA ranked 7th, in Spain 2nd, in Mexico 2nd, in Turkey 1st, in Portugal 2nd, in Greece 9th, in Gulf Region 4th, and in Morocco 1st (9).
Asia. South Korea (10). The insurance market increased by 13%. However, the Motor market only grew by 0.2%, due to the economic slowdown and strong price competition. AXA
ranked 1st in the D irect Motor insurance market or 6th in the total
The insurance market grew by 5% driven by Motor and Medical.
in the Property & Casualty market with a market share of 4.4%.
The competitors in the global risks market are acting at a worldwide level with multinational clients placing their risks far beyond their countries of origin via international programs or in key global market places. In this market, AXA Corporate
March/April as banks were able to stabilize capital and liquidity conditions improved. While US and European economies had trouble fi nding their fl oor, emerging economies in Asia, notably
China, and in Latin America, such as Brazil, started to rebound after a sharp deceleration. By year-end 2009, most countries in the world had resumed growth, led by emerging countries. In the asset management market, AXA Investment Managers ranked 11th and AllianceBernstein 18th (16). On a combined basis, AXA
(5) Source: Turkish Association of Insurance Companies as of Sept 2009.
(11) Source: web site of General Insurance Association of Japan, Japanese Economy News Paper dated January 20, 2010.
(13) Source: ISM: Insurance Services Malaysia Bhd as of September 2009.
Various governments have striven to clean up the situation in their domestic banking systems and to support their economy. In the United States, the stimulus package that was fi nally adopted by Congress totaled $787 billion, which is equal to 5.5% of GDP.
Monetary policies generally remained very accommodating and the central banks introduced additional policies to revitalize money and corporate bond markets. In the US, the Fed kept the range of the Fed Funds at between 0 and 0.25% and announced several quantitative easing programs, the main ones being the monetization of Treasury debt ($300 billion) and Mortgage-
Backed Securities (up to $1,250 billion and $200 billion in Fannie
Asset-Backed Securities Loan Facility) program for fi nancing the purchase of newly issued Asset-Backed Securities. In Japan, the
Bank of Japan (BoJ) kept its main rate unchanged at 0.1% and supported the banking sector by underwriting subordinated debt securities, and launched a program for purchasing commercial paper. In Europe, the Bank of England (BoE) also followed the same trend by keeping its main rate at 0.5% and announced a program for purchasing high quality public and private sector assets for an initial amount of £75 billion. The European Central
Thus, the BoJ announced that it would stop buying up private debt securities, a measure it adopted in 2008 and that was scheduled to end in December. The ECB said that its last long-term refi nancing operations (12 months and 6 months, in December 2009 and
March 2010, respectively) would be the last of their kind, but that it would leave its shorter-term operations open.
Abundant liquidity continued to fl ood the markets, and the recovery of risky asset prices continued to hold over the year.
(market activities) and non-fi nancials (cost cutting more than revenue growth) and an expansion in multiples.
Over the year, the Dow Jones in New-York and the Nikkei in
Japan both increased by 19%. In the same trend, the CAC
40 and the FTSE in London both increased by 22%. The US’s leading S&P 500 index went up by 23%. The MSCI World Index increased by 27% and emerging indices (MSCI Emerging +78%)
Long-term yields on the government issues of developed economies staged a multi-step rebound over the course of 2009. Overall, the US 10-year T-bond ended the year at 3.84%, an increase of 158 bps compared to December 31, 2008 and the
tightened by 104 bps and moved from 177 bps to 74 bps, while the iTRAXX Crossover (Below Investment Grade) decreased by 596 bps to 432 bps. The CDX Main IG decreased from 99 bps to 86 bps between December 31, 2008 and December 31, 2009.
Euro (closing exchange rate moved from Yen 126.8 at the end of 2008 to Yen 131.3 at the end of 2009). The Pound Sterling gained 7% against the Euro (closing exchange rate moved from £0.958 at the end of 2008 to £0.888 at the end of 2009). The Swiss Franc gained 1% against the Euro (closing exchange rate moved from
On an average rate basis, the US Dollar gained 5% against the Euro (from $1.47 over 2008 to $1.39 over 2009), the Yen increased by 20% (from Yen 161.7 for the twelve months ending
AllianceBernstein units was completed at $18.3 per unit for a total price of $150 million pursuant to the fi nal installment of the put agreement exercised by the certain former shareholders of Sanford
December 2009 to fund deferred compensation plans which were previously granted through mutual funds. These 2009 restricted unit awards vest over four years.
On December 13, 2009, AXA announced that a revised joint offer, their best and fi nal, was communicated by AXA and AMP
would buy AXA’s shares in AXA APH for AU$ 6.9 billion in cash and AXA would acquire from AMP AXA APH’s Asian operations for AU$ 9.1 billion in cash. As a result, net cash consideration paid by AXA would be AU$ 2.2 billion (or €1.4 billion). Compared to the closing price of AXA APH share price on November 5, 2009, this offer provided a 53% premium and represented a 16%
(NAB), which was recommended by the AXA APH Committee of independent directors. Under terms publicly disclosed by NAB, the offer subject to AXA’s approval, made by NAB provided a 58% premium to AXA APH’s shareholders compared the closing price of AXA APH share price on November 5, 2009 and the impact for AXA would be comparable to those of the AXA/AMP
On February 6, 2008, AXA announced it had reached an agreement to acquire OYAK’s 50% share in AXA OYAK Holding
paid a purchase price of $525 million (€354 million) in cash for
with a 12.6% market share in the high-potential P&C Turkish insurance market. Mainly focused on non-life, especially motor and commercial property, the company experienced strong topline growth over the past years and is one of the most profi table players in the market. In L&S, on a market mainly driven by
benefi t from its know-how in underwriting, claims management, client segmentation, service and brand management. AXA
On March 19, 2008, AXA United Kingdom completed the purchase of 100% of the share capital of SBJ Group. The acquisition of SBJ will complement and enhance AXA’s United
On January 12, 2007 (closing date), AXA United Kingdom announced that it had reached an agreement with insurance brokers Stuart Alexander and Layton Blackham to acquire both businesses. AXA United Kingdom acquired both fi rms through its subsidiary Venture Preference Ltd (renamed Bluefi n
In connection with AllianceBernstein’s acquisition of the business of Sanford C. Bernstein, Inc. in 2000, AXA Financial, Inc.
entered into a purchase agreement under which certain former shareholders of Sanford C. Bernstein have the right to sell (“Put”)
to AXA Financial, subject to certain restrictions set forth in the agreement, limited partnership interests in AllianceBernstein LP
On March 17, 2007, AXA Holdings Belgium SA reached an agreement with ELLA Holdings SA and its main shareholder
On April 23, 2007 (closing date), AXA United Kingdom announced the acquisition of a leading independent commercial broker business, Smart & Cook. AXA United Kingdom bought the entire share capital of Smart & Cook Holdings Ltd through its subsidiary Venture Preference Ltd, (renamed Bluefi n Insurance
Group Ltd from December 31, 2008), which also houses recently acquired Stuart Alexander and Layton Blackham businesses, purchased in January 2007.
On July 5, 2007, AXA fi nalized defi nitive settlements with all claimants in litigations seeking nullity and avoidance
(Nichtigkeits- und Anfechtungsklagen) of the squeeze-out resolutions adopted by the General Meetings of AXA Konzern
Following registration of these squeeze-outs, further litigation with minority shareholders on valuation issues is expected in a compensation review procedure (Spruchverfahren) under
German law. The total investment to reach a 100% ownership in AXA Konzern, KVAG, AXA Lebensversicherung and Deutsche
On July 27, 2007, AXA and UkrSibbank, the Ukrainian banking subsidiary of BNP Paribas, announced that they reached an agreement to acquire 99% of the share capital of Vesko, Ukraine’s
6th largest P&C insurer. The transaction closed on November 13, 2007. The purchase price amounted to €17 million for AXA.
Corporation (“Bao Minh”) announced that they reached an agreement to establish a strategic partnership in the Vietnamese insurance market. As part of this agreement, AXA acquired a 16.6% stake of the share capital of Bao Minh for a total amount of VND 1,194 billion (€54 million) on September 26, 2007.
AXA will have the option to buy out the remaining stake through calls exercisable in 2010 and 2011. This transaction closed in the fi rst half of 2008.
On June 4, 2007, AXA announced that it had entered into a memorandum of understanding with SNS Reaal with a view to fi nalizing discussions on the sale of its Dutch operations, comprising 100% of AXA Netherlands, Winterthur Netherlands and DBV Netherlands, for a total cash consideration of €1,750 million, after consultation with trade unions and workers’
councils. AXA contemplated exiting the Dutch insurance market given the limited possibilities to reach a leading position through organic growth in the foreseeable future as this market is highly competitive and dominated by large local players. AXA’s
On July 25, 2007, AXA announced it had reached an agreement with China Life Insurance Co Ltd, a Life insurance company incorporated in Taiwan, for the sale of Winterthur Life Taiwan
AXA announced on November 23, 2009 the completion of a €2 billion capital increase with preferential subscription rights and with the issue of 174 million new shares.
For several years, the AXA Group has been offering to its employees in and outside of France, the opportunity to subscribe for shares issued by way of a capital increase reserved for employees. In 2009, employees invested a total of €0.4 billion leading to a total of 26 million newly issued shares. Employee
In addition, AXA supplemented its program in March 2009 with a new put spread strategy on €4 billion on Eurostoxx 50 maturing on June 30, 2009 and July 1, 2009. Following the equity market rally between March and May 2009, AXA lengthened its hedging program in June 2009 by an additional €3.5 billion put spread strategy on Eurostoxx 50, maturing as at December 30, 2009.
The hedge was effective in a [1,750; 2,000] range. These two hedges resulted in a €103 million loss corresponding to the premium paid.
At December 31, 2009, AXA Equitable had $7.6 billion nominal of protection on the S&P index consisting of optional strategies.
total premium of this program amounted to €351 million. The change in fair value of these derivatives was refl ected through earnings with a €-381 million negative impact net of tax recorded in full year 2009 net income.
US over-the-counter market. The Group intends to maintain fi nancial reporting discipline through an annual program to test the effectiveness of its internal control going forward.
On a comparable basis means that the data for the current year period were restated using the prevailing foreign currency exchange rates for the same period of prior year (constant exchange rate basis). It also means that data in one of the two periods being compared were restated for the results of acquisitions, disposals and business transfers (constant structural basis) and for changes in accounting principles
In particular, comparable basis for revenues and APE in this document means including acquisitions, disposals and business transfers, and net of intercompany transactions in both periods.
Consolidated gross revenues for full year 2009 reached €90,124 million, down 1% compared to 2008.
Total Life & Savings gross revenues were down 1% to €57,620 million, or down 4% on a comparable basis mainly due to the United States, the United Kingdom, Japan, Switzerland and Australia/New Zealand, partly offset by Mediterranean
United Kingdom APE decreased by €251 million (-20%) to €926 million, primarily due to (i) lower Investment & Savings volumes (€-111 million or -25%), due to the impact of recessionary market conditions on Onshore and Offshore Bond volumes, (ii) a €87 million decrease (-26%) in Individual and Executive Pensions as economic conditions have reduced the UK pensions market, and (iii) a €62 million decrease (-15%) in Group Pension volumes, mainly due to the impact of economic conditions on incremental contributions from existing company schemes, partly offset by
decreased by €41 million (-9%). This was driven by a €37 million decrease (-19%) in Life to €192 million mainly due to lower Term products sales and a €8 million decrease (-10%) in Investments
in Health to €249 million, mainly due to higher sales of the new
France APE increased by €255 million (+19%) to €1,602 million, mainly due to Group lines strong performance (+38%) with large contracts in Retirement and higher sales in Protection, as well as a positive contribution in Individual Savings (+10%).
Mediterranean & Latin American Region APE increased by €83 million (+20%) to €497 million mainly driven by higher contribution of general account savings products (€104 million or +57%) mainly in AXA MPS in Italy (Italian bancassurance jointventure, €105 million or +160%) reinforced by Antonveneta, partly offset by the lower contribution of index-linked and unitlinked products in AXA MPS (€-24 million or -28%).
Kingdom & Ireland and Canada, partly offset by Germany and the Mediterranean & Latin American Region. Commercial lines decreased by 2% especially in the United Kingdom & Ireland and
& Ireland (+19%), due to +43% growth in new business written through the internet platform Swiftcover, (ii) France (+3%) due to a positive price effect and positive net infl ows, and (iii) Canada
(+3%) driven by positive net infl ows combined with a positive price effect in H ousehold, (ii) Canada (+17%) in Property mainly driven by both higher volumes and a positive price effect, (iii) the
(iv) Belgium (+2%) mainly due to price indexation in Property, partly offset by (v) the United Kingdom & Ireland (-4%) mainly driven by a more selective underwriting in Travel and declining volumes within Personal Medical Insurance.
Commercial lines (38% of P&C gross revenues) decreased by 2% on a comparable basis with Motor down 1% and Non-
Motor revenues were down 1%, driven by (i) the United Kingdom
International Insurance revenues were up 1% to €2,860 million or up 2% on a comparable basis mainly driven by (i) AXA
Asset management revenues decreased by 22% or 25% on a comparable basis to €3,074 million mainly driven by lower management fees (-26%) due to lower average Assets under
related to lower average mutual fund assets, and institutional research services down 8% due to lower client trading activity.
Retail and €-5 billion for Private Client) and negative exchange rate impact of €-9 billion.
(-18%) to €1,187 million. Excluding distribution fees (retroceded to distributors), net revenues decreased by €193 million
Assets under Management increased by €14 billion from yearend 2008 to €499 billion at the end of December 31, 2009 mainly as a result of €31 billion positive market impact partly offset by €-19 billion net outfl ows, including €-13 billion third party business and €-5 billion AXA Group business.
AXA Bank Europe (-7% due to (i) a lower net interest and fee income and (ii) a decrease of the net capital gains, including an unfavorable exchange impact) and AXA Banque (-10%
mainly due to unfavorable variation in fair value of macro-hedge derivative instruments partly offset by higher commercial margin), partly offset by Hungarian bank (+47% mainly driven by higher interest margin).
Amortization of value of purchased life business in force (365) (473) (357)
INCOME FROM OPERATING ACTIVITIES, GROSS OF TAX EXPENSE 5,695 6,394 7,983
Net income from investments in affi liates and associates 20 23 29
Profi t or loss on fi nancial assets (under fair value option) & derivatives 485 (2,501) (596)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 485 (2,501) (596)
Group underlying earnings amounted to €3,854 million. On a constant exchange rate basis, underlying earnings decreased by €249 million (-6%), driven by a drop in Property & Casualty, Asset
& Revenues were impacted by €+12 million reclassifi cation from investment margin in the United Kingdom. Excluding this impact, Fees & Revenues decreased by €159 million (-2%)
DAC amortization following the fi nancial market recovery in 2009), Australia/New Zealand (€-39 million driven by lower premiums in 2009 combined with a lower level of assets under management) and the United States (€-24 million), partly offset by Germany (€+78 million due to higher loadings on general account premiums in line with business development) and
Japan (€+46 million) due to a shift towards Protection products with higher loadings ratio and to the contribution of Variable
States, primarly as a result of signifi cant lower basis cost, lower fi nancial market volatility as well as credit spreads tightening and gains from interest rates hedging partly offset by lower lapse assumptions, (ii) €165 million one-off gain in the United
■ Higher tax expenses and non-controlling interests (up €318 million or +62%). Excluding €29 million higher positive tax one-offs (mainly with €66 million in Belgium on “Revenus
States in 2008), tax expenses and non-controlling interests increased by €289 million (+57%), driven by higher pre-tax earnings.
