Intangible assets recognized in business combinations mainly include value of distribution agreements and customer related intangibles, including €1,436 million (net carrying value) assets with indefi nite useful life.
The recoverability of the value of the distribution agreement between AXA and Alpha Bank in Greece is tested by comparing the projected cash fl ows at the date of the purchase with the cash fl ows issued from the latest business plan. This comparison led to an acceleration of the amortization of the
Life and Savings intangible by €12 million in 2011 and by an additional €12 million in 2012 mainly because of the specifi c
Greek interest rates environment which led to revise upwards the discount rate. In 2013, there was no acceleration of amortization required.
(a) In 2013 includes €41 million from the 10 years distribution agreement signed with HSBC in Mexico and €16 million from the acquisition of W.P. Stewart by AllianceBernstein.
In 2012 includes €145 million from the distribution agreement with HSBC in Hong-Kong and Singapore.
(b) In 2012 includes the sale of Bluefi n Corporate Consulting.
Equity instruments designated as at fair value through profi t or loss (a) 6,326 6,326 1.04%
Non consolidated investment funds designated as at fair value through profi t or loss (a) 4,484 4,484 0.74%
Investments (excluding those backing contracts where the fi nancial risk is borne by policyholders) 450,039 443,853 73.24%
Debt instruments designated as at fair value through profi t or loss (a) (b) 29,861 29,861 4.93%
Investments (excluding those backing contracts where the fi nancial risk is borne by policyholders) 464,786 458,661 75.71%
Breakdown of the carrying value and fair value of investments in real estate properties at amortized cost, excluding the impact of all derivatives: (In Euro million)
As of 2013, the end of year balance of impairment on investment in real estate properties amounted to €1,062 million and the amortization balance amounted to €2,112 million. The impairment change for the period amounted to €172 million, of which €86 million Group Share.
Debt instruments (at cost) that are not quoted in an active market 6,431 6,538 6,431 141 33 6,010 6,203 6,010 232 39
Non consolidated investment funds available for sale 5,113 6,002 6,002 901 11 5,513 6,368 6,368 940 84
Debt instruments available for sale 9,607 9,625 9,625 136 118 8,539 8,615 8,615 250 174
Debt instruments (at cost) that are not quoted in an active market 1,275 1,275 1,275 - - 1,817 1,817 1,817 - -
Equity instruments available for sale 1,912 2,263 2,263 361 10 3,108 3,483 3,483 380 5
Equity instruments available for sale 14,134 17,421 17,421 3,395 108 12,655 15,241 15,241 2,637 52
(a) Net of impairment – including premiums/discounts and related accumulated amortization.
The table below sets out the debt instruments portfolio by issuer type, excluding macro-hedging derivatives and other derivatives but including the effect of related hedging derivatives (IAS 39 qualifying hedges or economic hedges). Details of the effect of derivatives are provided in Note 20.3.
Debt instruments (at cost) that are not quoted in an active market, the effect of derivatives (detailed in Note 20.3), loans and debt instruments backing contracts where the fi nancial risk is borne by policyholders are excluded from the table below.
Total Financial investments exposed to interest rate risk 29,344 122,176 262,452 413,972 31,261 121,876 276,574 429,712 9.6. EXPOSURE TO PRICE RISK
Equity instruments as of December 31, 2013 7,382 6,414 1,324 1,429 2,729 1,240 1,354 2,418 24,291
The Group is party of repurchase agreements and securities lending transactions under which fi nancial assets are sold to a counterparty, subject to a simultaneous agreement to repurchase these fi nancial assets at a certain later date, at an agreed price. While substantially all of the risks and rewards of the fi nancial assets remain with the Group over the entire lifetime of the transaction, the Group does not derecognize the fi nancial assets. The proceeds of the sale are reported separately. Interest expense from repurchase and security lending transactions is accrued over the duration of the agreements.
Additionally, the Group is party to total return swaps under which fi nancial assets are sold to a counterparty with a corresponding agreement that cash fl ows equal to those of the underlying assets will be transmitted back to the Group in exchange for specifi ed payments and any increases or declines in the fair value of the assets are borne by the Group.
The breakdown of fi nancial assets/liabilities not qualifying for derecognition was as follows: (In Euro million)
Carrying value of associated liabilities 1,625 24,418 3,766 2,047 28,346 2,606 9.8. NON CONSOLIDATED INVESTMENT FUNDS
Non consolidated investment funds mainly holding equity securities 2,018 286 2,305 1,636 265 1,900
Non consolidated investment funds mainly holding debt instruments 3,771 217 3,988 4,462 271 4,733
Other non consolidated investment funds 4,729 376 5,105 5,584 477 6,061
The amortized cost of non consolidated investment funds available for sales are as below: ■ funds mainly holding equity securities: €797 million in 2013 compared to €752 million in 2012; ■ funds mainly holding debt instruments: €1,542 million in 2013 compared to €1,498 million in 2012; ■ other funds: €3,049 million in 2013 compared to €3,649 million in 2012.
(d) Revaluation to fair value for instruments at cost include the macro-hedge and other derivatives.
Impairment – Non consolidated investment funds 1,141 81 (154) - (30) 1,038
(a) Mainly relates ot changes in the scope of consolidation and impact of changes in exchange rates.
Note 20.5) and assets backing contracts where the fi nancial risk is borne by policyholders is as follows: (In Euro million)
Fair value mainly based on an observable market data (level 2)
(2) values provided at the request of the Group by pricing services and which are not readily publicly available; ■ assets measured on the basis of valuation techniques including a varying degree of assumptions supported by market transactions and observable data.
Amounts presented in level 2 and 3 represent a variety of circumstances. A fi nancial instrument is regarded as not quoted in an active market if there is little observation of transaction prices as an inherent characteristic of the instrument, when there is a signifi cant decline in the volume and level of trading activity, in case of signifi cant illiquidity or if observable prices can not be considered as representing fair value because of dislocated market conditions. Characteristics of inactive markets can therefore be very different in nature, inherent to the instrument or be indicative of a change in the conditions prevailing in certain markets.
Assets such as certain unquoted debt instruments, some instruments issued on private markets such as Private Equity instruments or private loans were always considered as not quoted in active markets as an inherent characteristic of these investments and were included as Assets not quoted in active markets/No active markets in all periods presented. Valuations are based either on external pricing providers or internal models using techniques commonly used by market participants.
A majority of assets classifi ed in level 3 corresponds to Private
Financial investments and loans held to maturity - - - -
Investments in real estate properties at amortized cost - 25,090 - 25,090
Financial investments and loans at amortized cost 1,286 48,675 33,765 83,726
TOTAL FAIR VALUE OF INVESTED ASSETS AT AMORTIZED COST 1,286 48,675 33,765 83,726
The Group applies the IFRS 13 fair value hierarchy as described in Note 1.5. Specifi cs to the valuation of investments are further described in Note 9.10.1 and the same principles apply to the fair value of investments at amortized cost.
(a) Includes dividend distributions, changes in consolidation method and impacts of revaluation of assets in shareholders’ equity.
(c) This entity closes its full year accounts as of September 30.
At the end of 2013, fi nancial information of Neufl ize Vie was as follows (on a 100% basis): ■ total assets: €10,865 million (€9,929 million as of
Assurance Co. Ltd was as follows (on a 100% basis): ■ total assets: €2,580 million (€1,335 million as of December 31, 2012); ■ total liabilities (excluding shareholders’ equity): €2,046 million
(d) Following the approval by China Insurance Regulatory Commission (CIRC) in 2012, AXA Minmetals Assurance Company Limited restructured its shareholding and became ICBC-AXA Life insurance Co. Ltd, a joint-venture between Industrial and Commercial Bank of China Co. Ltd (ICBC), AXA and China Minmetals Corporation. As a consequence, AXA was diluted from 51% to 27.5%, with no change in the consolidation method as equity method.
Premiums earned not yet written 3,434 - 3,434 3,434 3,631 - 3,631 3,631
Receivables arising from direct insurance and inward reinsurance operations 14,452 (316) 14,137 14,137 15,322 (354) 14,968 14,968
Receivables arising from outward reinsurance operations 790 (78) 711 711 835 (89) 746 746
(c) Including €333 million deposits in the central banks in 2013 and €1,129 million in 2012.
The table above excludes cash held by consolidated investment funds in the “Satellite Investment Portfolio”, as defi ned in Note 1.8.2.
Cash and cash equivalent as of December 31 (b) 20,609 30,101
Net cash and cash equivalents decreased by €9,492 million compared to 2012 mainly due to: ■ Switzerland Life & Savings €-4,370 million mainly driven by a change in asset allocation as more cash was invested mainly in debt instruments; ■ France Life & Savings €-1,093 million mainly due to investments made in 2013 notably in equity, debt instruments and loans; ■ The US Life & Savings €-2,576 million mainly due to a decrease of cash fl ows from derivatives related to the guaranteed minimum benefi ts on Variable Annuity products refl ecting improved market conditions; ■ AXA Bank Europe €-877 million mainly due to the decrease of the settlement account with the National Bank of Belgium
(€-786 million); partly offset by: ■ the Company €+77 9 million essentially due to the positive impact of the reduction in the amount of margin calls under collateral contracts guaranteeing the counterparty risk on fi nancial instruments, positive cash fl ow from entities to the Company net of the dividend paid, partly offset by the reduction in outstanding commercial paper.
borrowing collateral receivables and payables; ■ €+352 million net cash related to changes in scope of consolidation, mainly following the sale of MONY Life
Net cash used in investing activities was €-7,475 million in 2012, mainly refl ecting: ■ €-5,849 million of net cash used in purchases and sales of fi nancial invested assets; ■ €-1,392 million of net cash impact of assets lending/
As of December 31, 2013 and December 31, 2012, undated subordinated debt recognized in shareholders’ equity broke down as follows: (In Euro million)
equity included net accumulated fi nancial expenses of: ■ €-2,410 million as of December 31, 2013; ■ €-2,125 million as of December 31, 2012.
AXA’s share capital and capital in excess of nominal value: ■ increase in capital of €309 million mainly following employee share offering (December 2012); ■ share-based payments for €49 million.
As of December 31, 2012, 1.6 million treasury shares backing contracts where fi nancial risk is borne by policyholders held in consolidated investment funds were not deducted from shareholders’ equity. Their total estimated historical cost was €32 million and their market value €21 million at the end of
The Statement of Comprehensive Income, presented as primary fi nancial statements, includes net income for the period, the reserve relating to the change in fair value of available for sale fi nancial instruments, the translation reserve, and actuarial gains and losses on employee benefi t obligations.
RESERVE RELATED TO CHANGES IN FAIR VALUE OF AVAILABLE FOR SALE FINANCIAL INSTRUMENTS INCLUDED IN SHAREHOLDERS’ EQUITY
Less unrealized gains and losses attributable to: Shadow accounting on policyholders’ participation (14,270) (20,116)
UNREALIZED GAINS AND LOSSES (NET OF TAX) – 100% – TOTAL 8,426 11,177
At December 31, 2013, most of the unrealized gains on assets available for sale related to the Life & Savings segment, leading to signifi cant movements in shadow policyholders’ participation.
In jurisdictions where participating business represents an important portion of contracts in force and where required minimum local policyholders’ share in the entities’ results (limited to investment or not) are signifi cant, the reconciliation between gross unrealized gains and losses on available for sale fi nancial assets and the corresponding net reserve recognized in shareholders’ equity were as follows as of December 31, 2013: (In Euro million)
Shadow accounting on Value of purchased Business In force - - (52)
Unrealized gains and losses (net of tax) – Equity accounted companies 22 - -
Minority interests’ share in unrealized gains and losses (c) (4) - -
Investments bought in the current accounting period and changes in fair value (a) (1,868) 6,659
Unrealized gains and losses (net of tax) 100% as of December 31 8,426 11,177
The positive impact in equity of actuarial gains and losses arising from employee defi ned benefi ts obligation was mainly explained by: ■ the increase in discount rates; ■ plan assets outperformance above the opening discount rate;
(€-157 million), partly offset by the UK (€+117 million) and the Company (€+82 million, driven by change in fair value of derivatives and debt hedging net investments in foreign operations).
The total impact of employee benefi ts actuarial gains and losses amounted to €-745 million (of which group share was €-740 million and minority interests was €-4 million) as of
The €12 million decrease in minority interests to €2,355 million was driven by comprehensive income and transactions with minority interests’ holders: ■ the comprehensive income for the period notably included the following: • Net income attributable to minority interests for €+130 million,
Liabilities arising from insurance contracts 288,632 51,114 8,661 348,407 302,560 50,569 9,249 362,378 of which measured at current assumptions (d) 6,058 - - 6,058 10,995 - - 10,995
Liabilities arising from insurance contracts where the fi nancial risk is borne by policyholders 125,593 - - 125,593 113,921 - - 113,921
Reinsurers’ share in unearned premiums reserves 31 406 183 619 3 374 195 572
Reinsurers’ share in claim reserves (a) 1,198 1,674 1,810 4,682 998 1,591 2,112 4,702
Reinsurers’ share in other reserves 356 4 - 360 374 (34) - 340
Reinsurers’ share in liabilities arising from insurance contracts 13,472 2,084 1,994 17,550 6,162 1,931 2,307 10,400
Note: Liabilities relating to unearned revenues and fees (see Note 7.3), to policyholders participation (see Note 14.8), and derivative instruments (see Note 20.4) are excluded from the table above. Reinsurer’s share in insurance contracts liabilities relating to policyholders’ participation (€155 million in 2013 and €139 million in 2012), as well as derivatives instruments (none in 2013 and 2012) are excluded from the table above.
The increase in reinsurers’ share in future policy benefi t reserves was mainly driven by the reinsurance in 2013 of a certain block of
Reinsurers share in liabilities arising from investment contracts where the fi nancial risk is borne by policyholders 4 5
Claim reserves as of January 1 35,483 7,760 43,243 34,423 8,138 42,561
Gross claims reserve as of January 1 (a) 36,626 8,018 44,645 35,579 8,388 43,967
Change in scope of consolidation and change in accounting method 101 30 131 (192) 7 (185)
Claim reserves as of December 31 36,154 7,330 43,485 35,483 7,760 43,243
Claim handling cost reserves as of December 31 1,090 253 1,344 1,143 259 1,402
Reinsurers’ share in total claim expenses 863 120 983 621 200 821
Reinsurers’ share in claim reserves as of December 31 1,674 1,810 3,484 1,591 2,112 3,704
The table below includes liabilities arising from insurance and investment contracts for the Life & Savings segment, whether or not the risk is borne by policyholders (i.e. including unit-linked business), but excludes unearned revenue and unearned fees reserves, liabilities arising from policyholders’ participation and derivative instruments relating to insurance and investment contracts.
Collected premiums net of loadings on premiums (+) 46,489 6,841 53,329 45,249 6,216 51,465
Surrenders, maturities and other claims and benefi ts paid net of charges and penalties (-) (46,394) (9,854) (56,247) (43,857) (8,484) (52,341)
Unit-Linked technical reserves value adjustment (+/-) 20,297 761 21,058 12,317 1,404 13,722
Change in reserves relating to technical and actuarial items (+/-) (b) (1,313) 2,901 1,588 6,101 2,406 8,507
(b) Notably includes “interests credited and policyholders’ participation credited to reserves”, “fees on account balance and investment management fees” and “change in reserves relating to other technical and actuarial items”.
Reinsurers’ share in change in reserves relating to technical and actuarial items (+/-) (b) (298) - (299) (191) 1 (190)
Impact of foreign currency fl uctuation (237) - (237) (79) - (79)
Reinsurers’ share technical reserves as of December 31 (a) 13,473 23 13,495 6,162 18 6,180
(Non Unit-Linked) – Liabilities arising from: Investment contracts with Discretionary Participation Features (DPF) measured according to existing accounting policies (a) (d) 33,850 36,350
(b) See Note 1.14.2. – Reserves measured according to IFRS 4.24 option which allows to evaluate certain portfolios with current assumptions.
The loss reserves development table shows movements in loss reserves between 2003 and 2013, based on previously applied accounting standards, in accordance with IFRS 4. All contracts concerned are insurance contracts as defi ned by IFRS.
The surplus (shortfall) of the initial reserve with respect to the re-estimated (gross) fi nal cost for each year represents, for a given year N, the difference between the amount shown in the second line (gross reserves for unpaid claims and claims expenses developed in 2013 adjusted for changes in exchange rates and scope of consolidation) and the amount shown in the fi nal diagonal under “Reserve re-estimated”.
LOSS RESERVES DEVELOPMENT TABLE: PROPERTY & CASUALTY AND INTERNATIONAL INSURANCE (EXCLUDING COLISÉE RE (EX-AXA RE))
Gross reserves for unpaid claims and claims expenses developed in 2013 adjusted for changes in exchange rates and scope of consolidation (a) 26,529 27,261 28,624 42,624 44,412 44,874 45,156 45,360 45,700 46,409 47,095
(a) In 2004, AXA Corporate Solutions Assurance US, Mosaic Insurance Company (ex AXA RE P&C Insurance Company) were transferred from Colisée RE (ex AXA RE) to “other international activities”. The reserves of AXA Corporate Solutions Assurance US were presented on an occurrence year basis and included in the Property & Casualty loss reserves development table. The reserves of Mosaic Insurance Company (ex AXA RE P&C Insurance Company) and Coliseum RE (ex AXA CS Reinsurance Company) were presented on an underwriting year basis and included in the Colisée RE (ex AXA RE) loss reserves development table.
Under the terms of the agreement, AXA retains exposure to any changes in the fi nal cost of claims occurring before
December 31, 2005. However, the proportional treaty set in place as part of the agreement between AXA RE and Paris Ré
protects AXA entirely from any claims occurring after January 1, 2006. Consequently, the table below shows the development of loss reserves recognized in AXA RE’s balance sheet at each year-end until December 31, 2005. Reserves recognized after that, which correspond to exposure assumed fully by Paris
Gross reserves for unpaid claims and claims expenses developed initially at the booking date (a) 4,200 3,314 4,523
Initial net claims reserves in excess of (less than) re-estimated net claims reserves as of December 31, 2013
(b) In 2004, AXA Corporate Solutions Assurance US, Mosaic Insurance Company (ex AXA RE P&C Insurance Company) were transferred from Colisée RE (ex AXA RE) to the “other international activities”. The reserves of AXA Corporate Solutions Assurance US were presented on an occurrence year basis and included in the Property & Casualty loss reserves development table. The reserves of Mosaic Insurance Company (ex AXA RE P&C Insurance Company) and Coliseum RE (ex AXA CS Reinsurance Company) were presented on an underwriting year basis and included in the Colisée RE (ex AXA RE) loss reserves development table.
Managers. Claims are managed by dedicated teams of experts who use a variety of claims payment including settlements, policy buy-backs and, in certain cases, litigation. In addition, they focus specifi cally on fi nal resolutions of exposures, either through commutations or other solutions.
At year-end 2013, key data relating to Asbestos claims were as follows: (In Euro million)
(a) Reserves at the end of the year/Average yearly payments over the last 3 years (excluding commutations).
As a result of those various changes and after allowing for movements in exchange rates, AXA held total reserves for asbestos exposure (net of reinsurance) of €976 million at yearend 2013.
The following table shows liabilities and assets arising from policyholders’ participation as of December 31, 2013.
The deferred policyholders’ participation liability and asset include the impact of shadow accounting (see defi nition in
Note 13.2.1, but also with regard to other temporary differences not necessarily linked to fi nancial assets. Note 13.2.1 also contains a focus on jurisdictions with signifi cant portions of participating business and where required minimum local policyholders’ share in the entities’ results are signifi cant. This
Note discloses for such jurisdictions unrealized gains and losses related to available for sale investments and related shadow accounting adjustments. Decrease in deferred policyholders’
The ta ble below shows the breakdown of projected payments and surrenders related to insurance and investment contracts
International Insurance. Actual maturities may differ signifi cantly from the estimates set out below, mainly because some of the contracts contain a surrender option controlled by the policyholder that may reduce their duration.
In Property & Casualty and International Insurance business, most reserves (91% as of December 31, 2013) are not discounted, with the exception of disability annuities and worker’s compensation liabilities that are deemed structured settlements and where the discount rate is revised regularly.
The estimated impact of the unlocking of discount rates relating to Life & Savings reserves was €1,603 million reserve decrease for 2013 (compared to €625 million reserve increase for 2012)
gross of policyholders’ participation, tax impacts and other shadow accounting impacts and was included in the income statement of the period.