(-30%). Excluding the change in scope related to the acquisition of Seguros ING in Mexico (€15 million) and Reso in Russia
Europe) than in 2008, as well as (ii) a rise in attritional claims
(+1.7 points), mainly due to higher frequency and large claims, and (iii) stable positive prior year development,
Excluding the contribution of Mexico, the expense ratio decreased by 0.2 point to 28.2%, c. as a result, the combined ratio was up 3.6 points to 99.0%.
(down €355 million). Excluding Mexico, Reso and the impact of the buyout of non-controlling interests in Turkey, income tax expenses and non-controlling interests decreased by €358 million. Excluding €12 million lower positive tax one-offs
Taxés”, €13 million in Germany and €9 million in Switzerland in 2009, versus €25 million in Germany, €13 million in the
Asset Management underlying earnings amounted to €355 million. On a constant exchange rate basis, underlying earnings decreased by €240 million (-41%) mainly due to (i) lower management fees, driven by lower average AUM (-18%) and lower average fees (-2.8 basis points), (ii) the non recurrence of a €74 million carried interest on a real estate fund in 2008,
Group net capital losses attributable to shareholders amounted to €-386 million. On a constant exchange rate basis,
Net Income amounted to €3,606 million. On a constant exchange rate basis, net income increased by €2,607 million (+283%)
mainly as a result of: ■ Lower adjusted earnings: €-306 million to 3,468 million,
Weighted average number of shares 2,127.0 2,133.3 2,083.1 2,091.4 2,035.4 2,043.6 2,090.6 2,108.7 2,042.7 2,060.8
Adjusted earnings (Euro per ordinary share) 1.50 1.49 1.63 1.63 1.67 1.66 2.80 2.77 2.86 2.84 -8.4% -8.3%
(a) EPS calculation takes into account interest payments and foreign exchange rate impacts related to perpetual debts classifi ed in shareholders equity with retrospective application.
(a) Including adjustement to refl ect fi nancial charges related to perpetual debt (recorded through shareholders’ equity).
(b) Excluding change in fair value on invested assets and derivatives (recorded through shareholders’ equity), and excluding perpetual debt (recorded through shareholders’ equity).
Change in unearned premium reserves net of unearned revenues and fees (162) (235) (275)
Net income from investments in affi liates and associates 3 21 22
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (52) (1,079) (237)
Gross revenues increased by €2,055 million (+14%) to €16,353 million (1): ■ Group Lines (41% of gross revenues) increased by 23%
APE increased by €255 million (+19%) to €1,602 million mainly due to Group lines strong performance (+38%) with large contracts in Retirement and increased sales in Protection as well as a positive performance in Individual Savings (+10%).
to €884 million due to a higher policyholder charge both attributable to higher investment income and higher unallocated reserve bonus. Excluding the unallocated reserve bonus effect, investment margin would have been stable.
Net technical margin increased by €295 million (+63%) to €762 million primarily due to (i) €190 million charge reclassifi ed from technical margin to commissions refl ecting contractual changes in Group Protection contracts and to (ii) €68 million higher prior year reserve development on Group Lines.
Amortization of VBI increased by €27 million (+53%) to €-77 million mainly due to an update of actuarial assumptions.
Adjusted earnings decreased by €424 million (-43%) to €561 million mainly resulting from (i) underlying earnings decrease
Net income increased by €417 million (+98%) to €842 million refl ecting (i) €-424 million lower adjusted earnings, more than offset by (ii) €+841 million increase in the fair value of mutual funds and derivatives mainly due to credit spread tightening.
Profi t or loss on fi nancial assets (under FV option) & derivatives (555) 83 40
Gross revenues decreased by €4,372 million (-32%) to €9,386 million. On a comparable basis, gross revenues decreased by €4,857 million (-35%) mainly driven by: ■ Variable Annuity premiums (59% of gross revenues) decreased by 44% refl ecting a slowdown in sales related to uncertain market conditions as well as management repricing and redesign actions; ■ Life premiums (26% of gross revenues) decreased by 5%
primarily driven by market conditions, the impact on fi rst year life premiums of product modifi cations in 2008 and the elimination of certain Universal Life guaranteed features in the fi rst quarter of 2009; ■ Mutual Funds gross revenues (1% of gross revenues)
decreased by 19% driven by prevailing uncertain fi nancial market conditions; ■ Fees on Asset Management business (6% of gross revenues)
Fees & revenues decreased by €41 million (-3%) to €1,554 million.
Net technical margin rose by €1,484 million to €500 million. On a constant exchange rate basis, net technical margin increased by €1,458 million (+148%) primarily due to higher GMxB margin refl ecting signifi cant lower basis cost, lower volatility, interest rate hedging gains and credit spread narrowing in 2009 partially offset by reserve adjustment for lower lapse assumptions.
■ DAC amortization increased by €173 million, primarily refl ecting higher GMxB margins and higher lapse rates on
Variable Life products, partially offset by the non-recurrence of a €-610 million adjustment in 2008 refl ecting an unlocking and amortization reset to refl ect a long term average Separate
Amortization of VBI decreased by €25 million (-39%) to €-39 million. On a constant exchange rate basis, amortization of
On a constant exchange rate basis, adjusted earnings increased by €880 million refl ecting the increase in underlying earnings and lower net impairments.
Net capital gains or losses attributable to shareholders net of income tax (38) (71) (26)
Gross revenues decreased by €766 million (-22%) to €2,783 million. On a comparable basis, gross revenues decreased by €497 million (-14%): ■ Investment & Savings (77% of gross revenues): • I nsurance premiums (62% of gross revenues) reduced by 15% primarily due to lower volumes of Onshore Bond business driven by the recessionary market conditions and the switch to mutual funds following the change of capital gains taxation; • F ees on I nvestment products (15% of gross revenues)
Insurance, partially offset by an increase in Protection business; ■ Other revenues (4% of gross revenues) decreased by 1%
APE decreased by €361 million (-28%) to €926 million. On a comparable basis, APE decreased by €251 million (-20%)
primarily due to: ■ D ecrease in investment and savings volumes of €111 million
Investment margin decreased by €111 million (-46%) to €133 million. On a constant exchange rate basis, investment margin decreased by €96 million (-39%) primarily due to: ■ €46 million decrease in shareholder participation in with-profi t bonuses as a result of market conditions and lower asset base; ■ €38 million decrease in investment return on shareholder assets largely due to lower asset yield mainly on short term investments; ■ €12 million decrease as a result of a reclassifi cation into fees
Fees & revenues decreased by €179 million (-23%) to €609 million. On a constant exchange rate basis, fees & revenues decreased by €107 million (-14%) mainly due to: ■ €75 million lower fees mainly due to lower average account balances; ■ €40 million decrease of upfront loadings as a result of lower volumes of Creditor and Offshore cash bonds fully offset in commissions; ■ €12 million increase as a result of a reclassifi cation from investment margin.
Net technical margin increased by €196 million (425%) to €243 million. On a constant exchange rate basis, net technical margin increased by €225 million (487%) mainly due to: ■ €165 million one-off gain as a result of reduction in liabilities using a higher discount rate related to an internal rest ructuring of an annuity portfolio; ■ €38 million increase refl ecting a change in investment assumptions on non-profi t business; ■ €14 million increase mainly refl ecting 2008 reserves strengthening not repeated this year.
On a constant exchange rate basis, expenses decreased by €81 million (-9%) due to: ■ €46 million decrease as a result of an employee pension scheme one-off; ■ €40 million decrease due to lower commissions from reduced volumes of Creditor and Offshore cash bonds fully offset in fees & revenues; ■ €21 million decrease mainly as result of cost containment measures taken by management; ■ P artially offset by restructuring costs of €26 million.
VBI decreased by €91 million (-94%) mainly due to increase in future expectation for with-profi t bonuses following the market recovery in the second half of the year, and non-recurrence of the impact of 2008 market conditions.
As a result, the underlying cost income ratio decreased by 17.6 points to 77.1%.
Adjusted earnings increased by €98 million (+194%) to €148 million. On a constant exchange rate basis, adjusted earnings increased by €115 million (229%), largely due to the underlying earnings movement, as well as to €27 million lower net impairments mainly on equity securities.
On a constant exchange rate basis, net income decreased by €293 million (-114%). In addition to the changes in adjusted earnings, net income included the following negative adjustments: €247 million undiscounted tax on unrealiz ed gains attributable to policyholders in unit-linked life funds (1), €64 million change in fair value on fi xed income and equity derivatives, and €105 million on foreign exchange movements mainly on fi xed income assets and equities impairments.
Gross revenues increased by €810 million (+18%) to €5,438 million. On a comparable basis, revenues declined by €419 million (-9%): ■ Life revenues (40% of gross revenues) decreased by €228 million (-12%) notably impacted by the bankruptcy of one large independent agent (LINA); ■ Investment & Savings (31% of gross revenues) decreased by €163 million (-11%) due to lower sales of Variable Annuity products; ■ Health revenues (29% of gross revenues) decreased by €29 million (-2%) following the bankruptcy of LINA, partially offset by the new Long Term Care and Cancer products.
(-9%). This was driven by a €37 million (-19%) decrease in
Life to €192 million mainly due to decreasing demand on Term products with tax deductibility and a €8 million (-10%) decline of Investments & Savings sales to €91 million driven by lower sales of Variable Annuity products. This was partially offset by a €4 million (+2%) increase in Health to €249 million following higher sales of the new Long Term Care and Cancer products.
Annuity products (fully offset by higher amortization of deferred acquisition costs). Excluding these impacts, fees and revenues slightly increased driven by the in-force growth.
Net technical margin decreased by €82 million (-84%) to €16 million. On a constant exchange rate basis, net technical margin declined by €85 million (-87%) mainly driven by: ■ S urrender margin up €+14 million to €35 million following
Expenses increased by €231 million (+37%) to €-851 million. On a constant exchange rate basis, expenses increased by €63 million
amortization increased by €43 million (+44%) mainly driven by the assumption change impact (€-38 million) on the legacy book of business.
As a result, the underlying cost income ratio increased by 11.9 points to 76.7%.
Income tax expenses decreased by €53 million (-35%) to €-97 million. On a constant exchange rate basis, income tax expenses decreased by €72 million (-48%) attributable to lower pre-tax earnings and a non-recurring tax item in 2009
Adjusted earnings decreased by €99 million (-30%) to €231 million, or by €144 million (-44%) on a constant exchange rate basis, driven by €38 million higher impairments and €37 million lower realized capital gains, combined with the €69 million decrease in underlying earnings.
This adjustment was reversed in 2009 and no similar adjustment was needed for October to December 2009. On a constant exchange rate basis and excluding the €+106 million reversal, net income increased by €297 million, mainly due to the impact of the tightening of credit spreads on the corporate bonds and
Gross revenues increased by €483 million (+8%) to €6,715 million (1) mainly due to: ■ Life (€+357 million) driven by an increase of single premiums in Investment and Savings business attributable to general account short term investment products and unit-linked products; ■ Health increased by €105 million stemming from a positive effect of tariff increase and new business.
APE increased by €2 million (+0%) to €469 million. On a comparable basis, APE decreased by €16 million (-3%) due to (i) non-recurring 2008 “Riester step-up effect” (increase in retirement premiums due to higher fi scal incentive for policyholders), (ii) decreasing regular premiums unit-linked annuity business partly offset by (iii) higher single premiums from general account short term investment products and (iv) Health business boosted by legal changes in 2009.
Investment margin increased by €14 million (+14%) to €118 million due to lower policyholder bonus allocation partly offset by a decreasing gross investment income as a result of lower dividends from equities and alternative investments and lower income from certain participating notes.
Fees & revenues increased by €80 million (+36%) to €302 million due to lower policyholder bonus allocation and higher loadings on general account premiums partly offset by lower loadings on unit-linked regular premiums in line with the new business development.
Expenses increased by €41 million (+22%) to €-228 million due higher commissions in Health and lower policyholder participation.
Amortization of VBI increased by €3 million (+39%) to €-11 million.
As a result, the underlying cost income ratio decreased by 12.4 points to 52.3%.
Net income increased by €20 million (-29%) to €-50 million due to higher adjusted earnings, favorable change in fair value of equity and fi xed income investments partly offset by the non-recurring policyholder bonus allocation related to the share transfer of the
Profi t or loss on fi nancial assets (under FV option) & derivatives (19) (56) (10)
• F ees on investment products increased by €8 million driven by Twinstar Income.
APE decreased by €25 million (-9%) to €255 million. On a comparable basis, APE decreased by €37 million (-13%): ■ Group Life decreased by €47 million (-22%) to €173 million after strong new business in 2008. The slowdown in new business was a consequence of the fi nancial crisis, where less cancellations in the market led to fewer new business opportunities at the end of 2008; ■ Individual Life increased by €9 million (+14%) to €82 million driven by the success of the Variable Annuity product Twinstar
margin decreased by €22 million (-20%) driven by higher investment income allocated to policyholders.
Fees & revenues increased by €17 million (+9%) to €208 million.
Net technical margin increased by €18 million (+13%) to €163 million. On a constant exchange rate basis, net technical margin increased by €10 million (+7%) mainly driven by Individual
Expenses increased by €26 million (+17%) to €-179 million. On a constant exchange rate basis, expenses increased by €17 million
As a result, the underlying cost income ratio increased by 7.8 points to 44.6%.
Income tax expenses decreased by €33 million (-52%) to €-30 million. On a constant exchange rate basis, income tax expenses decreased by €34 million (-55%) driven by a one-off positive impact of €21 million led by the decrease in tax rate by 1 point to 21%.
Adjusted earnings increased by €252 million to €225 million. On a constant exchange rate basis, adjusted earnings increased by €241 million driven by lower net impairments mainly on equities.
Net income increased by €278 million to €185 million. On a constant exchange rate basis, net income increased by €269 million due to higher adjusted earnings, lower foreign currency losses and a favorable change in fair value mainly on convertible bonds, hedge funds and derivatives.
Profi t or loss on fi nancial assets (under FV option) & derivatives 188 (249) (93)
Gross revenues decreased by €44 million (-2%) to €2,519 million (1): ■ Individual Life & Savings revenues decreased by 5% to €1,866 million driven by a 33% drop in the unit-linked investment and savings products while segregated and general account products were more resilient (-2%) (notably
APE increased by €4 million (+2%) to €264 million. Individual Life
& Savings increased by 6% to €235 million mainly driven by Crest products. Group Life & Savings decreased by 24% to €28 million as a result of the non recurrence of large contract sales in 2008.
Net technical margin increased by €29 million (+44%) to €95 million mainly driven by a €47 million non-recurring higher positive prior year reserve development in Individual Life partly offset by a less favorable mortality and disability experience.
mainly driven by higher contribution of general account savings products (€104 million or +57%) mainly in AXA MPS (€105 million or +160%) reinforced by Antonveneta, partly offset by the lower contribution of index-linked and unit-linked products in AXA MPS
Net technical margin rose by €30 million (+44%) to €98 million, of which €5 million from Mexico and Quadrifoglio Vita. On a constant exchange rate basis and excluding Mexico and
(+39%) to €93 million due to the release of a risk reserve in Spain.
Quadrifoglio Vita, expenses decreased by €3 million (-1%) to €-305 million mainly driven by lower administrative expenses.
Amortization of VBI decreased by €11 million (-27%) to €-30 million, of which €1 million from Mexico and Quadrifoglio Vita.
As a result, the underlying cost income ratio increased by 1.1 points to 69.7%. On a constant exchange rate basis and excluding Mexico and Quadrifoglio Vita, underlying cost income ratio increased by 0.5 point to 64.8%.
Income tax expenses increased by €3 million (+7%) to €-48 million, of which €4 million from Mexico and Quadrifoglio
Vita. On a constant exchange rate basis and excluding Mexico and Quadrifoglio Vita, income tax expenses were in line with previous year.
Vita and the buyout of non-controlling interests in Turkey. On a constant exchange rate basis and excluding Mexico, Quadrifoglio
Central and Eastern Europe 470 467 423 o/w South East Asia (a) 164 210 257
Net realized capital gains or losses attributable to shareholders (12) (161) 83
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (17) 21 (10)
Gross revenues decreased by €187 million (-11%) to €1,532 million. On a comparable basis, gross revenues decreased by €205 million (-12%): ■ G ross written premiums and fees (77% of gross revenues)
Protection in 2009 offset by less favorable claims experience in these products in 2009; ■ E xpenses decreased by €40 million (-7%) to €-546 million.
Adjusted earnings increased by €99 million (142%) to €29 million. On a constant exchange rate basis, adjusted earnings increased by €100 million (143%) refl ecting the increased underlying earnings and signifi cantly lower net impairments on equity securities.
APE increased by €11 million (+10%) to €123 million. On a comparable basis, APE increased by €3 million (+3%), mainly driven by Protection products partially offset by lower sales in
APE increased by €4 million (+3%) to €168 million. On a comparable basis, APE increased by €19 million (+11%) driven by Pension Funds (€+31 million, +42%) partly offset by Life
(1) AXA interest in AXA Asia Pacifi c Group is 54.08% broken down into 53.92% direct interest holding and an additional 0.15% owned by the AAPH
(2) AXA interest in AXA Asia Pacifi c Group is 54.08% broken down into 53.92% direct interest holding and an additional 0.15% owned by the AAPH
Net income increased by €23 million to €14 million. On a constant exchange rate basis, net income increased by €24 million in line with adjusted earnings.
(+9%) mainly refl ecting €4 million from Accumulator type product and €4 million from Term insurance & Universal life.
Underlying earnings decreased by €3 million (-35%) to €5 million. On a constant exchange rate basis, underlying earnings decreased by €2 million (-34%) as a result of increased commission expenses related to new business.
(-22%) primarily due to the signifi cant decrease in unit linked sales as a result of the uncertain investment market conditions.
India (€3 million), multi-distribution capability and increased geographical coverage in China (€2 million) as well as the growth in regular premium sales and new product launches in Singapore
Underlying earnings decreased by €12 million to €-2 million. On a constant exchange rate basis, underlying earnings decreased by €12 million, mainly driven by Indian expansion (€-10 million)
Change in unearned premium reserves net of unearned revenues and fees (103) (244) (362)
Net income from investments in affi liates and associates 18 5 5
Profi t or loss on fi nancial assets (under fair value option) & derivatives 187 (656) 4
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 187 (656) 4
Profi t or loss on fi nancial assets (under FV option) & derivatives 65 (290) 34
Net technical result decreased by €303 million (-17%) to €1,473 million: ■ C urrent accident year loss ratio increased by 6.7 points to 81.5% mainly attributable to Klaus storm (+2.2 points), adverse winter conditions and hail claims (+2.0 points), and Motor higher claims (+1.9 points) mainly due to higher frequency; ■ A ll accident year loss ratio increased by 5.7 points to 74.2%
as a result of the increase in current accident year loss ratio partly offset by higher prior year positive reserves development
As a result, the combined ratio increased by 6.1 points to 99.1%.
Net investment result increased by €31 million (+5%) to €600 million mainly driven by a higher net corporate bond yield.
Income tax expenses decreased by €94 million (-28%) to €-245 million mainly explained by lower pre-tax earnings.
Adjusted earnings decreased by €159 million (-29%) to €380 million as a consequence of (i) the decrease in underlying earnings (€-216 million) and (ii) €59 million lower capital gains net of hedging derivatives partly offset by €116 million lower impairment charges.
Net income increased by €200 million (+82%) to €445 million as the adjusted earnings decrease was more than offset by the favorable change in fair value of mutual funds and derivatives
(€+318 million) mainly due to credit spread tightening and a €37 million positive impact on foreign exchange.
Net capital gains or losses attributable to shareholders net of income tax (58) (227) 71
Travel, Creditor and Warranty down 23% to €321 million due to selective underwriting and Health down 2% to €539 million due to declining volumes within Personal Medical Insurance.
notably relating to freezing conditions in January and fl ooding in November and (ii) three large claims (+0.7 point) impacting commercial property and personal motor; ■ T he all accident year loss ratio increased by 6.6 points to 70.0% refl ecting the deterioration in current accident year loss ratio combined with a lower level of positive prior years reserve development.
Expense ratio decreased by 3.4 points to 32.3% with the acquisition ratio down 0.9 point to 24.8% mainly due to a decrease in commissions (-1.3 point) driven by renegotiation of broker commission rates, changes in business mix and reductions in profi t sharing commissions.
As a result, the combined ratio was up 3.3 points to 102.2%.
Net income from investments in affi liates and associates (0) 5 5
Profi t or loss on fi nancial assets (under FV option) & derivatives 23 (146) 29
Gross revenues decreased by €27 million (-1%) to €3,527 million (1): ■ P ersonal lines (65% of gross revenues) were down 2% to €2,269 million due to lower production in Motor and Personal
Net technical result decreased by €50 million (-4%) to €1,148 million.
■ T he current accident year loss ratio increased by 0.3 point to 76.4% driven by Liability and Motor; ■ T he all accident year loss ratio increased by 1.2 points to 67.4% due to lower positive prior year reserve development.
As a result, the combined ratio increased by 0.5 point to 98.7%.
Income tax expenses increased slightly by €7 million (+6%) to €-112 million, due to the non-repeat of the 2008 non-recurring tax benefi ts partly offset by lower pre-tax operating result.
Adjusted earnings decreased by €119 million (-40%) to €179 million due to lower underlying earnings and negative result from equity hedging, partly offset by lower impairments on equities and higher realized gains.
Net capital gains or losses attributable to shareholders net of income tax (25) (41) 119
Gross revenues decreased by €12 million (-1%) to €2,145 million (1). On a comparable basis, gross revenues were stable: ■ Personal lines (62% of gross revenues) were up 1% driven by Non-Motor (+2%) of which Property up 3% refl ecting the evolution of ABEX household index partly offset by portfolio losses, whereas Motor remained stable; ■ C ommercial lines (38% of gross revenues) were down 3% with
Net technical result decreased by €18 million (-3%) to €651 million: ■ C urrent accident year loss ratio increased by 1.2 points to 82.1% mainly due to climatic event (1.2 points or €-26 million); ■ A ll accident year loss ratio increased by 0.7 point to 69.7%
refl ecting the deterioration of current loss ratio partly offset by positive prior year reserve developments notably on Workers’
As a result, the combined ratio was up 1.0 point to 99.8%.
Profi t or loss on fi nancial assets (under FV option) & derivatives 22 (37) (16)
The Mediterranean and Latin American Region includes the following changes in scope: ■ Mexico consolidated from 07/01/2008; ■ Turkey buyout of non-controlling interests on 07/01/2008.
Construction in Spain, partly offset by Health development with new contracts in Mexico and the Gulf Region.
Net technical result decreased by €183 million (-9%) to €1,796 million of which €126 million from Mexico. On a constant exchange rate basis and excluding Mexico, net technical result decreased by €299 million (-16%) to €1,524 million: ■ C urrent accident year loss ratio increased by 2.9 points to 79.2%. Excluding Mexico, the current accident year loss ratio increased by 2.8 points to 79.7% mainly due to the cost of natural events (Klaus storm, Vitoria hail in Spain and fl oods in Italy and Turkey), and Motor lines in most of the countries
Excluding Mexico, the all accident year loss ratio increased by 5.0 points to 72.9% mainly driven by the increase of the current accident year loss ratio and a less favorable prior year reserves development notably in Motor.
Expense ratio rose by 0.9 point to 25.7%. Excluding Mexico, the expense ratio rose by 1.1 points to 25.3% due to (i) an increase of the acquisition ratio (+0.9 point) mainly due to incentive to agents, (ii) the launch of a Direct channel in Italy, (iii) a negative volume effect in Spain, and (iv) a slight increase of administrative expense ratio (+0.2 point) mainly due to IT investment in Italy.
Adjusted earnings decreased by €233 million (-45%) to €281 million of which €26 million from Mexico and the Turkey buyout of non-controlling interests. On a constant exchange rate basis and excluding Mexico and the Turkey buyout of noncontrolling interests, adjusted earnings decreased by €253 million
(-50%) to €255 million due to the decrease in underlying earnings and to lower impairments, partly offset by lower capital gains on equities.
Mexico and the Turkey buyout of non-controlling interests, net income decreased by €194 million (-44%) to €246 million driven by lower adjusted earnings partly offset by a positive impact of change in fair value on mutual funds (€74 million) and lower
Net technical result increased by €99 million (+16%) to €726 million. On a constant exchange rate basis, net technical result increased by €64 million (+10%): ■ C urrent accident year loss ratio increased by 3.1 points to 76.8% due to large losses (+1.9 points or €-46 million mainly hail events) and higher attritional losses mainly in both Motor and Property; ■ A ll accident year loss ratio decreased by 2.8 points to 66.3%
refl ecting positive prior year results (€+121 million) mainly in commercial lines.
Net investment result increased by €4 million (+2%) to €186 million. On a constant exchange rate basis, net investment result decreased by €5 million (-3%) driven by lower income on real estate and loans.
Income tax expenses decreased by €15 million (-22%) to €-54 million. On a constant exchange rate basis, income tax expenses decreased by €18 million (-26%) following the reduction in tax rates by 1 point to 21% in 2009 leading to an one-off positive effect from deferred taxes (€9 million).
Underlying earnings increased by €22 million (+9%) to €260 million. On a constant exchange rate basis, underlying earnings increased by €9 million (+4%).
Net income increased by €242 million to €227 million. On a constant exchange rate basis, net income increased by €231 million due to higher adjusted earnings, lower foreign currency losses and favorable change in fair value of alternative assets.
(a) Includes Hong Kong, Singapore, South Korea and Malaysia (Malaysia was fully consolidated for the fi rst time in 2007).
Net realized capital gains or losses attributable to shareholders 7 (44) 22
(+7%): ■ P ersonal lines were up 7% or €42 million benefi ting from net new infl ows in Motor and tariffs increase mainly in Japan,
Expense ratio decreased by 1.8 points to 25.5% mainly due to a tight control over expenses region wide, despite the marketing investments in South Korea to foster the AXA brand recognition.
As a result, the combined ratio increased by +0.9 point to 99.4%
Net technical result improved by €1 million to €5 million with the continuing positive development of the Motor business.
Underlying earnings and adjusted earnings remained stable at €-10 million, as the improvement in technical result was offset by higher expenses driven by business development across the region.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income for the International
Net realized capital gains or losses attributable to shareholders 19 (16) 23
As a consequence, the all accident year loss ratio decreased by 4.2 points to 84.0% (2.0 points excluding reclassifi ed commissions from technical margin to expenses on Assumed business).
Income tax expenses increased by €22 million (+47%) to €-71 million refl ecting the increased pre-tax underlying earnings and the non-recurrence of a positive one-off in 2008 (€14 million).
Net income increased by €132 million to €160 million refl ecting the increase in adjusted earnings and the favorable change in fair value of mutual funds (€+91 million) mainly as a result of credit spread tightening.
Underlying earnings decreased by €16 million (-119%) to €-3 million impacted by lower positive prior year developments mainly in Group Motor Liability Cover and lower Group Property pool results mainly impacted by Klaus storm.
Net income decreased by €9 million (-72%) to €3 million with lower underlying earnings partly offset by positive impact of foreign exchange rates.
Underlying earnings increased by €99 million (+240%) to €141 million. On a constant exchange rate basis, underlying earnings increased by €101 million (+245%) driven by lower losses on Life run-off portfolio whereas P&C run-off portfolio was stable.
Adjusted earnings increased by €112 million (+295%) to €150 million. On a constant exchange rate basis, adjusted earnings increased by €114 million (+300%).
On a constant exchange rate basis, net income increased by €104 million (+216%).
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 49 (163) 3
Gross revenues decreased by €653 million (-25%) to €1,973 million (1). On a comparable basis, gross revenues decreased by €722 million (-29%) due to management fees down 33% due to 31% lower average AUM, distribution fees down 27%
Net investment result increased by €147 million (+118%) to €22 million. On a constant exchange rate basis, net investment result increased by €146 million (+117%) due to higher realized and unrealized gains on investments related to deferred compensation obligations, offset in general expenses.
General expenses decreased by €103 million (-6%) to €-1,665 million. On a constant exchange rate basis, general expenses decreased by €190 million (-11%) primarily due to
As a result, the underlying cost income ratio increased by 14.2 points to 81.5%.
Income tax expenses decreased by €125 million (-83%) to €-26 million. On a constant exchange rate basis, income tax expenses decreased by €126 million (-84%) due to lower pretax earnings. The 2009 one-time tax benefi t of €62 million due primarily to the release of reserves relating to the tax treatment of compensation plans was fully offset by the non-recurrence of the 2008 deferred tax liability release on undistributed foreign earnings from last year.
(-42%) to €185 million. On a constant exchange rate basis, underlying earnings decreased by €143 million (-45%).
AXA ownership of AllianceBernstein as of December 31, 2009 was 62.2%, refl ecting the increase in ownership interest of approximately 3% due to the exercise of the fi nal Bernstein put, offset by the issuance of 8.3 million restricted units during
Profi t or loss on fi nancial assets (under FV option) & derivatives 29 (118) 3
Assets under management (“AUM”) increased by €14 billion from year-end 2008 to €499 billion at the end of December 2009 mainly as a result of €+31 billion favorable market impact and €-19 billion negative net outfl ows, including €-13 billion 3rd party business and €-5 billion AXA Group business.