14.10 EMBEDDED D ERIVATIVES MEETING THE DEFINITION OF AN INSURANCE CONTRACT
AXA sells insurance contracts that contain a variety of options and guarantees for contract-holders. These features are described in Note 4. They are not embedded derivatives which
This Note describes the features that are embedded derivatives and meet the defi nition of an insurance contract on a standalone basis. The primary features can be divided into two main categories: guaranteed minimum death benefi ts (GMDBs) or guaranteed minimum income benefi ts (GMIBs) offered on Unit-
GMDB and GMIB liabilities is based on models which involve numerous estimates and subjective judgments, including those regarding expected market rates of return and volatility, policyholders’ behaviour assumptions and GMIB election rates.
There can be no assurance that ultimate experience will not differ from management’s estimates. In addition to providing for risk through establishing reserves, AXA also manages the risk through a combination of reinsurance programs and active fi nancial risk management programs including derivatives.
I Note 15 Liabilities arising from banking activities 15.1. BREAKDOWN OF THE LIABILITIES ARISING FROM BANKING ACTIVITIES
Banking liabilities issued at fair value – Retail customers 1,690 1,690 1,062 1,062
The fair value option is used to measure certain debt from banking activities designated at fair value through profi t or loss (€1,690 million in 2013 and €1,062 million in 2012). The
Banking liabilities related to retail customers, corporate customers, and interbanking refi nance, are not traded in active markets and quoted prices are not available. However, given the short maturities of main liabilities arising from banking activities (see Note 15.2), the carrying amounts may be considered as reasonable proxies for fair values. Thus, the fair value of amounts displayed above for these instruments are considered to be level 3 fair values.
Other liabilities arising from banking activities relate to bonds issued with prices quoted regularly and publically available in active markets. As such, the fair values of these liabilities are considered as level 1 instruments.
In 2013, debt relating to investments under lending agreements and equivalent in banking activities amounted to €9,163 million
Macro-hedge derivatives and other derivatives related to liabilities arising from banking activities (1) (34) (103) (138) (3) (130) (71) (204)
Provisions for risks and charges included the following items: (In Euro million) December 31, 2013
(a) As described in Note 1.2.1, comparative information related to previous period was retrospectively restated for the amendments to IAS 19.
As of December 31, 2013, the “Other provisions for risks and charges” mainly included provisions for tax liability (€645 million)
Changes in provisions for risks and charges (excluding employee benefi ts and share-based compensation) are set out below: (In Euro million) 2013 2012 Restated (a)
Debt component of subordinated notes, 2.5% due 2014 (€) 2,122 2,043
Subordinated debt maturity below 10 years fi xed rate 98 126
Other fi nancing debt instruments issued (under €100 million) 185 220
Other fi nancing debt owed to credit institutions (under €100 million) 44 1
July 2023 and fl oating thereafter with a step up of 100 basis points), to anticipate the refi nancing of part of subordinated debt instruments maturing on January 1, 2014; ■ the repayment of €841 million Euro Medium Term Note maturing in 2013.
For the sensitivity to movements in interests rates, please refer to page 171 of the “Interest rates & Equity risk related to the operating activities of Group subsidiaries” Section.
Derivatives on fi nancing debt instruments issued (a) (53) (53) 1 1
Information on the fair value fi gures presented in this Note is provided in addition to information on carrying values and should be used with caution. On the one hand, these estimates are based on closing date parameters such as interest rates and spreads, which fl uctuate over time, and resulting in instantaneous values, and on the other hand because there are multiple possible methods to derive these estimates.
The table below sets out the contractual maturities of fi nancing debt (excluding the impact of derivatives detailed in Note 20.4).
Other debt instrument issued, notes and bank overdraft (b) 3,574 4,334
Debt relating to investments under lending agreements and equivalent (c) 20,909 24,397
Other debt instruments issued, notes and bank overdrafts (other than fi nancing debt) by issuance are described below: (In Euro million)
December 31, 2012, mainly due to decrease in commercial papers at the Company (€801 million) and at US Holdings
(€282 million), partly offset by an increase in bank overdrafts mainly in the Life & Savings segment (€486 million).
As of December 31, 2013, payables arising from direct insurance and inward reinsurance operations totaled €8,317 million, a decrease of €638 million compared to December 31, 2012 mainly due to decrease of brokers and general agents payables in the Property & Casualty segment.
As of December 31, 2013, payables arising from direct outward reinsurance operations totaled €12,227 million, an increase of €6,876 million compared to December 31, 2012 mainly due to increase in deposits and guarantees in the Life & Savings segment.
Payables arising from direct insurance, inward reinsurance and direct outward reinsurance operations are measured at amortized cost.
Income from operating activities, gross of tax expenses (excluding result from investments consolidated using equity method) 6,122 5,166
Impact of differences in tax rates and tax bases (558) (491)
Tax losses of prior years used in the current year without DTA recognized previously (19) (13)
Deferred tax assets recognized on tax losses of prior years (12) (51)
Derocognition of deferred tax assets on tax losses of prior years (b) 14 11
Impact of adjustments, decrease in value and other items (14) (27)
(b) Derecognition of DTA (Deferred Tax Assets) arising on tax losses is shown in “Tax losses impact”.
Deferred tax Assets/(liabilities) concerning: ■ Reserves relating to the fair value adjustment of available for sale assets 4,372 7,956 (3,584) (4,831)
■ Reserves relating to hedge accounting and other items (55) 101 (157) (95)
In the table above, the net deferred tax position corresponds to the difference between deferred tax assets (DTA) and deferred tax liabilities (DTL) carried on the Group’s consolidated statement of fi nancial position. Note that the breakdown of DTA/DTL disclosed in these tables corresponds to the deferred tax before the netting that occurs for balance sheet presentation purpose as required by IAS 12.
The change from net liability position €-2,115 million in 2012 to €-1,981 million in 2013 mainly came from a signifi cant decrease in unrealized capital gains on fi xed income assets.
Recognized Deferred Tax Assets (DTA) on tax loss carried forward by maturity and expiration date
DTA recognised on tax losses carried forward 283 285 274 202 269 78 281 543 - 2,216
DTA recognised on tax losses carried forward 9 3 52 23 14 1 59 619 1,436 2,216
DTA recognised on tax losses carried forward 204 177 255 617 108 140 163 498 - 2,160
The amount of the potential Deferred Tax Assets (DTA) which has not been recorded in the accounts at the end of the year as considered unrecoverable represented €514 million (€503 million in 2012) of which: ■ €447 million concerned unrecognized DTA on €1,889 million tax losses carried forward (€401 million DTA on €1,728 million tax losses carried forward in 2012). The major part of these losses has no maturity date (€1,669 million in 2013 and €1,447 million in 2012); ■ €68 million related to other unrecognized deferred tax assets (€101 million in 2012).
As of December 31, 2013, the notional amount of all derivative instruments totaled €403.3 billion (€459.2 billion at the end of 2012). Their net fair value as of December 31, 2013 totaled €-923 million (€-721 million at the end of 2012).
The notional amount of derivatives which is used to express the volume of instruments outstanding and to provide a basis for comparison with other fi nancial instruments most certainly overstates the level of activity and does not directly measure risk as it greatly exceeds the possible credit and market loss that could arise from such transactions. It does not represent the amounts that are effectively exchanged by the parties, and thus is not a measure of the Group’s exposure to derivative instruments. For example, the Group is exposed to credit risk in respect of its counterparties to the derivative instruments, but is not exposed to credit risk on the entire notional amounts. AXA
Moreover, regulatory developments will most likely continue to increase derivative hedging activities. Indeed, in a regime where the capital requirements are based on the value at risk over a one-year horizon of the marked-to-market balance sheet, the
Note 20.2.1): ■ notional amount of interest rates derivatives decreased by €-28.6 billion compared to 2012, mainly due to (i) reduced interest rate hedging associated with guaranteed minimum benefi ts on Variable Annuity products, mainly in the United
States as a result of improved market conditions and consistently with the 2012 reserves assumptions refi nements which reduced interest rate sensitivity, as well as in Japan in the context of the European Market and Infrastructure
In 2013 the notional amount of hedging derivative instruments as defi ned by IAS 39 (fair value hedge, cash fl ow hedge and net investment hedge) of the Group was €68.5 billion versus €44.6 billion in 2012. The net fair value recorded was €-856 million as of December 31, 2013, versus €-2,048 million in 2012.
As of December 31, 2013, the notional amount of interest rate derivative instruments totaled €250.4 billion (€278.9 billion at the end of 2012). Their net fair value as of December 31, 2013 totaled €722 million (€1,628 million at the end of 2012).
AXA mainly uses (i) interest rate Swaps (58% of total notional amount of interest rate derivative instruments), (ii) interest rate options (25%), and (iii) futures and forwards (15%).
& Savings (notional amount of €21.3 billion in 2013 versus €39.6 billion in 2012), Germany Life & Savings (notional amount of €17.5 billion in 2013 versus €21.9 billion in 2012), and in Japan Life & Savings (notional amount of €6.0 billion in 2013 versus €14.2 billion in 2012); (ii) manage duration gap and/or hedge convexity risk between assets and liabilities on the general account as a part of
Life & Savings (notional amount of €10.0 billion in 2013 compared with €10.0 billion in 2012), and Japan Life
Life & Saving for €0.8 billion (versus €1 .0 billion in 2012); (iii) hedge equity exposures relating to the Group investments in strategic shares (€1.1 billion compared with €2.5 billion in 2012).
One of the main objectives of currency derivatives instruments is to limit variations in net foreign currency-denominated assets resulting from movements in exchange rates in order to protect partially or in full the value of AXA’s net foreign-currency investments in its subsidiaries and thus reduce the variability of Group consolidated shareholders’ equity against currency fl uctuations, but also of others key indicators such as liquidity, gearing and solvency ratios. Notional amount of derivatives used by the Company to hedge the foreign currency exposure decreased from €47.7 billion in 2012 to €21.5 billion in 2013, as its derivatives portfolio was restructured with no major change on hedged volumes.
Currency derivative instruments are also used to hedge foreign exchange mismatch between assets and liabilities in insurance subsidiaries of the Group. While most of the operating units’
commitments are matched by assets denominated in the same currency, some entities may invest in foreign currency denominated assets to diversify their investments. This is the case mainly in (i) Switzerland using such contracts to hedge exchange rate risk arising from their investments in equities and debt instruments denominated in non CHF currencies (mainly € and US$) with a total notional amount of €31.4 billion in 2013 versus €29.0 billion in 2012, and (ii) Japan Life & Savings using future and forward foreign currency contracts to hedge exchange-rate risk arising from its investments in fi xedmaturity debt instruments denominated in non JPY currencies with a total notional amount of €13.3 billion in 2013 versus €17.1 billion in 2012.