Net investment result decreased by €104 million (-103%) (both on current and constant exchange rate basis) to €-3 million, mainly as a result of lower realized carried interest in 2009 (notably €74 million non-recurring carried interest on a real estate fund in 2008) and a €15 million decrease as a result of a reclassifi cation into revenues in 2009.
(-37%) to €171 million. On a constant exchange rate basis, underlying and adjusted earnings decreased by €97 million
Net realized capital gains or losses attributable to shareholders (4) (64) (5)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (8) 4 (0)
Underlying earnings decreased by €45 million (-66%) to €24 million mainly due to an increase in expenses (€-26 million)
notably from the expansion of the banking activity to other countries, lower net realized capital gains on bonds portfolio (€19 million), higher distribution commissions (€-12 million) and higher provision on credit losses (€-9 million) partly offset by a higher interest and commission margin (€+15 million).
Net income increased by €30 million (125%) to €6 million mainly due to an increase in adjusted earnings, the favorable change in fair value and capital gains of mutual funds and other assets nets of derivatives (€+12 million) and lower integration costs
Net income decreased by €8 million to €3 million, refl ecting the negative impact of the change in fair value of macro-hedge derivatives instruments (from €23 million to €3 million), partly offset by higher adjusted earnings.
Underlying earnings decreased by €3 million to €-4 million driven by higher administrative expenses and credit loss allowances partly offset by the positive effect from taxes due to fi rst time integration of AXA Bank in German tax group.
Underlying earnings increased by €11 million to €-11 million due to set up costs (€14 million) in 2008.
Assurance, AXA Financial, AXA Asia Pacifi c Holdings, AXA United Kingdom Holdings, AXA Germany Holdings, AXA Belgium Holdings,
Net realized capital gains or losses attributable to shareholders (64) 1,185 27
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 288 (535) (365)
Adjusted earnings decreased by €51 million to €-14 mainly driven by €41 million lower net realized capital gains and the underlying earnings evolution.
Adjusted earnings decreased by €27 million to €-116 million, in line with underlying earnings evolution.
Underlying earnings increased by €8 million to €-11 million. On a constant exchange rate basis, underlying earnings increased by €8 million due to lower fi nancial charges driven by lower interest rates combined with lower debt levels and an appreciation in the
Adjusted earnings increased by €12 million to €-7 million. On a constant exchange rate basis, adjusted earnings increased by €12 million in line with underlying earnings and driven by a realized internal gain on derivatives.
Underlying earnings increased by €43 million to €-24 million. On a constant exchange rate basis, underlying earnings increased by €40 million due to (i) €25 million lower fi nancial charges on variable interest loans, (ii) €8 million increase in equity income and
Adjusted earnings increased by €43 million to €-24 million. On a constant exchange rate basis, adjusted earnings increased by €40 million in line with underlying earnings.
Underlying earnings increased by €11 million to €9 million, mainly due to higher non-recurring tax items partly offset by increased administrative expenses.
Adjusted earnings increased by €25 million to €-19 million mainly driven by the increase of underlying earnings and lower impairments on equities.
Adjusted earnings increased by €24 million to €3 million due to higher underlying earnings and lower equity impairments.
Net income increased by €17 million to €-4 million mainly due to higher adjusted earnings.
Underlying earnings, adjusted earnings and net income increased by €4 million (+15%) to €28 million driven by more favorable run-off developments.
In spite of uncertainties around the macro-economic context and taking into account the evolution of the regulatory framework,
AXA should benefi t from favorable trends in the insurance and asset management markets, its leading brand, innovative products and improving quality of service.
It also means that data in one of the two periods being compared were restated for the results of acquisitions, disposals and business transfers (constant structural basis) and for changes in accounting principles (constant methodological basis).
before the impact of: (i) exceptional operations (primarily change in scope and discontinued operations); (ii) integration and restructuring costs related to material newly acquired companies; (iii) goodwill and other related intangibles; and
Derivatives related to invested assets: ■ Include all foreign exchange derivatives, except the ones related to currency options in earnings hedging strategies which are included in underlying earnings; ■ Exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy; ■ And also exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds, for which cost at inception, intrinsic value and pay-off fl ow though adjusted earnings, and only time value fl ows through net income when there is no intention to sell the derivatives in the short term (if not, fl ows through adjusted earnings).
(including interest charges and foreign exchange impacts related to perpetual debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares.
Diluted earnings per share (diluted EPS) represent AXA’s consolidated earnings (including interest charges and foreign exchange impacts related to perpetual debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares, on a diluted basis (that is to say including the potential impact of all outstanding dilutive stock options being exercised performance shares, and conversion of existing convertible debt into shares, provided that their impact is not anti-dilutive).
The calculation is prepared with the following principles: ■ For net income ROE: Calculation is based on consolidated fi nancial statements, i.e. shareholders’ equity including perpetual debt (“Super Subordinated Debts” TSS/“Perpetual
TSS/TSDI; ■ For adjusted and underlying ROE: • all perpetual debts (TSS/TSDI) are treated as fi nancing debt, thus excluded from shareholders’ equity,
(iii) the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the related policyholders’ participation (see above)
(iv) change in URR (Unearned Revenue Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin analysis.
■ For investment contracts without DPF: (i) deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines “Fees & Revenues” and “Net Technical Margin”; (ii) change in UFR (Unearned Fees Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying
Underlying Fees & Revenues include: (i) revenues derived from mutual fund sales (which are part of consolidated revenues); (ii) loading charged to policyholders on premiums/deposits and fees on funds under management for separate account
(unit-linked) business; (iii) loading on (or contractual charges included in) premiums/
deposits received on all non unit-linked product lines; (iv) deferral income such as capitalization net of amortization of
Costs (DAC) and net rights to future management fees only for investment contracts without DPF; (iv) administrative expenses; (v) claims handling costs; (vi) policyholder bonuses if the policyholder participates in the expenses of the company.
operating margin, where “Underlying” operating margin is the sum of (i) Underlying Investment margin; (ii) Underlying Fees and revenues, and (iii) Underlying Net technical Margin (all items defi ned above).
Current accident year loss ratio net of reinsurance is the ratio of: (i) current year claims charge gross of reinsurance + claimshandling costs + result of reinsurance ceded on current accident year excluding the recurring interests credited to the insurance annuity reserves; to
Underlying expense ratio is the ratio of: (i) underlying expenses (excluding claims handling costs); to
Underlying Cost Income Ratio: (general expenses including distribution revenues)/ (gross revenues excluding distribution revenues).
Note 4 to the consolidated fi nancial statements included in Part 4 of this Annual Report which is covered by the Statutory Auditor’s
Liquidity management is a core part of our fi nancial planning including our debt profi le schedule and, more broadly, our capital allocation process. Our liquidity resources result principally from the operations of our Life & Savings, Property & Casualty and
Over the past several years, AXA has expanded its core operations
The Company and each of its major operating subsidiaries are responsible for fi nancing their operations. The Company, as the holding company for the AXA Group, coordinates these activities and, in this role, participates in fi nancing the operations of certain subsidiaries. Certain of AXA’s subsidiaries, including
(or other Group companies) must therefore take into account these constraints as well as potential future regulatory changes.
Cash positions also fl uctuate as a result of cash-settled margin calls from banks relating to collateral agreements on derivatives, and the Company’s statutory (parent only) results may be impacted by unrealized gains and losses on derivatives used to hedge currency or other risks. The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating expenses.
The liquidity of the Group’s insurance operations is affected by, among other things, the overall quality of AXA’s investments and the Group’s ability to liquidate its investment assets to meet policyholder benefi ts and insurance claims as they fall due.
The investment strategy of AXA’s Life & Savings subsidiaries is designed to match the investment returns and estimated maturity of their investments with expected payments on their insurance contracts. Entities regularly monitor the valuation and duration of their investments and the performance of their fi nancial assets. Financial market performance may affect the level of surrenders and withdrawals on life insurance policies, as well as projected immediate and long-term cash needs. As a result of close monitoring of surrenders rates on a weekly basis,
As at December 31, 2009, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €18,210 million, net of bank overdrafts of €1,356 million; ■ An improved debt profi le with (i) a total net fi nancial debt mostly subordinated and maintained with a long maturity profi le, with €2.3 billion debt repayments over the next three years out of a total outstanding net amount of €13.5 billion, taking into account the fi rst date of step-up calls on subordinated debt, and (ii) debt ratios consistent with strong rating requirements
(debt gearing: 26% (1) at year-end 2009, versus 35% at yearend 2008; interest coverage: 7.9x (2) at year-end 2009, versus 8.5x at year-end 2008); ■ The Group’s fi nancial strength giving it broad access to various different markets via standardized debt programs: for example, at the end of 2009, an envelop of €5 billion of French commercial paper, of $1.5 billion of US commercial paper and a €12 billion program under EMTN documentation.
(i) a regular monitoring of the liquidity position in terms of resources
(monthly monitoring of liquidity resources including government bonds and a part of the equity and corporate bond portfolio) and requirements (monthly monitoring of surrenders’ rate for each local entity and consolidated view at Group level), (ii) confi rmed undrawn credit lines for €8.8 billion at year-end 2009, up €2.7 billion from year-end 2008, and (iii) a liquidity emergency plan in place designed to deal with liquidity crises that may arise, which can provide short term liquidity of approximately €27 billion of assets eligible for European Central Bank tenders (of which €25 billion immediately available) at year-end 2009, representing an increase by respectively €8 and €10 billion compared to yearend 2008, creating a very large alternative source of refi nancing.
On a consolidated basis, subordinated debt (including derivative instruments) totaled €6,352 million after taking into account all intra-group eliminations and excluding perpetual debts (TSS/
TSDI, which are included in shareholders’ equity, as described in Note 1.12.2 of Part 4 – consolidated fi nancial statements ), compared to €6,734 million at December 31, 2008.
The decrease of €382 million, or €-379 million on a constant exchange rate basis, mainly resulted from the €-418 million change in market value of currency swaps and interest rate swaps at AXA SA.
Movements in these items are described in Note 16 of Part 4
On a consolidated basis, AXA’s total fi nancing debt outstanding amounted to €2,937 million at December 31, 2009, a decrease of €3,627 million from €6,564 million at the end of 2008. On a constant exchange rate basis, the decrease was €3,622 million, mainly due to AXA SA’s repayment of commercial paper
(€4.6 billion), partly offset by the issuance of a new senior notes of €1,000 million under favorable market conditions.
Movements in this item are described in Note 16 of Part 4 –
At December 31, 2009,other debt instruments issued totaled €951 million, down from €966 million at the end of 2008. The decrease of €15 million resulted mainly from €30 million decrease of commercial paper from AllianceBernstein and €135 million decrease from Australian and New Zealand business as the contribution of held for sale operations are stated as separate asset and liability in the consolidated statement of fi nancial position as at December 31, 2009, which were partly offset by €98 million increase at AXA SA level and €84 million increase from CDOs.
At December 31, 2009, other debts owed to credit institutions totaled €4,266 million (including €1,356 million of bank overdrafts), down €1,444 million compared to €5,710 million at the end of 2008 (including €1,415 million of bank overdrafts). The decrease was attributable primarily to a €1,413 million decrease at AXA SA related to margin calls from banks under collateral agreement.
Dividends paid to the Company by its subsidiaries in 2009 in respect of the 2008 fi nancial year totaled €2,718 million (2008: €2,674 million, 2007: €2,178 million), of which approximately €295 million was in currencies other than the Euro (2008: €392 million, 2007: €213 million). The €44 million increase in dividends in 2009 was mainly driven by a €24 million increase in dividends received from the Group’s European subsidiaries to €2,352 million, including a €1,250 million increase from AXA
France Assurance to €1,987 million (of which €900 million paid in shares), and partly offset by a €1,053 million decrease from AXA
As a holding company, AXA SA is not subject to restrictions on dividend payments, provided that its accumulated profi ts are suffi cient to cover them and that the Group solvency ratio does not decrease below 100% after dividend payment in cash. However, many Group subsidiaries, particularly its insurance subsidiaries, are subject to restrictions on the amount of dividends they can pay to their share holders. For more information on these restrictions, see Note 28.3 of Part 4 – consolidated fi nancial statements .
The Company anticipates that cash dividends received from operating subsidiaries and other fi nancing sources available to the
Company will continue to cover its operating expenses (including interest payments on its outstanding debts and borrowings) and dividend payments during each of the next three years. AXA
expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash fl ow remaining after payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses as well as future issues of debt and equity instruments .
Dividends paid to AXA SA’s shareholders in 2009 in respect of the 2008 fi nancial year totaled €836 million, or €0.40 per share, versus €1.20 per share paid in 2008 in respect of the 2007 fi nancial year (€2,473 million in total). All of these dividends were paid in cash.
The Company’s operating insurance subsidiaries are required by local regulations to maintain a minimum solvency margin.
Directive 2002/87/EC of December 16, 2002. France transposed this directive through an ordinance dated December 12, 2004, which introduced the notion of fi nancial conglomerate into the
The various components of what the Group considers as available capital are determined in accordance with these regulatory requirements under Solvency 1, which are not yet harmonized throughout Europe while waiting for Solvency 2. At December 31, 2009, available capital amounted to €37.7 billion (€28.1 billion at
December 31, 2008 and €31.0 billion at December 31, 2007) of which: (i) consolidated shareholders’ equity after dividend proposal: €39.4 billion (€34.7 billion at December 31, 2008 and €33.8 billion at December 31, 2007), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and undated subordinated debt; (ii) gross unrealized capital gains and other: €14.0 billion
December 31, 2007); (iii) admitted subordinated debt: €11.0 billion (€11.0 billion at
AllianceBernstein as it is part of its net consolidated book value) of which €24.5 billion (€25.9 billion at December 31, 2008 and €24.5 billion at December 31, 2007) and less the net consolidated book value of its equity interests in credit institutions, investment companies and other fi nancial institutions: €4.4 billion (€4.6 billion at December 31, 2008 and €4.9 billion at December 31, 2007).
Company to ensure the continuity of its activities in the event its fi nancial position deteriorates.
Management closely monitors the Group’s ratings and currently expects that these ratings should remain at levels suffi cient for the Company and its insurance subsidiaries to compete effectively. Given continuing adverse fi nancial market and general economic conditions, however, management cannot predict with any degree of certainty the timing and/or magnitude of future ratings actions.
(ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our cost of obtaining reinsurance, (v) negatively impacting our ability to obtain fi nancing and/or increasing our cost of fi nancing, (vi) triggering additional collateral requirements under certain agreements to which we are party, (vii) harming our relationships with creditors or trading counterparties and/or (viii) adversely affecting public confi dence in us. Any of these developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition.
occurrence of certain events (e.g. absence of dividend payment voted in the preceding Annual Shareholders’ Meeting or receipt by the Company or by certain of its principal subsidiaries of a regulatory demand to restore their applicable minimum solvency margin level). Payment of deferred interest becomes due in certain specifi ed cases (e.g. payment of a dividend, notifi cation of the end of a regulatory demand to restore solvency, liquidation or redemption of the TSDI).
In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions. A failure of any of the
Shareholders’ Meeting that will be held on April 29, 2010. The dividend will be payable on May 6, 2010 with an ex-dividend date of May 3, 2010. For individuals whose fi scal residence is in
France, this dividend gives rise to a 40% tax relief equal to €0.22 per share. These individuals may, barring certain exceptions, opt to have an 18% fl at deduction at source, leading to the loss of the 40% tax relief mentioned earlier. The 12.1% welfare taxes
(CSG, CRDS and welfare deduction) due by the persons who are deemed to be French residents for tax purposes are, in any case, paid at the date of the dividend payout.
MEDEF in a report dated October 2003 and recommendations dated January 2007 and October 2008 with respect to the compensation of executive directors of listed companies
This governance structure is designed to separate the powers and responsibilities of management from those of supervision.
On October 7, 2009, AXA announced that it intends to propose to the General Shareholders’ Meeting on April 29, 2010 a change in its corporate governance structure from a dual board structure
(Supervisory Board and Management Board) to an unitary board structure (Board of Directors).
In this context, the Supervisory Board approved on February 17, 2010 the proposed amendments of AXA’s Charter (statuts)
Company’s registered share capital; ■ P roposals for share repurchase programs to be submitted to shareholders at their General Shareholders’ Meetings; ■ F inancial operations that may lead to substantial changes in the fi nancial structure of the Company; ■ M ergers and acquisitions, whatever their form;
The guidelines governing the operation, organization and compensation of the Supervisory Board and its Committees are set forth in the Board’s Bylaws. The Bylaws detail, in particular, the powers and of the Supervisory Board and its Comittees.
The Supervisory Board meets as often as it deems necessary but not less frequently than once each quarter. Periodically
Prior to each meeting, Supervisory Board members receive documentation concerning matters to be reviewed, generally eight days in advance. In accordance with the Supervisory
Board or its Chairman on a regular basis about the Company’s fi nancial condition, cash position and commitments as well as any signifi cant events or transactions involving the Company or the Group.
Pursuant to Article 10 of the Company’s Charter, the members of the Supervisory Board are appointed by the General
representative who is appointed by shareholders every four years from among a list of candidates selected by the Group’s employee-shareholders. No member of the Supervisory Board is appointed by the employees. The Supervisory Board does not have any non-voting members (censor ).
Each year the Supervisory Board assesses the independence of all of its members on the basis of the recommendations contained in the AFEP/MEDEF Code and, for the members of the Audit Committee, on the basis of the criteria set forth in the
Board determined that eleven of the fourteen Supervisory Board members were independent after assessing the criteria of the
AFEP/MEDEF Code: Mrs. Dominique Reiniche, Messrs. Jacques de Chateauvieux, Léo Apotheker, Norbert Dentressangle, Jean-
Suleiman. In addition, the Supervisory Board has determined that all the members of the Audit Committee meet the independence criteria set forth in the Sarbanes-Oxley Act.
Vice-Chairman of the Supervisory Board Chairman of Financière de Cuzieu (S.A.S. )
Financière Norbert Dentressangle 30 bis, rue Sainte-Hélène 69287 Lyon Cedex 02 – France
Building Capital 8 32, rue de Monceau 75008 Paris – France
Member of the Supervisory Board Chairman of the AFEP (Association Française des Entreprises Privées)
Member of the Supervisory Board Attorney at Law Lussan & Associés 250 bis, boulevard Saint Germain 75007 Paris – France
Member of the Supervisory Board Chairman and CEO of GDF SUEZ
Member of the Supervisory Board Chairman of the Board of Banca Monte dei Paschi di Siena S.p.A. (Italy)
Member of the Supervisory Board Chairman Europe of The Coca-Cola Company
The General Shareholders’ Meeting to be held on April 29, 2010 will be asked to vote on a change in the governance of the
Governance Committee, the appointment of the fi fteen following persons to the future Board of Directors: ■ Mmes. Wendy Cooper (representative of the employeeshareholders ) and Dominique Reiniche (independent),
Normale Supérieure (ENS-Ulm) and member of the Corps des Mines. From 1997 to 1999, she was in charge of budget of Telecommunication and Defense at the French Ministry of
Affairs of the French Prime Minister’s Offi ce. In 2002, she joined the Suez Group. She then held various positions: from 2002 to 2005, at Strategy & Development; from 2005 to 2007, director of Performance and Organisation; from 2007 to 2008,
Mrs. Suet-Fern Lee, born in 1958, graduated with a double fi rst in law from Cambridge University in 1980 and qualifi ed as a Barrister-at-Law at Gray’s Inn London in 1981. She was admitted to the Singapore Bar in 1982. She is President-Elect of the Inter-Pacifi c Bar Association (IPBA) and has been a council member of the International Bar Association. She is
Board focused, in particular, on the following matters: ■ R eview of the Group strategy; ■ E xamination of the 2008 fi nancial statements and the 2009 half year fi nancial statements; ■ R eview of the reports of the Supervisory Board Committees; ■ A uthorization of the main projects with respect to acquisitions and disposals; ■ R eview of the Group’s portfolio of businesses and activities; ■ R eview of the AXA corporate governance and of the proposed change in the Company’s governance structure from a dual board structure (Supervisory Board and Management Boad) to an unitary board structure (Board of Directors); ■ R eview of the appointment of Mr. Henri de Castries as
Chairman and CEO (Président Directeur Général) if the change in governance is approved by shareholders; ■ R eview of the Group’s management organization and the proposal to implement global business line heads of the
Chairman and member of the AXA Supervisory Board 58, French nationality.
BOURBON. From 1989 to 2001, he developed BOURBON into an international conglomerate and then listed the company on the Paris Stock Exchange in 1998. From 2001, he has refocused
(1) Except otherwise stated, the following information concerning the members of the Supervisory Board is updated as at December 31, 2009.
Vice-Chairman and member of the AXA Supervisory Board 55, French nationality.
Dentressangle Group, a transportation and logistics services specialist, and served as its Chairman until 1998. He is currently
Economics of the Hebrew University of Jerusalem. Before joining ABP Partners, Mr. Apotheker held various positions at McCormack & Dodge Europe and Swift. He also served as founding Chairman and COO of ECsoft, one of the largest
Apotheker has held various positions: from 1995 to 1997, he was
CEO and founder of SAP France and SAP Belgium; from 1997 to 1999, Chairman of SAP for the South-West Europe Region; from 1999 to 2002, Chairman of SAP EMEA (Europe, Middle East and
■ S.A.P. ITALIA Sistemi, applicazioni, prodotti in data processing S.p.A. (Italy)
Fordham Law School, New York, NY. From 1981 to 1987, she was Assistant Counsel to New York Governors Carey and
Vice- President & Associate General Counsel of AXA Equitable in charge of the Government Relations function, representing
French government cabinet positions with his last position being head of cabinet of the Secretary of State for Industry. In 1978, he joined Rhône-Poulenc to run the Saint-Fons plant, and was then promoted to Senior Executive Vice-President of Rhône-Poulenc for the Specialty Chemicals business unit. In 1984, he became Senior
Executive Offi cer of Péchiney and Chairman of Carbone Lorraine (in 1988). In 1991, he became Group Chief Executive Offi cer of Eridania
Management Board in 1997. He left PSA in February 2007. From
Offi cer of the Rhône-Poulenc Group that later merged with and into
AXA Millésimes (1) (S.A.S. ), permanent representative of AXA to the Management Committee
Executive Offi cer in 1994. In 1993, he became a non-executive director of AXA Equity and Law plc (Chairman, 1995) and in 1997 a non-executive director of AXA UK plc. Since September 2000,
(Philosophy Degree), University Paris I (Law Master), and of l’Institut d’É tudes Politiques de Paris. Mr. François Martineau has been Attorney since 1976. In 1981, he was “Secrétaire de la
Lyonnaise des Eaux. On May 4, 2001, Mr. Gérard Mestrallet was appointed Chairman and Chief Executive Offi cer of Suez. Since
Director or member of the Supervisory Board: ■ Crédit Agricole SA
Banca Monte dei Paschi di Sien a S.p.A. – Piazza Salimbeni, 3 – 53100 Sienna – Italy
Section of the Court of Sienna and then in 2000 Chairman of the Criminal Section of the Court of Sienna. In July 2001, he was appointed Chairman of the Monte dei Paschi di Siena
ROC Partners – 580 Park Avenue – New York, NY 10065 –
Investment Management. Mr. de Oliveira was also a member of the fi rm’s Management Committee since its inception in 1995.
Oliveira was the only executive from JP Morgan & Co. asked to join the Executive Committee of the new fi rm with operating responsibilities. Between 2002 and 2006, Mr. de Oliveira was an
Ms. Wendy Cooper, who is the employee shareholders representative on AXA’s Supervisory Board, is an employee of
AXA Equitable, which is a subsidiary of AXA in the United States.
The Supervisory Board conducts an annual self-assessment in order to review its composition, organization and functioning.
The conclusions of this self-assessment are discussed annually during a meeting of the Supervisory Board.
In early 2009, a formal self-assessment of the Board and its
Committees was carried out in two steps: (1) a detailed questionnaire was completed by all members of the Supervisory Board, and (2) the corporate secretary of the Supervisory Board and a representative of the Group Legal Department then interviewed each board member to discuss in further detail their responses as well as the
The Supervisory Board has four special Committees that review specifi c matters and report to the board: (1) the Audit Committee,
Committee are set forth in the Supervisory Board’s Bylaws and in a dedicated Charter for the Audit Committee. Each
Committees make recommendations to the Supervisory Board on matters within the scope of their responsibility but have no legal decision making authority.
On December 31, 2009, the Audit Committee had four members , all of whom were determined by the Supervisory Board to be independent in accordance with the criteria contained in the
AFEP/MEDEF Code and the Sarbanes-Oxley Act. In addition to assessing independence, the Supervisory Board also reviewed the qualifi cations of all Audit Committee members in terms of their fi nancial expertise and business experience and believes that all members have the requisite expertise, experience and qualifi cations to fulfi l their duties as Audit Committee members. The Committee members at December 31, 2009 were Messrs. Anthony Hamilton
The scope of the Audit Committee’s responsibilities is set forth in an Audit Committee Charter which defi nes the Committee’s principal missions, including the following: ■ O verseeing the activities and systems of internal control over events that expose the Group to signifi cant risk; ■ M onitoring the fi nancial reporting process, the systems of internal control over fi nancial reporting and the accuracy and integrity of the Group’s fi nancial reporting; ■ P roviding for recommendations on proposals for appointement of the Statutory Auditors as well as monitoring their independence; and
The Audit Committee met seven times in 2009. The average attendance rate was 96.43%. Within the framework of its principal missions such as described above, the Committee focused, in particular, on the following issues: ■ 2008 annual and 2009 half-year fi nancial statements; ■ Group Audit strategy;
The member of the Management Board in charge of Finance, the
Group Chief Financial Offi cer as well as the head of the Group
Offi cer as well as the head of the Group Legal Department attend the Committee’s meetings on a regular basis.
Board to be independent in accordance with the criteria set forth in the AFEP/MEDEF Code. At December 31, 2009, those members were: Messrs. Ramon de Oliveira (Chairman), Léo
The Finance Committee has the following principal missions: ■ T o examine and issue an opinion on any plan to sell real estate or equity stakes, when their value exceeds the delegations of power granted to the Management Board by the Supervisory
Meeting; • setting the dates of payment of the dividend and, if any, of interim dividends; ■ T o examine any plan to perform a fi nancial operation of signifi cant size for the AXA Group presented by the
Management Board, originating with a company that is directly or indirectly controlled by the Company, as well as the directs given in the management of the assets of the AXA Group and, more generally, any issue involving the fi nancial management of the AXA Group; ■ T o review the impact on capital and solvency at Group level of all signifi cant investments and the Asset and Liability
General Shareholders’ Meeting; ■ P roposal for payments of dividends; ■ E xamination of the project of the issue of preferred shares; ■ A cquisitions, restructurings and disposals; ■ R eview of the fi nancial authorizations; ■ R eview of the project for share capital increase with preferential subscription rights.
Committee had six members, four of whom were determined by the Supervisory Board to be independent in accordance with the criteria set forth in the AFEP/MEDEF Code. At
Board and its Chairman; ■ T o examine in depth certain governance matters (Supervisory
Board assessment…); ■ T o review the AXA Group Compliance and Ethics Guide.
The Ethics and Governance met four times in 2009. The average attendance rate was 83.33% and the Committee focused, in particular, on the following matters: ■ A ppointment of the Management Board; ■ E volution of the Group governance; ■ P rocess of selection of the future corporate offi cers; ■ C omposition of the Supervisory Board and its Committees; ■ I ndependence of the members of the Supervisory Board.
The Compensation and Human Resources Committee has the following principal missions: ■ T o issue proposals to the Supervisory Board for the fi xing of: • the compensation of the Chairman of the Supervisory Board,
• the value of the directors’ fees to be submitted to the
• the allocations of Company’s stock options and free allotments of shares to the members of the Management
Committee focused, in particular on the following matters: ■ A ppointment of the Management Board; ■ C ompensation paid to members of the Management Board and of the Executive Committee; ■ C ompensation policy and principles; ■ S tock option and performance share allocation; ■ D irectors’ fees for Supervisory Board members; ■ A pplication of the AFEP/MEDEF recommendations of
In order to facilate coordination among the Group’s different businesses and further leverage its size, it has been asked to
Messrs. François Pierson and Christopher Condron, members of the AXA Management Board, to assume group-wide responsibility on an international level for Property & Casualty insurance, and
Directors). In the event this proposal is approved by shareholders, the term of the existing Management Board members will terminate on April 29, 2010.
AXA Financial, Inc. 1290 Avenue of the Americas New York – NY 10104 United States
(a) On November 17, 2009, Mr. Claude Brunet resigned his mandate as a member of AXA’s Management Board.
(b) Mr. Alfred Bouckaert will retire at the time of the AXA General Shareholders’ Meeting to be held on April 29, 2010. As announced o n January 28, 2010, Mr. Jacques de Vaucleroy has been appo inted CEO of the Northern, Central and Eastern Europe Region (NORCEE) of AXA as of March 15, 2010 in replacement of Mr. Alfred Bouckaert.
Members of the Management Board devote substantially all of their professional time to the management of the Group and do not hold outside directorships or engage in professional activities outside the AXA Group that would interfere with or impede in any material way their availability to focus on the Group and its business.
Mr. Henri de Castries is a graduate of the É cole des Hautes É tudes
Commerciales (HEC) and obtained a law degree before completing preparatory studies at the É cole Nationale d’Administration (ENA).