In 2013, the notional amount of credit derivatives held by the
ALM strategy is implemented to compensate for the lack of depth or liquidity in some markets by taking a synthetic credit risk (notional amount of €10.1 billion in 2013 versus €11.3 billion in 2012).
(a) Carrying value, i.e. net of impairment, discount premiums and related amortization, including accrued interest, but excluding any impact of derivatives.
TOTAL LIABILITIES ARISING FROM INVESTMENT CONTRACTS 70,874 (22) 70,852 70,664 (56) 70,608
Instruments not quoted in an active market or n o active market
Derivative instruments relating to fi nancing debt, operating debt and other fi nancial liabilities - 211 - 211 - 553 - 553
Net value of derivative instruments – liabilities (2) 33 (1,003) - (970) 41 (1,666) - (1,625)
The Group mitigates counterparty credit risk of derivative instruments by contractually requiring collateral for the majority of derivative contracts. At December 31, 2013, the adjustment to the fair value of derivatives for non-performance risk was not material.
LIFE & SAVINGS 55,331 55,016 of which direct premiums 50,704 50,679 of which reinsurance assumed 3,158 2,893 of which fees and charges on investment contracts with no participation features 323 334 of which revenues from other activities 1,147 1,111
PROPERTY & CASUALTY 28,791 28,315 of which direct premiums 28,331 27,584 of which reinsurance assumed 403 671 of which revenues from other activities 57 59
(c) As described in Note 1.2.1, comparative information related to previous period was retrospectively restated for the amendments to IAS 19.
Life contracts (including endowment contracts) 22,090 154,664 1,008 22,442 160,166 1,315
Fees and charges relating to investment contracts with no participating features (b) 323 - 32,781 334 - 30,235
Contracts with fi nancial risk borne by policyholders (Unit-Linked) 16,016 125,593 36,925 15,232 113,921 34,063
(b) Relates to liabilities arising from investment contracts without discretionary participation features and investment contracts without discretionary participation features where the fi nancial risk is borne by policyholders.
TOTAL – PROPERTY & CASUALTY EXCLUDING INTERNATIONAL INSURANCE 28,832 7,322 1,013 77 37,245 13,869 51,114
TOTAL – PROPERTY & CASUALTY INCLUDING INTERNATIONAL INSURANCE 33,035 10,450 1,204 140 44,828 14,947 59,775
TOTAL – PROPERTY & CASUALTY EXCLUDING INTERNATIONAL INSURANCE 28,106 7,377 1,037 106 36,626 13,943 50,569
Net investment result (excluding fi nancing expenses) from the fi nancial assets of insurance Companies and Companies in other business segments (excluding revenues from the fi nancial assets of banks included in net revenues from banking activities) was as follows: (In Euro million)
Debt instruments designated as at fair value through profi t or loss (c) 1,061 - (541) - 519
Other assets held by consolidated investment funds designated as at fair value through profi t or loss 377 - 42 419
Non consolidated investment funds held for trading 2 - 33 - 35
The changes in investments impairment for available for sale assets include impairment charges on investments, and releases of impairment only following revaluation of the recoverable amount. Write back of impairment following investment sales are included in the net realized capital gains or losses on investments aggregate.
Increase/(write back) of tangible assets amortization - - - - - - - - - (19)
Charges relating to owner occupied properties 221 234 40 496 204 10 16 - 726 922
length of service and their salary in the fi nal years leading up to retirement.
Benefi t payments in the United Kingdom, the United States and Switzerland are from trustee-administered funds and plan assets held in trusts are governed by local regulations and practice. The board of trustees, generally composed of representatives of the Company and plan participants in accordance with the plan’s regulations is responsible for governance of the plans including investment decisions and contribution schedules in order to meet the existing minimum funding requirement or funding regime objective, jointly with
In France and Belgium, benefi t payments are managed by insurance companies or mutual funds.
The assumptions for each of the liabilities are consistent with the economic features of the corresponding countries’ plans. The weighted-average assumptions used by AXA for pension plans in the principal regions in which AXA operates were as follows: DECEMBER 20 13 ASSUMPTIONS
For any given plan, the discount rate is determined at the closing date by using market yields for the corresponding currency on high quality corporate bonds with consideration of AA and depending on the plan’s duration and the maturity profi le of the defi ned benefi t obligation.
Defi ned Benefi t Obligation at the beginning of the year 17,937 16,333 705 633 18,641 16,966
Actuarial (gains) and losses arising from changes in demographic assumptions 78 391 (25) - 53 391
Actuarial (gains) and losses arising from changes in fi nancial assumptions (720) 1,177 (63) 79 (783) 1,257
Fair value of plan assets at the beginning of year 9,164 8,311 4 4 9,168 8,316
Interest income on plan assets 320 345 - - 320 345
Actual return on plan assets, excluding interest income 455 393 - (1) 455 392
Net transfer In/(Out) (including acquisitions and disposals) - (10) - - - (10)
Benefi ts paid by plan assets (458) (481) (1) - (459) (481)
Fair value of plan assets at the end of the year (B) 9,536 9,164 5 4 9,541 9,168
Interest income on separate assets 22 36 - - 22 36
Actual return on separate assets, excluding interest income 27 39 - - 27 39
Net transfer In/(Out) (including acquisitions and disposals) (1) (48) - - (1) (48)
Benefi ts paid by separate assets (126) (98) (1) (1) (127) (99)
Cumulative effect of asset ceiling at the beginning of the year 10 7 - - 10 7
Interest cost on asset ceiling - - - - - -
Cumulative impact of asset ceiling (10) (10) - - (10) (10)
(b) This amount mainly includes the 2013 plan amendments or curtailments effect in the United States, in Switzerland, and in France.
(d) This amount includes additional contributions paid to plan assets in the United Kingdom and in the United States to reduce the defi cit.
is recognised to the extent that it is recoverable, either through future contribution reductions or a refund to which the Group has an unconditional right, including the ability to use the surplus to generate future benefi ts.
Defi ned Pension and other benefi ts expense (Service Cost + Net Interest Cost/Income) 375 536 32 36 407 571
Consistently with IAS 19 requirements, this Note only considers l iabilities net of Plan Assets and therefore excludes Separate
IAS 19. Insurance assets or liabilities (w ithin the Group) and pension obligations remain on the balance sheet.
In some other countries (mainly in Switzerland), non-transferable insurance policies related to Defi ned Benefi ts Obligation between entities within the Group are effectively backed by general account assets (available to general creditors in case of bankruptcy) but not taken into consideration in the pension assets disclosures. Indeed, insurance liabilities and Separate
Plan Assets on the one hand and Separate Assets and a part of
Assets and a part of Swiss assets should be considered as backing Defi ned Benefi t Obligation like any other Plan Assets
December 31, 2013 shown below only captures the evolution of the liability recorded in the Group’s statement of fi nancial position net of Plan Assets and does not include Separate
Assets and Swiss assets included in the Insurance g eneral a ccount liabilities (as presented in Note 26.2.8). The table below shows the detailed roll-forward of the statement of fi nancial position liability, with the separate assets added at each year end.
Adjustment due to separate assets (61) (88) - - (61) (88)
Benefi ts directly paid by the employer 314 331 37 42 351 373
Benefi ts paid by separate assets 126 98 1 1 127 99
Net transfer in/(out) (including acquisitions and disposals) 47 (20) - 1 47 (19)
Net transfer in/(out) of separate assets to plan assets - - - - - -
Net balance sheet position at the end of the year (6,223) (7,743) (542) (700) (6,765) (8,443)
26.2.7. Sensitivity analysis of the defi ned benefi t obligation (DBO): gross of all assets
In the United Kingdom, the Pensions Act 1995 legislation governs pension funds and the Pensions Act 2004 introduced regulations on the funding of defi ned benefi t pension arrangements and several other measures. Central to the funding regime are the Statutory Funding Objective (SFO)
Statement of Funding Principles (SFP) which is a document prepared by the Trustees which sets out their policy for ensuring that the SFO is met. As part of the actuarial valuation, the appropriate level of future contributions to be paid to the pension plan are determined and a schedule of contributions is prepared by the Trustees of the pensions scheme following discussions with the entity. This includes a 10 year recovery plan to ensure that the Statutory Funding Objective (SFO) is met. The contributions for the recovery plan are based on the actuarial valuation performed every three years. However the schedule of contributions may change more frequent if signifi cant events occur in the year.
January 1 measurement date and any contribution in excess of the minimum is determined at the discretion of the plan sponsor.
In Switzerland, the presentation of the pension liability refl ects the fact that the assets covering a large part of the retirees do not qualify as pension assets defi ned under IAS 19 (not taken into consideration in the pension assets disclosures as described in Note 26.2.6) because managed internally by the insurance company and not handled by a third party. However, legally, the sole purpose of these assets is the coverage of the liabilities of the pension fund. This means that under statutory
(b) This amount includes: Separate Assets or right to reimbursements and other assets managed within the Group but not taken into consideration in the pension disclosures as described in Note 26.2.6.
Estimated future benefi ts to be paid by the assets or the employer
As pension liabilities have a long-term nature, a mix of equity instruments, debt instruments and real estate investments is used in plan assets.
AXA Group as at December 31, 2013 and 2012, respectively (fair value hierarchy principles as described by the Group are described in Note 1.5): Asset mix for plan assets
L iability Management (ALM) framework defi ning an optimal strategic allocation with respect to the liabilities structure.
(a) The amount presented for 2012 has been adjusted to include the cost relating to AXA Investment Managers performance Shares.
The cost includes the expenses from share-based compensation instruments issued by the Group as well as by
The share-based compensation instruments listed above are mostly composed of instruments settled in equity but include also instruments settled in cash. The unit cost of the equity settled instruments does not vary for a given plan while the cash settled instruments unit cost is updated at each closing.
From 2007 to 2012, for the employees who were granted more than 5,000 options, the fi rst two instalments vest unconditionally at the end of the vesting period, while the fi nal instalment is subject to the fulfi lment of certain conditions regarding the performance of the AXA shares compared to the
The total cost is amortized over the vesting period and an estimated pre-vesting lapse rate of 5% is applied. On that basis, the expense recognized in profi t or loss for the year ended December 31, 2013 was €10.1 million (€14.8 million for the year ended December 31, 2012).