In 1968, Mr. Alfred Bouckaert started working as a stockbroker with JM Finn & Co in London. In 1970, he joined Arthur
Andersen. In 1972, he joined the Chase Manhattan Bank where he held various commercial and credit posts before becoming
Chase’s Manager of Commercial Banking for Belgium. In 1984, he was appointed General Manager of Chase in Copenhagen
Lyonnais to head the bank’s European Operations. In 1999, he became Managing D irector of AXA Royale Belge and AXA also appointed him Country Manager for the Benelux (Belgium, The
Ukraine and AXA Insurance (Ukraine). Since September 2008, he has been a director of RESO (Russia).
Chairman of the Board of Directors: ■ AXA Belgium SA (Belgium)
Director of member of the Supervisory Board: ■ L’Ardenne Prévoyante (Belgium)
(1) Except o t herwise stated, the following information concerning the members of the Management Board is updated as at December 31, 2009.
Nationale d’Administration (ENA), he started his career in 1984 as commercial counselor for the French Consulate General in
Paris Dauphine, Mr. François Pierson joined AGP in 1974 and became Sales D irector. In 1990, he became General Manager of the South-East Region of AXA Assurances in France and director of Distribution. In 1995, he was appointed Deputy
Since November 2001, Mr. François Pierson has been a member of the AXA Management Board as well as Chief Executive Offi cer of AXA France and responsible of the Group’s Large Risks activities, AXA Assistance and AXA Canada. In January 2010,
Permanent representative of AXA to the B oard of AXA Cessions
For the year ended December 31, 2009, the French members of the AXA Management Board (Messrs. Henri de Castries,
Mr. Christopher Condron and Mr. Alfred Bouckaert, also members of the Management Board, have employment contracts, respectively, with AXA Equitable in the United States and AXA
The members of the Management Board do not hold any directorships or other positions with companies outside the AXA
Group, except for a limited number of external directorships which do not interfere with or impede in any material way their availability to focus on the Group and its business. Certain members of the Supervisory Board, however, are corporate offi cers and/or directors of companies that may have agreements or dealings from time to time with the AXA Group including extensions of credit, purchases of securities (for their own account or for third parties), underwriting of securities and/or furnishing of other types of services or goods. These agreements or dealings are generally fully negotiated and performed on arm’s length terms and conditions. Consequently, AXA does not believe these agreements or dealings give rise to any confl icts of interests between (i) the duties to AXA of the Supervisory Board and Management Board members and (ii) the private interests and/or other duties of these individuals.
Board was selected, except for Mr. Giuseppe Mussari who was proposed for appointment to the AXA’s Supervisory Board pursuant to the terms of a bancassurance partnership agreement entered into in March 2007 between AXA and Banca Monte dei Paschi di Siena (BMPS), an Italian bank. This agreement, among other matters, provides that the AXA shareholders shall appoint a representative of BMPS on AXA’s Supervisory Board.
To the best of the Company’s knowledge based on information reported to it, none of the members of its Management Board or
The Executive Committee’s principal mission is to review and consider the AXA Group’s strategy.
AXA has an Executive Committee which is an internal management Committee composed of the members of AXA’s
Management Board and other key senior executives from across the Group selected on the basis of their role in the organization
(central or local). The seven principal business units of the Group represented on the Executive Committee are: Mediterranean and
■ E xchanging ideas and information on key Group strategic orientations.
Mark Pearson Chief Executive Offi cer of AXA Life Japan and AXA Japan Holdings (Japan)
As of January 1, 2010, the Executive Committee was comprised of the following sixteen members, including eight non-French nationals:
(d) In the United Kingdom, the Property & Casualty brokers were deconsolidated (-1,688 salaried employees).
The general principles of AXA’s executive compensation policy are regularly presented to the Compensation & Human
Resources Committee of the AXA Supervisory Board. This policy applies to all executives of the Group and is adapted to local regulations under the supervision of the Boards of Directors and compensation c ommittees of the Company’s subsidiaries. The effective application of these principles is regularly reviewed by the Compensation & Human Resources Committee of AXA.
The executive compensation policy is designed to: ■ A ttract, retain and motivate the best talents; ■ D rive superior performance; ■ A lign compensation levels with business performance.
The compensation of Management Board members is approved by the Supervisory Board, based on the recommendation of its
Compensation & Human Resources Committee on the basis of specifi c strategic objectives set at the beginning of the year.
Variable compensation for the year 2002 paid in 2003 €1,419,277 €2,000,000 71%
Variable compensation for the year 2005 paid in 2006 €2,671,626 €2,000,000 134%
Variable compensation for the year 2008 paid in 2009 €1,846,304 €2,700,000 68%
For other members of the Management Board, the variable compensation is also determined on the basis of an individually predefi ned target amount and includes three factors: ■ Group performance, as measured by the underlying earnings per share, P&C revenues, New Business Value in Life & Savings and customer scope index; ■ P erformance of the business unit or functional area of responsibility, measured against objectives set at the beginning of the year; ■ T heir individual performance, evaluated on the basis of predetermined strategic objectives.
For Management Board members who have a functional responsibility (C. Brunet (1) and D. Duverne), the proportion of their variable compensation linked to the AXA Group results accounts for 40%, the proportion linked to the performance of their functional area of responsibility for 30% and the proportion linked to their individual performance for 30%.
The performance of operational entities is determined on the basis of a grid made of the following performance indicators: ■ U nderlying earnings; ■ T echnical operating cash fl ow (Life net infl ow); ■ P&C revenues; ■ New Business Value; ■ C ombined ratio; ■ E xpenses; ■ C ustomer scope index.
The assessment of the leadership behaviors is based on the dimensions of the AXA leadership model: ■ C atalyze high performance – Change and Team leadership; ■ B uild to grow – Strategic vision and Building capability; ■ F ocus on customers; ■ S hare to succeed; ■ L ead through actions – Results orientation and Living through
CEO North, Central & Eastern Europe Business Unit Belgium €980,000 €900,000 109% €750,000 €1,000,000 75% €1,000,000 €1,000,000 100%
In charge of Finance, Strategy and Operations France €1,400,415 €1,250,000 112% €1,052,337 €1,350,000 78% €1,485,480 €1,350,000 110%
Chairman & CEO AXA France France €1,180,000 €1,150,000 103% €988,174 €1,200,000 82% €1,188,967 €1,200,000 99%
the growth of the client scope index (82% in 2009 versus 81%
in 2008), and (iv) the underlying earnings per share for 2009
(€1.67, -7% from 2008). They also considered the signifi cant growth in the Group’s net income in 2009 (+283%) as well as in the dividend proposed to shareholders for 2009 (0.55 euro compared to 0.40 euro for 2008).
All the tables included in this section comply with the recommendations from AMF, MEDEF and AFEP on executive directors’ compensation as well as on stock options and performance shares.
All the amounts presented in this Section 2.2 are gross amounts.
standards. This is an historical value at the date of grant, calculated for accounting purposes as described in the Note 25.3.1 of the 2009 consolidated fi nancial statements included in Part 4 of the
SUMMARY OF COMPENSATION, OPTIONS AND PERFORMANCE SHARES/UNITS GRANTED TO EXECUTIVE COMMITTEE MEMBERS (EXCLUDING MANAGEMENT BOARD MEMBERS)
Mark Pearson CEO of AXA Life Japan and AXA Japan Holdings
(a) The amounts of 500,000 euros reported in 2008 and 250,000 euros reported in 2009 under “Value of performance units granted during the year” correspond to units of the AXA Investment Managers Long Term Incentive Plan.
(b) D. Carrel-Billiard has been appointed as a member of the Executive Committee as of January 1, 2009.
(c) J.L. Granier has been appointed as a member of the Executive Committee as of January 1, 2010.
(e) V. Weill has been appointed as a member of the Executive Committee as of January 1, 2009.
On April 1, 2008, the fair value of one option was €3.39 for options without performance condition and €2.89 for options with performance condtion, and the fair value of one performance share/unit was €16.98.
On June 10, 2009, the fair value of one option was €3.43 for options without performance condtion, €3.02 for options with performance condition, and the fair value of one performance share/unit was €9.23.
Fixed compensation Variable compensation Exceptional compensation Board fees Benefi ts in kind TOTAL
In addition, C. Condron benefi ts from a credit of fl ight hours from use of a private plane and F. Pierson benefi ts from airplane tickets between Paris and his domicile in Marseille.
Mark Pearson (c) CEO of AXA Life Japan and AXA Japan Holdings
(a) Compensation and benefi ts in kind paid to J. Dacey include benefi ts paid in respect of his expatriate status in France.
SUMMARY OF EXECUTIVE COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2009 (EXCLUDING MANAGEMENT BOARD MEMBERS)
SUMMARY OF EXECUTIVE COMMITTEE MEMBERS’ COMPENSATION FOR THE YEAR 2008 (EXCLUDING MANAGEMENT BOARD MEMBERS)
(c) Compensation and benefi ts in kind paid to N. Moreau include benefi ts paid in respect of his expatriate status in the UK.
(d) Compensation and benefi ts in kind paid to M. Pearson include benefi ts paid in respect of his expatriate status in Hong-Kong and in Japan.
The members of the Supervisory Board, except for its Chairman, do not receive compensation from the Company, with the exception of a fee for attending meetings. The amount of directors’ fees paid to each AXA’s Supervisory Board member is indicated in the table below.
The overall amount of directors’ fees to be paid is determined by the shareholders, in accordance with applicable laws, and apportioned by the Supervisory Board to its members in accordance with its Bylaws: ■ H alf of the amount of directors’ fees is distributed evenly among members of the Supervisory Board as a fi xed component, with the Chairman and Vice-Chairman each receiving a double fee; ■ A portion of the remaining amount is distributed among members of the Supervisory Board in proportion to their actual attendance at the meetings of the Supervisory Board, with the
Chairman and Vice-Chairman each receiving a double fee; ■ T he remaining amount is allocated by the Supervisory Board to the various special c ommittees and distributed among their members in proportion to their actual attendance at c ommittee meetings, with the c hairmen of c ommittees receiving a double fee.
In addition of its directors’ fees, Mr. Jacques de Chateauvieux receives as Chairman of the Supervisory Board an annual gross compensation of €230,000.
Since 1989, AXA has promoted a stock options program, for its directors, offi cers and employees in France and abroad, aimed at rewarding their performance and aligning their interests with those of the Group by linking them to AXA’s stock performance over the long term.
Meetings, the Supervisory Board approves all stock options programs prior to their implementation.
AXA Financial in the United States, which consisted of purchase options on ADRs.
Group are published. As such, in 2009, the annual consolidated earnings were published on February 19, 2009 and the options grant took place on March 20, 2009. The strike price, which was supposed to be equal to the average of the share price during the 20 trading days before the grant date, was €7.54.
Supervisory Board, to set the strike price at €10.00, representing a 33% premium. Furthermore, for stock options granted to
Options may be granted during the year in the United States to newly-hired or newly-promoted employees or when the performance measures that give rise to option grants are available after the fi rst quarter of the year.
■ I mportance of the individual within the position ➮ retention
Management Board to ensure coherence and fairness. Individual grants of options are then decided by the Management Board, provided that grants to members of the Management Board shall receive the prior approval of the Supervisory Board, acting on the recommendation of its Compensation & Human Resources
Executive Committee members, and since 2007 with respect to any benefi ciary receiving a minimum of 5,000 options, are associated with a performance condition: the last tranche, i.e.
Inc. at a price of $12.00 to 9 benefi ciaries in the United States.
The portion of options granted in 2009 to the members of the
As at December 31, 2009, 9,567 AXA employees owned 81,393,880 outstanding options, representing 3.55% of the share capital on the same date (disregarding the dilution related to the exercise of these options), and 1,445 employees in the
The fi rst 10 employees benefi ciaries 672, 928 - 160, 253 55, 145
Total number (a) of shares to be subscribed, from which to be subscribed by : 10,725,180 496,049 8,854,652 3,697,059
05/03/2002 05/03/2002 05/03/2002 04/20/2005 04/20/2005 04/20/2005 06/06/2005 06/27/2005 07/01/2005 09/21/2005 03/31/2006 03/31/2006 06/06/2007 06/27/2007 07/01/2007 09/21/2007 03/31/2008 03/31/2008 06/06/2015 06/27/2015 07/01/2015 09/21/2015 03/31/2016 03/31/2016
Total number (a) of shares to be subscribed, from which to be subscribed by: 8,205 8,056,370 1,240,890 6,004
04/20/2005 04/20/2005 04/20/2005 04/20/2005 04/20/2005 04/20/2005 05/10/2007 05/10/2007 05/10/2007 09/24/2007 09/24/2007 11/19/2007 05/10/2009 05/10/2009 05/10/2011 09/24/2009 09/24/2011 11/19/2009 05/10/2017 05/10/2017 05/10/2017 09/24/2017 09/24/2017 11/19/2017 04/22/2008 04/22/2008 04/22/2008 04/22/2008 04/22/2008 04/22/2008 05/19/2008 09/22/2008 09/22/2008 11/24/2008 03/20/2009 03/20/2009 05/19/2012 09/22/2010 09/22/2012 11/24/2012 03/20/2011 03/20/2011 05/19/2018 09/22/2018 09/22/2018 11/24/2018 03/20/2019 03/20/2019
Total number (a) of shares to be subscribed, from which to be subscribed by: 114,324 22,291 2,137,462 53,237
The fi rst 10 employees benefi ciaries 84,309 20,317 615,165 47,753
(b) Options that were initially granted by FINAXA that merged into AXA on December 16, 2005.
06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
In charge of Finance, Strategy and Operations 06/10/2009 subscription or purchase 06/10/2019 100% of options: EuroStoxx Insurance index
Representative of employee shareholders at the Supervisory Board 03/20/2009 subscription or purchase 03/20/2019 -
Representative of employee shareholders at the Supervisory Board a) On November 17, 2009, Mr. Claude Brunet resigned his mandate as a member of AXA’s Management Board.
Stock options granted during the year by AXA or any eligible AXA Group’s subsidiaries, to the ten employees, outside management bodies’ members of the Company or of eligible AXA Group’s subsidiaries, who received the highest number of stock options (aggregate information) 617,470 15.13
Alfred Bouckaert CEO North, Central & Eastern Europe Business Unit 1,649,333 -
Denis Duverne In charge of Finance, Strategy and Operations 2,472,931 -
Grant criteria for Performance Units/Shares are similar to those used for stock options.