New York Stock Exchange Euronext Paris, the primary and most liquid market for AXA shares. Consequently, current holders of AXA ADRs may continue to hold or trade those shares, subject to existing transfer restrictions, if any.
volatility is based on AXA SA ordinary shares volatility, adjusted for the US$/€ exchange rate volatility. The expected dividend yield on AXA SA shares is based on the market consensus. The risk-free interest rate is based on the U.S. Treasury bond curve for the appropriate maturity.
(either through mutual funds (FCPE) or through direct share ownership) with a discount. The leverage on the employees’
In 2013, the cost of the lock-up period was measured at 19.73% for the traditional plan and 12.88% for the leveraged plan (due to different discounts). In addition to the lock-up cost, the opportunity gain offered to the employees under the leveraged plan was measured at 2.45%.
Amount subscribed by employee (in Euro million) 20.4 27.2 17.8 27.3
Total cost for AXA = [A] – [B] + [C] (as a percentage of the reference price) 0.27% 2.52% 0.19% 2.92%
TOTAL COST FOR AXA (IN EURO MILLION) 0.10 7.90 0.04 9.65
(“Customer Scope”). For the year ended December 31, 2012, both of these conditions were met and, consequently, the grant of the second tranche has been confi rmed.
The total cost of the AXA Miles is amortized over the vesting period (i.e. over 2 years for the 2+2 plan and over 4 years for the 4+0 plan) starting from the grand date. On that basis, the expense recognized in the profi t or loss for the year ended was €15.8 million).
Units defi nitely acquired. One year later in 2013, the employing entity paid in cash the second half provided that the benefi ciary was still an employee of the AXA Group at that date. For the settlement of the second half of the Performance Units defi nitely acquired, benefi ciaries may, if they wish, choose a settlement of all or part of their Performance Units in AXA shares.
For 2011 and 2012 grants, the number of Performance Units defi nitely acquired is known after two years and is paid one year later in cash by the employing entity, provided that the benefi ciary is still an employee of the AXA Group at that date.
AXA Investment Managers grants Performance shares to certain key employees as part of its overall LTI policy that also includes DIP (Deferred Incentive Plan) and LTIP (deferred payments based on unit rights per employee). The Investment
The total cost of Investment Managers Performance Shares recorded as of December 31, 2013 amounted to €18.6 million in earnings (€11.5 million as of December 31, 2012) gross of tax.
During the fourth quarter of 2011, AllianceBernstein amended all outstanding year-end long-term incentive compensation awards of active employees, so that employees who terminate their employment or are terminated without cause may retain their award, subject to compliance with certain agreements and restrictive covenants set forth in the applicable award
agreement, including restrictions on competition, employee and client solicitation, and a clawback for failing to follow existing risk management policies. This amendment eliminated employee service requirement but did not modify delivery dates contained in the original award agreements.
The amendment resulted in the immediate recognition in 2011 of the cost of all unvested AB Holding Unit-based compensation instruments granted from prior years amended at that date and amounted €234.5 million (100%, gross of tax) instead of an amortization over a maximum of four years.
Under the Incentive Compensation Program, AllianceBernstein made awards in December 2013 aggregating €119.1 million
(€13.1 million in 2012), including fi xed salary, bonuses, directors’ fees and benefi ts in kind; ■ Share-based compensation: the expense recognized in 2013 in respect of share-based compensation granted to Management Committee members was €7.3 million
Weighted average number of ordinary shares (net of treasury shares) – opening 2,372 2,340 2,340
Increase in capital (excluding stock options exercised) (c) 1 2 2
BASIC NET INCOME PER ORDINARY SHARE C = A/B 1.76 1.61 1.65
In 2013, the Company was party to the following transactions with related parties which may be deemed to have been material to AXA or the related party in question or unusual in their nature or conditions.
Assurances Vie Mutuelle, hereafter the “Mutuelles AXA”) are two mutual insurance companies engaged in the Property
& Casualty insurance business and Life & Savings insurance business in France. On December 31, 2013, the Mutuelles
AXA collectively owned 14.18% of the Company’s outstanding ordinary shares representing 23.54% of the voting rights.
Mutuelle 11%. Technical results are shared between these companies in proportion to their written premiums. Aggregate written premiums recorded in this coinsurance agreement amounted to €1,813 million in 2013 (of which €1,613 was attributed to AXA France IARD).
From time to time the Company enters into GIEs with certain of its subsidiaries. GIEs are intercompany partnerships, governed by French law, created to perform various common services for their members and to allocate associated costs and expenses among their members. The allocation of costs and expenses invoiced to GIE members may be based on various agreed criteria including particular activity drivers. The
AXA has given numerous commitments and guarantees, including fi nancing commitments, guarantees given to fi nancial institutions and customers, pledged assets, collateralized commitments and letters of credit. For a description of these commitments and guarantees, see Note 29 “Contingent assets and liabilities and unrecognized contractual commitments” to the Group’s consolidated fi nancial statements.
(e.g. to facilitate acquisitions, integration of acquired businesses, distribution arrangements, off-shoring arrangements, internal restructurings, sales or other disposals of assets or businesses, sales or renewals of products or services or similar transactions), to support their credit ratings, and/or to promote effi cient use of the Group’s capital resources. In this context, the Company may guarantee repayment of loans or other obligations between its subsidiaries, guarantee obligations of its subsidiaries to third parties, or provide other types of
guarantees for the benefi t of its subsidiaries. The benefi ciaries of these guarantees are generally required to compensate the
The Company, from time to time, makes capital contributions, loans, other extensions of credit, or otherwise provides liquidity and capital resources to its subsidiaries and affi liates for various business purposes including to fi nance their business operations and/or to promote the development of their business (e.g. to facilitate acquisitions, integration of acquired businesses, distribution arrangements, internal restructurings, or similar transactions). These transactions may involve the Company entering into various types of transactions with its subsidiaries and affi liates from time to time including loans or other types of credit arrangements, acquisitions or sales of assets, securities or other fi nancial instruments and/or similar transactions. In addition, the Company may from time to time borrow from its subsidiaries for various business purposes. These transactions are generally carried out on arms-length terms and conditions with loans and other extensions of credit bearing interest at varying rates that generally refl ect prevailing market rates at the respective dates such loans were originated.
To the best of the Company’s knowledge, based on information reported to it: ■ on December 31, 2013, there were no loans outstanding from the Group to any of the Company’s executive offi cers or to any member of the Company’s Board of Directors; ■ various members of the Company’s Board of Directors as well as various other executive offi cers and directors of other
Commitments received by AXA totaled €69,268 million at the end of 2013, and increased by €2,898 million compared to the end of 2012, mainly due to an increase in other commitments
(€1,700 million), partly offset by a decrease in fi nancing commitments (€1,427 million).
Pledged securities and collateralized commitments received totaled €32,769 million at the end of 2013, and mainly consisted of: ■ mortgage security collateral taken for loans totaled €22,465 million, mainly from AXA Bank Europe
(€19,166 million) and AXA Bank Hungary (€3,201 million); ■ security reverse repurchase agreements and similar operations totaled €4,850 million mainly in Japan Life
and Switzerland Property & Casualty (€545 million); ■ €2,815 million collaterals for reinsurance operations of which €1,754 million in the United States Life & Savings;
Letters of credit received totaled €355 million at the end of 2013 and were mainly from Turkey Property & Casualty
(€159 million) and from the US Life & Savings (€127 million).
Other commitments received totaled €4,183 million at the end of 2013, and were broken down as follows: ■ €1,243 million from Switzerland Life and Savings (€864 million)
and Switzerland Property & Casualty (€379 million) due to covered bonds collaterals; ■ €1,184 million received by Japan Life & Savings (€293 million),
(€1,100 million) mainly due to commitments received by real estate funds; ■ €590 million received by AXA Bank Europe related to money market activities.
Commitments given totaled €58,113 million at the end of 2013, a decrease of €960 million compared to the end of 2012, mainly due to a decrease of €4,125 million in pledged securities and collateralized commitments mainly in relation with repurchase transactions and similar operations (see below).
Financing commitments given totaled €2,486 million at the end of 2013, and mainly consisted of fi nancing commitments to customers (€2,417 million), notably comprising loan commitments granted at AXA Bank Europe (€933 million),
Pledged securities and collateralized commitments given totaled €34,424 million at the end of 2013, and mainly consisted of: ■ €11,478 million in AXA France including €9,686 million from
Life & Savings due to pledged assets for security repurchase agreements and similar operations (€9,288 million) and derivative transactions (€398 million), as well as €1,792 million from Property & Casualty mainly due to pledged assets for security repurchase agreements and similar operations
(€1,626 million); ■ €2,503 million in the United States Life & Savings in respect of pledged assets for securities repurchase agreements and similar operations.
Letters of credit given totaled €144 million at the end of 2013 and were mainly from Colisée RE (ex-AXA RE) (€80 million).
Other commitments given totaled €13,261 million at the end of 2013 and mainly consisted of: ■ Capital call options in respect of unfunded commitments to AXA Private Equity (€4,709 million) mainly from France
Life & Savings (€633 million) and United States Life & Savings
Group employee insurance contracts; ■ €1,527 million commitments mainly from France Life
Paribas Group entered into an agreement that replaces the prior agreement between them dated December 15, 2005.
Some AXA subsidiaries, principally insurance c ompanies, are subject to restrictions on the amount of funds they may transfer in the form of cash dividends or otherwise.
AXA’s insurance subsidiaries are limited to net income for the year and retained earnings calculated in accordance with the statutory accounting policies used by the subsidiaries to prepare their local fi nancial statements. Further restrictions may be imposed by the local insurance regulators in countries where AXA operates. In some cases, amounts available for distribution are also subject to regulatory capital adequacy tests or the approval of an independent actuary, or subject to individual provisions contained in a c ompany’s by-laws.
In accordance with European Union directives, insurance c ompanies with their registered offi ce in a European Union member country are required to maintain minimum solvency ratios which must be supported by capital, retained earnings and reserves and unrealized capital gains on marketable securities and real estate as reported in regulatory fi lings or subject to approval by local regulators in some countries. AXA’s insurance operations in countries outside the European Union are also subject to local capital adequacy and solvency margin regulations.
Mr Yves Nicolas: 63, rue de Villiers – 92208 Neuilly-sur-Seine, fi rst appointed on April 25, 2012. The current appointment is for a period of 6 years, until the annual General Meeting of the shareholders called to approve the fi nancial statements for the fi scal year 2017.
The current appointment is for a period of 6 years, until the annual General Meeting of the shareholders called to approve the fi nancial statements for the fi scal year 2015.
Auditors of the statements, for the diligence directly related to them, and for other services.
Statutory audit and certifi cation of local and consolidated fi nancial statements 24,061 27,414 62% 63% 10,298 8,474 81% 80%
L.P.) is included in the Annual Reports on Form 10-K for the year ended December 31, 2013 and subsequent reports on Form 10-Q, respectively, of AXA Equitable Life Insurance
Litigation”). The lawsuit was fi led derivatively on behalf of eight funds. The lawsuit seeks recovery under Section 36(b)
the Investment Company Act for alleged excessive fees paid to FMG LLC for investment management services. In light of the similarities of the allegations in the Sivolella and Sanford
Litigations, the parties and the Court agreed to consolidate the two lawsuits.
During the fi rst quarter of 2012, AllianceBernstein received a legal letter of claim (the “Letter of Claim”) on behalf of
AllianceBernstein organized in the U.K.) was negligent and failed to meet certain applicable standards of care with respect to the initial investment in and management of a £500 million portfolio of U.S. mortgage-backed securities. The alleged damages range between $177 million and $234 million, plus compound interest on an alleged $125 million of realized losses in the portfolio. On J anuary 2, 2014, Philips fi led a claim form in the High Court of Justice in London, England, which formally commences litigation with respect to the allegations in the
For example, Friends Provident (“FP”) has notifi ed certain indemnifi cation claims to AXA UK in connection with the sale of
M&A Transactions, the Group’s ordinary course of business activities or other matters.
(involving civil and/or penal matters) as well as to proposed changes in law and/or regulation that may signifi cantly impact their business and results of operations. For additional information on these matters as well as other risks and contingent liabilities affecting the Group and its business, please see section 3.1 “Regulation” and 3.2 “Risk Factors”
On January 9, 2014, AXA announced the successful placement of GBP 750 million of Reg S subordinated notes due 2054 to institutional investors. The initial coupon has been set at 5,625% per annum. It will be fi xed until the fi rst call date in January 2034 and fl oating thereafter with a step up of 100 basis points. The initial spread over Gilt is 215 basis points.
I Report of the Statutory Auditors on the consolidated fi nancial statements (For the year ended December 31, 2013)
We assessed the reasonableness of the assumptions used to calculate these values, particularly with respect to the Group’s experience and its regulatory and economic environments as well as the overall consistency of these assumptions; ■ the carrying value of goodwill is tested for impairment at each closing date using the methods described in Notes 1.7.1 and 5.2.2 to the consolidated fi nancial statements.
We verifi ed that the valuation methods used take into account the nature of tax differences, forecasts established by the Group and, when accounting policies permit, its intentions; ■ derivatives and hedging transactions are recognized in accordance with the methods and procedures described in Note 1.10 to the consolidated fi nancial statements. We assessed whether transactions that qualify for hedge accounting have been duly documented in accordance with hedge accounting rules.
Changes in the capital 337 5.2 DESCRIPTION OF AXA’S SHARE CAPITAL 338
Under Article 3 of its Charter, AXA’s corporate purpose is generally to: ■ acquire all types of ownership interests in any French or foreign company or business, including insurance companies or businesses; ■ acquire, manage and sell all listed or unlisted shares and securities, as well as personal or real properties, rights, shares or securities, whether listed or unlisted, that are related to such properties; and
■ perform all industrial, commercial, fi nancial, personal or real property transactions, directly or indirectly related to any of the foregoing.
Offi cer and the Deputy Chief Executive Offi cer(s) will receive compensation the amount and conditions of which will be set by the Board of Directors, upon proposal of the Compensation &
Governance Committee. Members of the Board of Directors receive a fi xed annual directors’ fee, the maximum overall amount of which is determined by the Shareholders’ Meeting and apportioned by the Board of Directors among its members. Notwithstanding the above, the Board of Directors’
When the number of Board members aged seventy or older exceeds one-third of the directors in offi ce, the oldest director is deemed to have resigned automatically unless any member of the Board of Directors aged seventy or older voluntarily resigns within three months.
Board of Directors has set for each Board member, whether an individual or a permanent representative of a legal entity to whom directors’ fees were paid, the objective of holding, within two years after fi rst being appointed, a number of shares in the Company, the value of which, on the basis of the closing price of the AXA share on December 31 of the preceding fi scal year, corresponds to an amount at least equivalent to the gross director’s fees earned in respect of the previous fi scal year.
If AXA is liquidated, the assets remaining after it pays its debts, liquidation expenses and all prior claims will be used to repay
Shareholders are convened, meet, and deliberate in accordance with applicable French laws and AXA’s Charter.
All shareholders are entitled to attend these meetings, either in person or by proxy, provided that they show valid proof of ID and share ownership as specifi ed under French Law.
Directive of April 21, 2004 (which was implemented in France in 2006) concerning takeover bids, may have certain antitakeover effects. In the case of AXA, the relevant provisions include, among other things, the existence of AXA shares with double voting rights.
French law generally requires mergers and certain consolidations to be approved by two-thirds of the shareholders attending or represented at the Extraordinary Shareholders’
The Company’s share capital may be modifi ed only under the conditions stipulated by the legal and regulatory provisions in force.
On December 31, 2013, AXA’s share capital was comprised of 2,417,865,471 ordinary shares, each with a par value of €2.29. All these shares were fully paid up and non assessable and began earning dividends on January 1st, 2013. The following table sets forth changes in the number of shares from January 1st, 2011 to December 31, 2013: Date Transaction
New equity issue reserved for employees of AXA (SharePlan 2012) 29,685,889 215,710,432 2,386,986,593 5,466,199,298
New equity issue reserved for employees of AXA (SharePlan 2013) 18,834,270 244,011,703 2,410,695,530 5,520,492,764 31/12/2013 Exercise of stock options 7,169,941 97,734,715 2,417,865,471 5,536,911,929
Board of Directors with respect to the Group’s internal control environment. This report was assessed by the Audit Committee before being reviewed and approved by the Board of Directors during its meeting of March 13, 2014.
The AXA Group is engaged in the fi nancial protection and wealth management business on a global scale. As such, it is exposed to a very wide variety of risks – insurance risks, fi nancial market risks and other types of risks – which are described in detail in this Annual Report. Please see, in particular, Part 3 –
These mechanisms and procedures principally include: ■ the Group’s corporate governance structures which are designed to ensure appropriate supervision and management of the Group’s business as well as clear allocation of roles and responsibilities at the highest level; ■ management structures and control mechanisms designed to ensure that the Group executives have a clear view of the principal risks the Group faces and the tools necessary to analyse and manage these risks; ■ internal control over fi nancial reporting ( ICOFR ), designed to ensure the accuracy, completeness and timeliness of the Group’s consolidated fi nancial statements and the other fi nancial information that the Group reports to the markets; and
These mechanisms and procedures, taken together, constitute a comprehensive control environment that executives believe is appropriate and well adapted to the Group’s business.
The Board of Directors determines the Company’s business strategy and oversees its implementation. The Board shall consider any question related to the proper functioning of the
The Board of Directors has established three Committees to assist it in fulfi lling its responsibilities: Audit Committee,
Committee. These Committees exercise their activities under the responsibility of the Board of Directors and report regularly to the Board of Directors on matters within the scope of their responsibility.
Audit Committee plays a particularly important role in reviewing internal control and risk related issues. The Committee reviews the Group’s internal control systems and procedures for risk management.
In recent years, AXA initiated a process designed to harmonize corporate governance standards throughout the Group. This effort is focused, among other matters, on standardizing, to the extent practicable, principles relating to a number of corporate governance matters including board composition and size, directors’ independence criteria, board committees and their roles, and directors’ fees.
The Group Governance Standards are part of a larger process including standards which apply to all AXA Group entities (the
Standards Handbook. Chief e xecutive o ffi cers of the entities are therefore required to annually certify that they have implemented the necessary controls designed to ensure that the executives under their control are acting in accordance with these standards.
For more information about the Management Committee including its composition, please see section 2.1 “Corporate offi cers, executives and employees” of this Annual Report.
AXA’s Management Committee, the c hief e xecutive o ffi cers of the Group’s principal subsidiaries and/or business units and selected other senior executives. While the Executive
Committee conducts QBRs, during which the performance of the AXA Group is reviewed. These QBRs were introduced in 2000 to provide M anagement with a clear and consistent framework for: (1) reviewing operational performance and monitoring the progress of key projects using quantifi able standards of measurement defi ned in collaboration with the
The role of Group Risk Management (GRM) is to identify, quantify and manage the main risks to which AXA is exposed.
For a detailed description of the organization, governance, missions and controls of Risk Management, please see section 3.3 “Quantitative and Qualitative Disclosures about
The local PBR units are responsible for producing their contribution to the Group consolidated fi nancial statements.
PBRC’s role encompasses principally the following: ■ establishing and distributing both consolidation and reporting standards and instructions to subsidiaries; ■ managing the Group’s fi nancial reporting system; ■ producing the consolidated fi nancial statements in accordance with International Financial Reporting Standards
(IFRS) and analyzing key performance indicators; ■ managing the Internal Financial Control (IFC) program; ■ developing and using management control tools; ■ steering the European Embedded Value process; ■ coordinating the production of AXA’s Annual Report
The information system is based on “Magnitude”, a consolidation tool managed and updated by a dedicated team.
The Compliance Support and Development Program is a structured program of on-going reviews with the Group operating companies around the world that is designed both to review signifi cant Compliance issues and processes as well as the quality of the Group’s Compliance programs and personel.
All internal audit teams across the Group report to the Group
Head of Audit whilst also having a direct and unfettered reporting line to their local a udit c ommittee c hairman and an administrative reporting line within their local management structure.
Departments, each of which is responsible for presenting to the Committee the signifi cant risks within its scope: Group
AXA’s ICOFR includes policies and procedures that: ■ pertain to the maintenance of records that, in reasonable detail, accurately and fairly refl ect the transactions and dispositions of Group assets; ■ provide reasonable assurance that transactions are recorded as necessary to permit the preparation of fi nancial statements in accordance with the applicable generally accepted accounting principles; ■ provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of executives and managers of the Group; and
PBRC (the Internal Financial Control (IFC) program) designed to ensure that AXA’s Chief Executive Offi cer and Deputy Chief
Treadway Commission (COSO). The IFC Standard is designed to defi ne the IFC program scope and governance, ensure consistency and quality in AXA’s fi nancial reporting and provide an overall framework for AXA’s annual IFC program.
In accordance with the IFC Standard, the in-scope AXA Group companies must (i) document the signifi cant processes and controls, as well as the rationale of how the associated risk of material misstatements due to error or fraud can be reduced to an acceptable level and (ii) test the design and operational effectiveness of key controls based on the test plans.