Units/Shares. This number will be used to calculate the actual number of units or shares that will defi nitely be acquired at the end of a 2-year acquisition period, under the condition that the benefi ciary is still employed by the AXA Group at that date; ■ E ach year during the acquisition period, half of the Performance
Units/Shares initially granted is subject to collective performance conditions measuring both the performance of the AXA Group and the benefi ciary’s operational business unit performance, based on pre-determined targets; ■ F or benefi ciaries in operating business units, their operational business unit performance carries a weighting of 2/3 while the AXA Group performance carries a weighting of 1/3. For benefi ciaries in Group support functions, the performance is measured at AXA Group level only; ■ I n 2004 and 2005, the performance indicators determined by the Management Board have been: • for the operational business units performance: underlying earnings and adjusted earnings,
Savings; ■ T he achievement of these performance targets determines the number of Units/Shares that will be acquired by the benefi ciary at the end of the acquisition period, subject to the benefi ciary being still employed by the AXA Group. The number of Units/
As far as Performance Units are concerned: ■ U nits acquired at the end of the 2-year acquisition period are valued on the basis of the average closing price of the AXA
Supervisory Board approves all Performance Shares programs prior to their implementation.
granted to the Management Board members each year as of 2009 may not exceed 20% of the aggregate number of Performance
At that date, a total of 902,288 units had been acquired by 2,046 employees. The settlement of these units was made partly in cash
At that date, a total of 608,296 shares had been acquired by 1,360 employees. These shares are subject to a 2-year restriction period until May 10, 2011.
The acquisition period of the Performance Shares plan launched on April 1, 2008 with a total of 1,401,587 Performance Shares granted to 1,566 benefi ciaries in France will end on April 1, 2010.
The shares acquired will be subject to a 2-year restriction period until April 1, 2012.
Performance Shares granted to 7 employees in France (the acquired share being restricted for another 2-year period, i.e.
A new Performance Shares plan was launched on March 20, 2009 and 1,528,418 Performance Shares were initially granted to 1,740 benefi ciaries in France. The 2-year acquisition period of this plan will end on March 20, 2011 and the acquired shares will be subject to a 2-year restriction period until March 20, 2013.
A second Performance Shares plan was launched on June 10, 2009 and 433,231 Performance Shares were initially granted to 8 benefi ciaries in France. The 2-year acquisition period of this plan will end on June 10, 2011 and the acquired shares will be subject to a 2-year restriction period until June 10, 2013.
(b) The 645,604 units acquired by 1,537 benefi ciaries of the March 26, 2004 plan have been settled as €7.8 million and $12.7 million in cash and 91,997 shares restricted until March 26, 2009.
In the table above all dates that are indicated shall read day/month/year.
(a) Performance Shares granted as a replacement for 250,306 Performance Units 2004 cancelled.
(c) The 461 Performance Shares of the May 10, 2007 Plan and the 506 Performance Shares of the April 1, 2008 Plan, acquired by anticipation, concern deceased benefi ciaries.
The numbers of Performance Shares indicated from April 1, 2008 plan onwards have been adjusted to take into account the impact of the share capital increase with preferential subscription rights of December 4, 2009.
Performance Units/Shares granted to the top 10 benefi ciaries (outside management bodies’ members)
Chief Operating Offi cer 06/10/2009 70,071 0.003% 646,755 06/10 /2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
In charge of Finance, Strategy and Operations 06/10/2009 92,198 0.004% 850,988 06/10 /2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
Chairman & CEO AXA France 06/10/2009 79,291 0.004% 731,856 06/10 /2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
The fair value of Performance Shares is determined in accordance with IFRS standards. This is an historical value at the date of grant, calculated for accounting purposes as described in Note 25.3.1 to the 2009 consolidated fi nancial statements included in Part 4 of this Annual Report. This value does not represent a current market value or other current valuation of these performance shares or the actual proceeds if and when the performance shares are acquired.
President & CEO of AXA Financial, Inc. 06/10/2009 139,035 1,283,293 10/06/2011 06/10/2013 - underlying earnings per share - P&C revenue - new business value Life
In charge of Finance, Strategy and Operations - - - - - -
Number of shares and number of units of mutual funds owned as of December 31, 2009
As proposed by the Management Board, the Supervisory Board has decided to implement as from January 1, 2007 a shareholding policy applicable to all members of the Management Board and of the Executive Committee.
AXA shares or ADRs or shares of listed Group subsidiaries, held directly or indirectly through mutual funds or similar investment vehicles, are taken into account for purposes of this Minimum
Requirement within a period of 5 years from (i) January 1, 2007 or (ii) the date of his/her fi rst appointment to the Management
Commercial Code, the Supervisory Board has decided that, as long as a Management Board member has not met his Minimum
Shareholding Requirement, all stock options and performance shares granted to him after January 1, 2007 will be subject to the following restrictions: ■ U pon each exercise of these stock options granted after
Requirement as at December 31, 2009, based on the AXA share value at that date (€16.54): Annual remuneration 2009 Shareholding requirement
prior to the earnings releases . These blackout periods generally commence about 30 days before its annual and semi-annual earnings releases. Depending upon the circumstances, these blackout periods may be declared at other times or may be changed in length.
To the best knowledge of the Company based on information reported to it, each of the Supervisory Board member held, as at
Number years Amount AXA shares ADR AXA AXA Shareplan units Alliance-Bernstein shares
I Transactions involving Company s ecurities completed in 2009 by Management Board and S upervisory B oard members
Detailed information about all of these transactions, as well as individual disclosures fi led in accordance with Articles 22322 and 223-25 of the AMF’s (Autorité des marchés financiers)
TRANSACTIONS INVOLVING COMPANY SECURITIES COMPLETED IN 2009 BY MEMBERS OF THE SUPERVISORY BOARD
Article 39 of the French Tax Code (Code général des impôts).
Under this scheme, a supplementary pension is paid to executives who retire immediately upon leaving the AXA Group, at age of 60 or older, and who have a minimum length of service of 10 years, of which at least 5 years as an executive. May also benefi t from the scheme, executives whose employment is terminated by the
Reduced rates shall apply for an executive seniority of less than 20 years. As an example, with 10 years of executive seniority, the supplementary pension allows to reach a global pension equivalent to 34% instead of 40%. This rate is reduced to 20%
Alfred Bouckaert, member of the Management Board, benefi ts from a contractual supplementary pension arrangement with
AXA Holdings Belgium providing for a capital at the age of 65 equivalent to N/40 x (25% T1 +75% T2) x 12.2221, where: ■ N = number of years of service; ■ T1 = annual Social Security ceiling in Belgium (€47,172 in 2009); ■ T2 = part of the fi xed salary exceeding T1.
The Company and its subsidiaries’ global commitments as regard to pension or retirement to the aforementioned executives was €36.3 million as at December 31, 2009.
Cadres de Direction de l’Assurance (CFE-CGC) and the Syndicat du Personnel de Direction des Sociétés d’Assurances et de
Christopher Condron, member of the Management Board and Chief Executive Offi cer of AXA Financial, Inc. and AXA
Equitable (together “AXA Equitable”) in the United States, benefi ts from a contractual clause with AXA Equitable stating that in case AXA Equitable terminates his employment for any reason other than gross misconduct, he would continue to receive compensation equivalent to his fi xed salary (currently
If the notice period is not served, he would receive from AXA
Holdings Belgium an indemnity equivalent to 24 months of compensation, calculated on the basis of his fi xed salary and variable compensation received during the past 12 months preceding the termination of his contract.
Indemnities or advantages due or likely to be due upon termination of functions
STATUS OF MESSRS. HENRI DE CASTRIES AND DENIS DUVERNE – COMPLIANCE WITH THE AFEP/MEDEF RECOMMENDATIONS
Messrs. Henri de Castries and Denis Duverne have decided to renounce their respective employment contracts in accordance with the AFEP/MEDEF recommendations. This renunciation will be effective following AXA’s General Shareholders’ Meeting on
Général or PDG) and Mr. Duverne would hold the position of
In connection with Mr. de Castries’ and Duverne’s decision to renounce their employment contracts in accordance with the AFEP/MEDEF recommendations, the Supervisory Board undertook a review of the consequences of this renunciation including with respect to the continuity of the social benefi ts
Castries and Duverne to renounce their employment contracts in accordance with the AFEP/MEDEF recommendations would not jeopardize the continuity of their accrued and future social benefi ts.
In this context, the Supervisory Board took the following decisions: ■ T he Supervisory Board authorized that, following the termination of their employment contracts, Messrs. Henri de Castries and Denis Duverne will continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement, etc.) on terms equivalent to those of all other director-level employees of the AXA Group in France; ■ T he Supervisory Board authorized a contractual severance benefi t for Messrs. de Castries and Duverne designed to replicate the benefi ts to which they are currently entitled as
AXA employees under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of new performance conditions in accordance with the
These commitments shall take effect upon the effective renunciation by Messrs. de Castries and Duverne of their respective employment contracts and will continue so long as they remain executive offi cers of AXA (including under renewed mandates); ■ Messrs. de Castries and Duverne also renounced the indemnities to which they are currently entitled, pursuant to the collective agreement dated 1993, as employees (i) at the time of their retirement (indemnités de départ en retraite) and
These commitments authorized by the Supervisory Board will be submitted to the approval of the next General Shareholders’
Group Company Savings Plan and are restricted from sale during a period of approximately 5 years (except specifi c early exit cases allowed by applicable laws). Employees’ personal investment is guaranteed by a bank, and employees also benefi t from a portion of the share appreciation, as compared to the non-discounted reference price.
The SharePlan 2009 program was carried out through a capital increase that took place in December 2009 and was open to almost all Group employees through voluntary contributions: ■ 30,995 employees took part in SharePlan 2009, representing 24.8% of eligible employees.
■ T he total amount invested was €393.7 million, as follows: • €26.7 million in the traditional plan, and
As at December 31, 2009, AXA employees and agents held 5.92% of the share capital and 6.84% of the voting rights. These shares are owned through mutual funds or directly, in the form of shares or ADRs.
AMF, and agreed to with an investment service provider, in compliance with market practices accepted by the AMF; b) (i) hedging stock options offered to some or all employees or corporate offi cers of the Company and/or affi liated entities or economic interest groups as defi ned in Article
former employees, corporate offi cers and general insurance agents of the Company or the AXA Group in connection with the implementation of any employee savings plan complying with the applicable laws and regulations, notably the Articles
L.3332-1 et seq of the French Labor Code, or all other employee savings plans, as well as carrying out any hedging transaction related to the employee savings plans referred to in (iv); c) holding shares for the purpose of subsequent payment or exchange in respect of potential external growth acquisitions, in compliance with the market practice accepted by the
AMF; d) delivering shares upon exercise of convertible, exchangeable or other securities giving a claim to the Company’s share capital by way of repayment, conversion, exchange, presentation of a warrant or in any other manner; e) canceling some or all of the repurchased shares, provided that the Management Board is duly authorized by the shareholders, under an extraordinary resolution, to reduce the capital through the cancellation of the shares acquired pursuant to a share repurchase program; or f) in general, performing all admissible operations, or to be subsequently admitted, by the applicable laws and regulations.
Share repurchase program submitted to shareholders approval on April 29, 2010
TABLE OF TRANSACTIONS MADE DURING THE CURRENT SHARE REPURCHASE PROGRAM (UNTIL JANUARY 31, 2010)
Number of shares purchased since the beginning of the program 13,477,626
Number of shares cancelled since the beginning of the program 101,617
Meeting held on April 22, 2008 (15th resolution) and at their
Between January 1, 2009 and April 30, 2009, 12,565,388 shares were purchased under this liquidity contract for an average weighted gross unit price of €10.35 and 15,465,388 shares were sold for an average weighted gross unit price of €10.26. Related transaction fees incurred over the same period amounted to approximately €90,000.
In addition, and in connection with the two share repurchase programs carried out pursuant to Article L.225-209 of the French
Company, equal to 0.38% of AXA’s share capital at the yearend closing date, acquired for an aggregate purchase price of €132,718,176.03 (with a par value of €2.29 per share).
(b) AXA Assurances IARD Mutuelle (11.08% of capital ownership and 17.41% of vot ing rights) and AXA Assurances Vie Mutuelle (3.05% of capital ownership and 4.79% of voting rights).
(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
Signifi cant changes in ownership of the Company’s share capital between December 31, 2007 and December 31, 2009 are set forth in the table below: As of December 31, 2009 (a)
As of December 31, 2009, to the best of the Company’s knowledge based on the information available to it, the Company had approximately: ■ 10,740 total registered holders of its ordinary shares (i.e. shareholders holding in nominative form); and
■ 89,072,633 ADSs outstanding, representing approximately 3.89% of the Company’s total outstanding shares.
I Related party transactions, e mployee s hareholders and c ross-s hareholding a greements
SharePlan 2009, and participating employees invested a total of more than €393 million, as follows: ■ €26.7 million in the traditional plan; and
Early redemption – The Company may purchase the bonds on any Stock Exchange or otherwise in accordance with applicable law, including by way of tender for purchase or exchange,
(b) As a result of certain fi nancing transactions (capital increases with preferential subscription rights, reserves distribution), the conversion conditions of AXA 2017 convertible bonds were adjusted on several occasions since their issue in 2000. During 2009, the conversion ratio was increased to 4.41 AXA shares with a par value of €2.29 for one convertible bond (see Euronext notice n° PAR_20091109_05426 published on November 9, 2009 and Euronext notice n° PAR_20091209_05954 published on December 9, 2009).
Management Board granted on July 1, 2007, 50 AXA shares to each employee of the AXA Group, with the exception of
The AXA Miles program resulted in a grant of 5,586,900 AXA
The 2005 agreement maintains the provisions of the prior agreement concerning minimal and stable cross-shareholdings.
Under the terms of this agreement, the AXA Group undertakes to hold at least 2,583,300 shares of Schneider stock and the
Agreements and commitments approved during the period from January 1, 2009 and February 17, 2010
It does not fall within the scope of our assignment to ascertain the potential existence of other agreements and commitments but rather, on the basis of the information that was supplied to us, to inform you, the shareholders, of the main features of those agreements of which we have been informed. It is not our responsibility to express an opinion on the utility or merits of such agreements. Pursuant to
We performed our work in accordance with the professional standards applicable in France. These standards consisted in the verifi cation of the consistency of the information we received with the basis documentation from which they are extracted.
Nature, purpose and conditions: On October 7, 2009, the Supervisory Board authorized an amendment to the supplementary pension scheme’s rule applicable to director-level employees (“Executives”) of the AXA Group in France and that includes certain members of the Company’s Management
This scheme, which has existed since January 1, 1992, has been modifi ed twice with effect from January 1, 2005 and from July 1, 2009.
Social Security ceilings; • 50% of the average gross compensation of the past 5 years preceding the retirement date, if this average is inferior to 8 annual
Nature, purpose and conditions: On February 17, 2010, the Supervisory Board acknowledged that Mr. Henri de Castries has decided to renounce his employment contract. This renunciation will be effective following AXA’s General Shareholders’ Meeting on April 29, 2010 which will consider AXA’s proposed change in the Company’s corporate governance structure in view of the adoption of a unitary board structure (Board of
Directors). Within this new structure, Mr. de Castries would hold the positions of Chairman and Chief Executive Offi cer (Président
Supervisory Board took the following decisions: • the Supervisory Board authorized the Company to take necessary commitments so that Mr. Henri de Castries continues, as executive corporate offi cer, to have social benefi ts (health insurance, life insurance, disability insurance, retirement, etc.) on terms equivalent to those of all other director-level employees of the AXA Group in France, and notably to amend accordingly the Group collective agreements for life, disability and retirement insurance and health insurance; • the Supervisory Board authorized a contractual severance benefi t for Mr. de Castries designed to replicate the benefi ts to which he is currently entitled as AXA employee under the 1993 collective agreement covering director-level employee of the insurance sector, but with the addition of new performance conditions in accordance with the AFEP/MEDEF recommendations.