3. Disclosure Controls & Procedures Certifi cates required to be submitted by AXA Executive Committee members, regional CFOs and certain other senior executives
Annual Report and formally certify (i) the accuracy and completeness of the information in the Annual Report with respect to the companies under his/her responsibility, and
However, all internal control systems, no matter how well designed, have inherent limitations and do not constitute a guaranty or provide absolute certainty. Even systems determined to be effective by executives may not prevent or detect all human errors, all system malfunctions, all fraud or all misstatements and can provide only reasonable assurance. In addition, effective controls may become inadequate over time because of changes in conditions, deterioration of compliance with procedures or other factors.
For information on the principles and rules adopted by the Board of Directors in order to determine the compensation and the advantages granted to the corporate offi cers please see Part 2 – section 2.2 “Full disclosure on executive compensation and share ownership” of this Annual Report.
Pursuant to the provisions of the French law dated July 3, 2008, it has been decided, in December 2008, to adopt all of the Afep -
Code that are in line with the long-established corporate governance principles initiated by the Company. AXA applies the recommendations of the Afep -Medef Code. Details are presented in sections 2.1 “Corporate offi cers, executives and employees” and 2.2 “Full disclosure on executive compensation and share ownership” of this Annual Report describing corporate governance mechanisms and containing information about executives’ compensation.
In order to take into account certain specifi cities of its governance practices, AXA has decided to adapt the following provisions of the Afep -Medef Code: ■ section 16.2.1 of the Afep -Medef Code related to the review of the accounts by the Audit Committee: for practical reasons, the review of the accounts by the Audit Committee generally occurs on the day preceding the Board of Directors’
(fi xed salary plus annual variable remuneration) received for the previous fi scal year. The Chairman & Chief Executive
Offi cer is consequently required to hold the equivalent of his/her total cash remuneration multiplied by three and the Deputy Chief Executive Offi cer is required to hold the equivalent of his/her total cash remuneration multiplied by two. AXA shares, ADS and other quoted subsidiaries of the Group are taken into account to calculate the number of shares actually held. Each executive offi cer is required to meet with this minimum shareholding requirement within a period of fi ve years from (i) January 1, 2007 or (ii) the date of his/her fi rst appointment as executive offi cer if he/she was appointed after January 1, 2007.
They generally begin 30 days prior to the disclosure of the annual or half-year earnings releases and 15 days prior to its quarterly fi nancial information releases. The
Compliance and Ethics Guide prohibits the sale of shares acquired subsequent to the exercise of stock options
R eport. These procedures mainly consisted of: ■ obtaining an understanding of the internal control and risk management procedures relating to the preparation and processing of fi nancial and accounting information on which the information presented in the Chairman’s R eport is based, and of the existing documentation; ■ obtaining an understanding of the work performed to support the information given in the report and of the existing documentation; ■ determining if any material weaknesses in the internal control procedures relating to the preparation and processing of fi nancial and accounting information that we may have identifi ed in the course of our work are properly described in the Chairman’s R eport.
AXA’s ICOFR includes policies and procedures that: ■ pertain to the maintenance of records that, in reasonable detail, accurately and fairly refl ect the transactions and dispositions of Group assets; ■ provide reasonable assurance that transactions are recorded as necessary to permit the preparation of fi nancial statements in accordance with the applicable generally accepted accounting principles; ■ provide reasonable assurance that receipts and expenditures are being made only in accordance with the authorization of management and directors of the Group; and
(b) Management’s Annual Report on ICOFR based on AXA’S IFC standard
To the Board of Directors of AXA: As Statutory Auditors of AXA and at your request, we have performed audit procedures on AXA and its subsidiaries’ (the “Company”)
internal control over fi nancial reporting as of December 31, 2013, in order to be able to obtain reasonable assurance as to whether
AXA (the “IFC standard”), which is an internal control and governance standard developed by AXA and used as a framework for its IFC programme, as described in the Management’s Annual Evaluation of Internal Control Over Financial Reporting on page 34 9 of this Annual Report. Our responsibility is to express an opinion on the Company’s management’s assertion, based on our audit procedures.
In our opinion, the Company’s management’s assertion that internal control over fi nancial reporting as of December 31, 2013, is effective, in all material respects, is fairly stated based on the criteria established in the IFC standard.
I confi rm that, to the best of my knowledge, the fi nancial statements have been prepared in accordance with applicable accounting standards and fairly present the assets and liabilities, the fi nancial position and the profi t or loss of the Company and its consolidated subsidiaries for the periods presented, and that the Board of Directors’ Report, the various sections of which are mentioned on page 399 of this Annual Report, fairly presents the evolution of the business, results and fi nancial position of the Company and its consolidated subsidiaries, and describes the principal risks and contingencies facing the Group.
FINANCIAL AUTHORIZATIONS TO ISSUE SHARES OR OTHER TYPES OF SECURITIES VALID AS OF DECEMBER 31, 2013
Ordinary shares or securities giving access to the capital, reserved for employees – 135 million (e) 18 months October 30, 2014
Ordinary shares reserved for a specifi c category of benefi ciaries in connection with offerings for employees – 135 million (e) 18 months October 30, 2014
Restricted shares (actions gratuites) (f)/ Plan for all employees – 0.4% (h) 38 months June 27, 2014
consent. They will be submitted to the Shareholders’ Meeting for approval on April 23, 2014: Issues without preferential subscription rights for shareholders
Ordinary shares reserved for a specifi c category of benefi ciaries in connection with offerings for employees – 135 million (a) 18 months October 23, 2015
Performance shares (actions gratuites) (b) – 1% (c) 38 months June 23, 2017
In 2013, by virtue of the authorization granted by the shareholders at the Shareholders’ Meeting of April 27, granted by the AXA Board of Directors.
Net financial expenses, including interest expenses net of interest income from loans and investments, totaled €1,063 million, compared to €1,105 million in 2012, representing a decrease of €42 million. This decline was mainly attributable to €85 million in gains arising from the rollover of internal debts with more favorable market conditions and a positive impact of €23 million from the repayments of debts that matured during the year, while the subordinated debt issues in early 2013 generated €62 million in additional interest costs.
In 2012, the corporate income tax benefi t derived mainly from €531 million of tax receivables from members of the tax consolidation group in France and €129 million allowances to provision for the risk of tax repayments.
Receivables from subsidiaries amounted to €123 million, down from €214 million at year-end 2012, representing a decrease of €91 million primarily attributable to the repayment of £38 million in loans granted to Société Beaujon.
Miscellaneous receivables totaled €66 million, refl ecting €28 million in fi nancial income receivable and €15 million in current accounts with Group entities.
Marketable securities came to €1 million, down €39 million given the sale of all the Mutual funds held.
January 2, 2014. The increase of €779 million compared to 2012 is mainly due to the positive impact of the reduction in the amount of margin calls under collateral contracts guaranteeing the counterparty risk on fi nancial instruments, positive cash fl ow from entities to the Company net of the dividend paid, offset by the reduction in outstanding commercial paper.
Provisions for contingent liabilities amounted to €2,687 million and mainly consisted in €1,129 million for redemption premiums related to subordinated notes, €305 million in provisions corresponding to the mark-tomarket revaluation of derivatives instruments, €612 million of provisions for exchange-rate risk and €372 million of provisions for the possible repayment of tax savings owed to subsidiaries belonging to the French tax consolidation group.
Unrealized foreign exchange gains amounted to €1,216 million at end-2013, up from €1,017 million at
Commercial Code (“Code de commerce”), disclosures related to the Company’s executive compensation appear in Part 2 –
In 2013, The company did not acquire any signifi cant equity interests within the meaning of Article L.233-6 of the French
Net book value on the sale of fi xed assets (123) (2,278)
III. NET INCOME FOR THE FINANCIAL YEAR VI + VII +VIII 1,727 3,261
a) After tax income, before depreciation, amortization and releases 1.25 0.69 3.98 0.65 0.81 b) After tax income, after depreciation, amortization and releases 1.73 (0.21) 3.67 1.37 0.71
Cœur Défense - Tour B - La Défense 4 - 100 Esplanade du Général de Gaulle - 92932 PARIS LA DEFENSE
Guild House - Guild Street - IFSC - Dublin 1 - Ireland
AXA LIFE INSURANCE COMPANY LTD 6 1 100. 00% 90 151, Gloucester Road - Wan Chai - HONG KONG
Les collines de l’Arche - 76 route de la Demi Lune – 92057 PARIS LA DEFENSE
1, Allée Scheffer - L-2520 Luxembourg 21, avenue Matignon - 75008 PARIS
Ul, Svetlanskaya, 250/1, V ladivostok,Primorsky Territory Far Eastern federal district, 690000 Russian Federation
a) French subsidiaries (total) 123 b) Foreign subsidiaries (total) 200 2) Participating interests not shown in section A
The fi nancial statements as at December 31, 2013 are prepared and presented in accordance with the provisions of the 1999
(amended by regulations CRC 2003-07 and CRC 2005-09), and CRC 2004-06 relating to the defi nition, recognition and measurement of assets. Application of these regulations has had no impact on the Company’s fi nancial statements.
Securities are classifi ed using the following criteria: ■ investments in subsidiaries and affi liates are securities representing at least 10% of the share capital of the issuing company plus those which the Company deems held for the long term; ■ other fi nancial assets comprise securities representing less than 10% of the share capital and which are not investments in subsidiaries and affi liates.
and FCP Mutual funds and to the average share price over the last month before the balance sheet date for the other securities.
The Company has issued two subordinated bonds: ■ 2.5% bonds, maturity January 1, 2014: 9,185,581 bonds with a par value of €165 and a redemption value of €230.88 were in circulation at December 31, 2013. The redemption premium amounts to €606 million; ■ 3.75% bonds, maturity January 1, 2017: 6,613,129 bonds with a par value of €165.50 and a redemption value of €269.16 were in circulation at December 31, 2013. The redemption premium amounts to €688 million.
The charge for the year ending December 31, 2013 amounted to €111 million, and the existing provision at December 31, 2013 is €1,129 million. The unamortized balance of €165 million was recognized as an off-balance sheet commitment.
At December 31, 2013, the remaining amount to be amortized was €29 million.
Other shareholders’ equity included €6,165 million of undated subordinated notes at December 31, 2013, versus €6,360 million at December 31, 2012, representing a decrease of €195 million mainly due to exchange rate fl uctuation impact.