The payment of the severance benefi t would also be subject to the three following performance conditions: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 65% of his variable compensation target; (2) evolution of the AXA share price at least equal to the DowJones
The amount of severance benefi t to be paid to the benefi ciary would be adjusted in accordance with the level of achievement against these performance conditions: (1)100% of the severance benefi t will be paid if at least 2 of the 3 performance conditions are met; (2) 40% of the severance benefi t will be paid if only 1 performance condition is met; and (3) no severance benefi t shall be paid if none of the performance conditions are met. Notwithstanding the foregoing, if only 2 of the 3 performance conditions are met, the amount of severance benefi t will be reduced by 50% if the performance condition (1) is not met or if AXA’s consolidated net income for the preceding fi scal year was negative.
These commitments shall take effect upon the effective renunciation by Mr. de Castries of his employment contract and will continue so long as they remain executive offi cers of AXA (including under renewed mandates).
This renunciation will be effective following AXA’s General Shareholders’ Meeting on April 29, 2010 which will consider AXA’s proposed change in the Company’s corporate governance structure in view of the adoption of an unitary board structure (Board of Directors).
Supervisory Board took the following decisions: • the Supervisory Board authorized the Company to take necessary commitments so that Mr. Duverne continues, as executive corporate offi cer, to have social benefi ts (health insurance, life insurance, disability insurance, retirement, etc.) on terms equivalent to those of all other director-level employees of the AXA Group in France, and notably to amend accordingly the Group collective agreements for life, disability and retirement insurance and health insurance; • the Supervisory Board authorized a contractual severance benefi t for Mr. Duverne designed to replicate the benefi ts to which he is currently entitled as AXA employees under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of new performance conditions in accordance with the AFEP/MEDEF recommendations.
Agreements and commitments approved in prior fi scal years that remained in force in 2009
In accordance with French Commercial Code, we have been informed that the following commitments and regulated agreements, approved in prior fi scal years, remained in force in 2009: With the BNP Paribas Group
On December 15, 2005 and after authorization by the AXA Supervisory Board on June 29, 2005, the AXA Group (AXA and its subsidiaries) and the BNP Paribas Group entered into an agreement that replaces the one in force since September 12, 2001, modifi ed by amendment as of October 26, 2004.
The agreement was made public by the AMF (Autorité des marchés financiers) on December 21, 2005.
On May 15, 2006, and after authorization by the AXA Supervisory Board on December 21, 2005, the AXA Group (the AXA Mutuelles,
AXA and its subsidiaries) and the Schneider Group entered into an agreement that provides for the maintenance of minimal crossshareholdings. Under the terms of this agreement, the AXA Group undertakes to hold at least 2,583,300 shares of Schneider stock and the Schneider Group undertakes to hold at least 8,816,681 shares of AXA stock. The number of shares held under this crossshareholding agreement will be adjusted as needed in order to refl ect the impact of capital transactions, including but not limited to free allotments of stock or share tenders involving the same company (stock splits or regrouping, etc.). In addition, the parties have consented to a reciprocal repurchase option in the event of a hostile takeover on either AXA or Schneider.
The table below sets forth, for the periods indicated, the reported high and low prices (closing and intraday) in Euro for the Company’s ordinary shares on Euronext Paris: Calendar Period Closing High
(a) Following the issue of new shares with preferential subscription rights closed by AXA in December 2009 (see Euronext notice n° PAR-20091109-05426-EUR published on November 9, 2009). Share prices prior to the listing of new shares were adjusted on the basis of the theoretical value of the right (see Euronext notice n° 2009-252 published on November 9, 2009).
The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris. The AXA ADSs, each representing one AXA ordinary share, are listed on the New York Stock Exchange (1).
The Bank of New York Mellon serves as depositary with respect to the Company’s ADSs traded on the NYSE. Each ADS represents the right to receive one ordinary share.
3 RISK FACTORS Certain disclosures about market risk and related matters 3.1 RISK FACTORS 178 3.2 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND RISK FACTORS 193
IFRS accounting standards. In presenting the risks set forth in this Section 3.1, management has prioritized the four categories of risks presented and the individual risks within each of these categories in a manner that corresponds to management’s current view as to the potential impact (from higher to lower) of the risk for the AXA Group. While the management devotes very substantial resources to risk management on an on-going basis as described in Section 3.2 of this Annual Report, the Group’s risk management activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Section 3.1.
Continuing diffi cult conditions in the global fi nancial markets and the economy may materially adversely affect our business and profi tability, and these conditions may continue
Our results of operations are materially affected by conditions in the global fi nancial markets and the economy generally. We have been affected by the fi nancial crisis and its aftermath during each of our last two fi scal years. A wide variety of factors including concerns over the availability and cost of credit, the stability and solvency of fi nancial institutions and other companies, future infl ation, energy costs, and geopolitical issues have contributed to increased volatility and diminished expectations for the economy in general and the markets going forward. These factors, combined with volatile oil prices, depressed real estate markets, volatile equity market values, declining business and consumer confi dence and the risks of increased future infl ation and unemployment, have precipitated a signifi cant economic slowdown in many of the countries where we do business.
The global fi xed-income markets continue to experience both volatility and limited market liquidity conditions, which have affected a broad range of asset classes and sectors. As a result, the market for fi xed income instruments has continued to experience increased price volatility, credit downgrade events, and increased probability of default. Global equity markets, while improved from 2008, continue to be volatile, with many major markets ending the year still down signifi cantly from their peak.
Management business, these adverse market conditions may impact the fl ow of investment capital into or from assets under management or supervision and could negatively impact the way customers allocate capital among money market, equity, fi xed income, or other investment alternatives.
Although we use hedging techniques to manage our exposure under certain of these guarantees, volatility in the fi nancial markets, combined with unanticipated policyholder behavior, may increase the cost of these hedges and/or negatively affect our ability to hedge certain of these risks, which may adversely affect our profi tability. For further risks related to our hedging techniques, see “Risks relating structure of our Group, the scope and nature of our business, and the products we offer – Our hedging programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate which may negatively impact our business, results of operations and fi nancial condition.”
represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. As at December 31, 2009 the Company’s consolidated solvency margin was 171% (taking into account the proposed 2009 dividend payment of €0.55 per share) which represented a €15.6 billion capital surplus at that date: (i) €22.1 billion of required capital (1), versus (ii) €37.7 billion of available capital (2). The Company’s year-end 2009 solvency margin is signifi cantly higher than its consolidated solvency margin at December 31, 2008 (127%) and at December 31, 2007 (154%). While management believes that consolidated solvency calculation methodologies and calculations are not entirely uniform and comparable across markets and between companies, the Company’s consolidated solvency margin is lower than the consolidated solvency margin ratios published by certain of the Company’s principal competitors. The Company’s consolidated solvency margin ratio is sensitive to capital market conditions (including the level of interest rates, the level of equity markets and foreign exchange impacts) as well as a variety of other factors. Adverse fi nancial market conditions would further negatively impact the Company’s consolidated solvency margin.
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view.
Insurance regulators have broad discretion in interpreting, applying and enforcing their rules and regulations with respect to solvency and regulatory capital requirements and, during periods of extreme fi nancial market turmoil of the type we have experienced over the past two years, regulators may become more conservative in the interpretation, application and enforcement of these rules which may involve them, for example, imposing increased reserving requirements for certain types of risks, greater liquidity requirements, higher discounts /
“haircuts” on certain assets or asset classes, more conservative calculation methodologies or taking other similar measures which may signifi cantly increase regulatory capital requirements. For example, in 2009, ACAM (Autorité de Contrôle des Assurances et des Mutuelles) undertook a review of Variable Annuity products sold in France as well as the Group’s hedging platforms and processes used to hedge certain risks associated with its
Variable Annuity business. ACAM’s review raised various issues including with respect to compliance of the French Variable
Annuity product with French legal requirements and certain aspects of AXA France’s statutory reserving methodology for its Variable Annuity business. Discussions with ACAM(3) on this review and actions to be undertaken by the Group in response are on-going. In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or, in extreme cases, putting a company into rehabilitation or insolvency proceedings. A failure of any of the
Company’s insurance subsidiaries to meet their regulatory capital requirements and/or a reduction in the level of their regulatory capital that may negatively impact their competitive position may also result in the Company having to inject signifi cant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and fi nancial position. For example, in 2008, the Company provided signifi cant amounts to its subsidiaries through loans, capital contributions or other mechanisms including approximately €2.44 billion loaned to its US subsidiary AXA Financial Inc.that was used to enhance the capitalization of AXA Financial’s insurance subsidiaries. In the current fi nancial market environment, management believes that its insurance subsidiaries may become increasingly dependent on the Company for capital resources and funding over the coming months.
In the context of the fi nancial crisis, management has developed various contingency plans designed to ensure that the Company’s consolidated solvency margin and the regulatory capital levels of its insurance subsidiaries remain well in excess of regulatory minimum requirements and at levels that leave the Company and its subsidiaries well positioned from a competitive point of view. These plans may involve use of reinsurance, sales of investment portfolio and/or other assets, measures to reduce capital strain of new business, issuance of preference shares or other measures. There can be no assurance, however, that these plans will be effective to achieve their objectives and any failure by the Company and/
(1) For this purpose, required capital is calculated based on formulas that take into account a variety of factors including (i) for Life & Savings business: specifi ed percentages of mathematical reserves (4% of mathematical reserves for business where investment risk is borne by the insurer and 1% of mathematical reserves for business where investment risk is borne by policyholders) adjusted by an entity specifi c retention rate plus an amount of capital at risk; and (ii) for Property & Casualty business, the highest amount of the following two results: 23% of the average cost of claims or 16% of the gross premiums written or earned, in each case, subject to various adjustments.
(3) As of March 9, 2010, the Autorité de contrôle des assurances et des mutuelles (ACAM) is replaced by the Autorité de contrôle prudentiel (ACP), a new authority resulting mainly from a merger of the Banking Commission (Commission bancaire) and the ACAM.
A2 counterparty credit rating on the Company and maintained its stable outlook. In March 2009, Fitch Ratings downgraded the fi nancial strength ratings of AXA’s principal insurance subsidiaries from AA to AA- (one notch) and also downgraded the Company’s senior debt from A+ to A- (two notches), subordinated debt from A to BBB+ (two notches) and short term debt from F1+ to
range, could have a variety of negative impacts on us including
(iv) increasing our cost of obtaining reinsurance, (v) negatively impacting our ability to obtain fi nancing and/or increasing our cost of fi nancing, (vi) triggering additional collateral requirements under certain agreements to which we are party, (vii) harming our relationships with creditors or trading counterparties and/
or (viii) adversely affecting public confi dence in us. Any of these developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition.
In addition, defaults by parties with which we have no direct contractual relation, such as a default by a credit insurer that has insured bonds, structured fi nance products or other securities we may hold in our investment portfolios, may adversely impact the value of those securities and potentially adversely affect the fi nancial markets more generally. These parties may default on their obligations due to bankruptcy, lack of liquidity, downturns in the economy or real estate market, operational failure or other reasons. Negative trends and investment climates in our major markets, such as those experienced in the course of the last two years, may result in an increase in impairments on our invested assets. There can be no assurance that any such losses or impairments of these assets would not materially and adversely affect our business and results of operations. For further risks relating to impairments taken on our investment assets, see “The determination of the amount of allowances and impairments taken on our investments requires use of signifi cant management judgment in certain cases, particularly for debt instruments, and could materially impact our results of operations or fi nancial position”. The default of a major market participant could disrupt the securities markets or clearance and settlement systems in our major markets, which could in turn cause market declines or volatility. A failure of a major market participant could also cause some clearance and settlement systems to assess members of that system or could lead to a chain of defaults that could adversely affect us. Even in the absence of an actual default, a perceived lack of creditworthiness of a major market participant may result in market-wide illiquidity or other disruptions that may adversely impact us and the fi nancial intermediaries (such as clearing agencies, clearing houses, banks, securities fi rms and exchanges) with whom we interact on a daily basis. For risks relating to defaults by reinsurers and retrocessionaires to which we have transferred part of our risks, see “Reinsurance may not be adequate to protect us against losses and we may incur losses due to the inability of our reinsurers to meet their obligations”.
In the normal course of business, AXA seeks to reduce losses that may arise from catastrophes or other events that cause unfavorable underwriting results through reinsurance. Under the reinsurance arrangements, other insurers assume a portion of the losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, ceded reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. W e evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound by the time their fi nancial obligation becomes due. The reinsurance market has become increasingly concentrated following recent mergers and acquisitions, which have reduced the number of
Our accounting principles and policy with respect to the determination of allowances and impairments on our investments is set forth in Note 1.7.2 “Financial i nstruments classifi cation”
Market conditions and other factors could adversely affect the carrying value of our goodwill, cause us to accelerate amortization of our DAC and VBI and/ or to derecognize deferred tax assets and deferred participation assets which could have a material adverse effect on our consolidated results of operations and fi nancial position
Euro, could have a material adverse effect on our consolidated results of operations, fi nancial position or cash fl ows through realized losses, impairments, and changes in unrealized gains and loss positions.
A sustained increase in the infl ation rate in our principal markets would have multiple impacts on AXA and may negatively affect our business, solvency position and results of operations
sustained increase in the infl ation rate in our principal markets would have multiple impacts on AXA and may negatively affect our business, solvency position and results of operations. For example, a sustained increase in the infl ation rate may result in an increase in market interest rates which may (i) decrease the value of certain fi xed income securities we hold in our investment portfolios resulting in reduced levels of unrealized capital gains available to us which could negatively impact our solvency margin position and net income, (ii) result in increased surrenders of certain Life & Savings products, particularly, those with fi xed rates below market rates, and (iii) require us, as an issuer of securities, to pay higher interest rates on debt securities we issue in the fi nancial markets from time to time to fi nance our operations which would increase our interest expenses and reduce our results of operations. A signifi cant and sustained increase in infl ation has historically also been associated with decreased prices for equity securities and sluggish performance of equity markets generally. A sustained decline in equity markets may (i) result in impairment charges to equity securities that we hold in our investment portfolios and reduced levels of unrealized capital gains available to us which would reduce our net income and negatively impact our solvency position, (ii) negatively impact performance, future sales and surrenders of our unit-linked products where underlying investments are often allocated to equity funds, and (iii) negatively impact the ability of our asset
management subsidiaries to retain and attract assets under management, as well as the value of assets they do manage, which may negatively impact their results of operations. In addition, in the context of certain Property & Casualty risks underwritten by our insurance subsidiaries (particularly “long-tail”