It also includes €47 million relating to the capitalization of software costs.
(a) The net increase of €491 million is explained by: ■ a €619 million increase in the capital of AXA Mediterranean Holding, including €300 million to reduce its level of corporate debt and €207 million in fi nancing its activities in Turkey; ■ a €60 million increase in AXA Asia’s capital to foster the development of its units; ■ a €168 million reduction in Colisée Re’s capital completed after the transfer of cash linked to the sale of Mony’s portfolio.
(In Euro million) Gross value Less than 1 year 1 to 5 years More than 5 years
Starting January 1, 2007, acquisition expenses on investments in affi liates are capitalized (included in the purchase price) and are subject to amortization over fi ve years.
Amounted to €1,372 million, up €119 million, of which €1,318 million related to the deferred recognition of exchangerate losses in line with the principles of hedge accounting.
(a) Proposed dividend at year end 2013 is submited to Shareholders’ Meeting of April 23, 2014.
Other shareholders’ equity amounted to €6,165 million, compared to €6,360 million at the end of 2012.
Amortization of convertible bond redemption premiums 1,018 111 - - 1,129
Company has the option of deferring payment of the coupons under certain conditions. Nonetheless, the coupons must be paid when these conditions cease to be met or on redemption of the instruments. When payment is deferred for an extended period, the coupons remain payable by law. Similarly, in the absence of dividends being paid, unpaid coupons accumulated over the years will be recognized as payable upon liquidation, if any. These instruments are classifi ed as debt on the basis of this contractual obligation to pay the coupons.
Financial debt stood at €11,557 million, compared to €13,354 million at December 31, 2012. This represented a decrease of €1,797 million owing to the maturity of a €1 billion Euro Medium Term Note in June and a €801 million reduction in outstanding commercial paper.
■ directors’ fees allocated to members of the Board of Directors €1,300 k
Income tax expense (b) - 558 558 * A positive sign indicates tax benefi t.
(a) Dividends received from investments in subsidiaries are under the fi scal “parent-subsidiary” regime and are tax-exempt.
Commitments to buy back shares and bonds from Group entities 40 -
Of which fi nancial guarantees given to Group entities 12,271 -
In force for a period of three years starting from August 5, 2010, this agreement is renewable automatically for successive periods of one year thereafter, unless one of the two parties decides to terminate the agreement earlier, in which case the terminating party is required to give three months’ notice prior to the next renewal date.
BNP Paribas decided as a joint and common initiative to terminate, with immediate effect, their agreement concluded on August 5, 2010.
rise in the interest rate curve or a 10% depreciation of the Euro .
(1) A 100 bps rise in interest rates leads to a 4.3% improvement in the fair value of debt, a 6.4% improvement in the fair value of derivatives, and a -0.7% deterioration in the fair value of loans.
(2) A 10% depreciation of the Euro leads to a -3.2% deterioration in the fair value of debt, a -20.5% deterioration in the fair value of loans and a 1.8% improvement in the fair value of derivatives.
The information on fair value presented above should be used with care: ■ since these estimates are based on the use of measurements such as interest rates and spreads at the balance sheet date; such measurements may fl uctuate over time; ■ and because there are a number of possible ways to perform these calculations.
None of the transactions operated by related parties, that are still outstanding at year end or that occurred during the course of the year, account for the distinctive characteristics of transactions to be disclosed in accordance with the ANC regulations n° 2010-02 and 2010-03 as made offi cial by the decision as of December 29, 2010 and announced in the Journal Officiel as of
In our opinion, the fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Company at December 31, 2013 and of the results of its operations for the year then ended in accordance with French accounting principles.
We assessed whether the impairment tests performed by the Company, depending on the situation regarding investments and the volatility of fi nancial markets, are appropriate and we also assessed the reasonableness of the resulting provisions. Regarding investments, for which impairment is based on the value-in-use and the intent to hold the investments, we assessed the data used in order to determine the value-in-use of the main investments in the portfolio and obtained confi rmation of the intent to hold them; ■ in accordance with the policies described in paragraph 2.9 of the notes to the fi nancial statements, provisions are recorded at the year-end for redemption premiums on convertible bonds issued by the Company whenever the prevailing stock price is lower than the discounted redemption value of the underlying note. We reviewed the reasonableness of the assumptions used to calculate these provisions, as regards stock market volatility and the maturities of outstanding convertible bonds issued by the Company; ■ derivatives used by your Company are assessed pursuant to the rules contained in paragraph 2.12 of the notes to the fi nancial statements. We checked that the implementation of hedge accounting, if applicable, was documented. In all other cases, we verifi ed that adequate provisions were recorded for the unrealized losses.
In accordance with professional standards applicable in France, we have also performed the specifi c verifi cations required by French law.
We have no matters to report as to the fair presentation and the consistency with the fi nancial statements of the information given in the Management Report of the Board of Directors, and in the documents addressed to the shareholders with respect to the fi nancial position and the fi nancial statements.
Michel Laforce – Xavier Crépon Philippe Castagnac – Gilles Magnan *This document is the English translation of the original legal statutory audit report which is, by law, prepared in French. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information therein, the original language version takes precedence over this translation. This English version should be read in conjunction with, and construed in accordance with French law and professional auditing standards applicable in France.
com) was concluded in order to guarantee a high level of social dialogue. AXA holds two EWC plenary meetings a year as well as monthly sessions, held by 12 members of the EWC, to stay abreast of labor and economic developments in each country.
AXA employees affected by possible employment issues; ■ AXA will do its utmost to prevent compulsory redundancies and other collective transfers, by pursuing other approaches whenever possible; ■ when geographic mobility is necessary, it must be offered as a matter of priority to employees who volunteer to move, with the process managed with a view to enabling their integration into a new environment under the best possible conditions; ■ AXA pledges to acknowledge certain individuals as staff representatives and uphold their liberty, rights and purpose, in line with national legislation and, where relevant, agreements in force in local business units; ■ aware that training represents a major investment both for the Group and for its employees, AXA commits to embrace a continuous-learning culture; ■ AXA condemns discrimination of any kind on the basis of gender, race, color, ethnic origin, genetic form of difference, disability, sexual orientation, language, religion, personal conviction, union membership or political opinion.
AXA established mobility policies and processes across its major entities to make business needs immediately visible through global Group-wide posting of available jobs, both internally and externally, and to facilitate transfers to align resources with AXA’s business priorities. In 2013, following the deployment by AXA in the United States and Germany in 2012,
Family Protect, AXA Global P&C and AXA Spain launched an extension of the mobility process with the intent of fully integrating an external recruitment platform.
International mobility remained stable, with about 600 assignments in 2013. The main objectives of international assignments remain deployment and development of key expertise and leadership skills in mature as well as developing markets. The recently created Centre of Expertise (CEMI France
AXA’s compensation policy aims to attract, develop and retain best talents by ensuring that (1) pay levels are market competitive, (2) internal equity relies on differentiated individual and collective performance and (3) pay-outs are affordable and in line with company’s fi nancial results.
Benefi ts form a signifi cant part of AXA’s broader total reward offer. AXA’s benefi ts approach is primarily country-driven, since employees benefi t plans can vary signifi cantly between countries due to different levels of social benefi ts provision and diverse tax and legal regulations. AXA’s policy is to target benefi ts coverage at the median of the relevant market and encourage fl exible benefi ts schemes, as this allows employees to choose the set of benefi ts they perceive as high-value.
Through its “SharePlan” program, the Group encourages employees to become AXA shareholders. Offered internationally for the fi rst time in 1994, each year “SharePlan” gives AXA
In 2013, this offer was made in 38 countries and 22,000 employees participated to the program for a total of €293 million in subscriptions.
To identify how AXA can continue to improve gender diversity at all levels of the organization and to foster the professional development of women, the fi rst AXA Women’s Conference was held in September 2013. In the presence of the Group
All entities undertake initiatives to implement local policies as well as best practices, tailor-made to their specifi c sector and local environment and regulation.
AXA Mexico for instance launched “AXA Lifestyle”, a wellbeing value-added program to help employees identify potential health risks as early as possible and control medical costs.
AXA’s skills development result remained high with 86.5% of its employees receiving a training course at least once during the year. At the same time, the average number of training days per employee was at 3.3 days.
Also in 2013, Learning and Development teams played a key role in supporting AXA’s commitments to innovation, digital culture and multi-access by designing and delivering programs such as “AXA Digital Leaders”. These programs targeted AXA’s executives and aimed to create a common understanding of how emerging technologies transform AXA’s business and the way customers engage with and experience the company’s products.
(which build specifi c technical skills for families of professions, such as Finance, Risk, Operational Excellence, IT, Human
The 2013 Dow Jones Sustainability Indices confi rm AXA as one of the industry leaders in the dimensions of “human capital development”, (with a rating 34 points above the industry average), and of “talent attraction and retention”, (with a rating 29 points above the industry average).
Management (38,000 employees in 2010). The Group also delivered a multidimensional performance appraisal platform,
In 2013, AXA ranked 71st in the Universum’s Global Top 100 most attractive employers among business students and 1st among insurance companies.
Furthermore in 2013, 115 high-potential graduates were recruited worldwide on graduate programs. Since 2012,
Paris, and the opportunity to have one international rotation in another AXA entity, with the aim for graduates to return to their original entities, following their assignments overseas.
Total headcount of salaried workforce (open-ended and fi xed-term contract) 112,869 emp. -0.5% 113,422 emp.
■ Number of fi xed-term contract transformed into open-ended contract 1,473 emp. 1,028 emp.
■ Number of departures due to external transfers (c) 726 emp. 1,138 emp.
■ Number of fi xed-term contract transformed into open-ended contract 121 emp. 79 emp.
■ Number of re-hires in the Company 27 emp. 30 emp.
Net headcount evolution of salaried non-sales force (entries versus departures) 1,461 emp. 1,236 emp.
Internal mobility rate of salaried workforce 8.9 % -0.2pts 9.1 %
Turnover rate of salaried non-sales force 12.7 % +0.4pts 12.3 %
Turnover rate of salaried sales force 30.9 % +1.1pts 29.8 %
■ Proportion of variable pay (related to wages) 16.7 % 16.2 %
Percentage of salaried workforce having received at least one training course 86.5 % +3.3pts 83.2 %
■ Proportion of absences due to work related accidents 2.2 % 1.8 %
■ Proportion of absences linked to maternity/paternity leave 31.6 % 25.3 %
Absenteeism rate of salaried non-sales force 4.9 % -0.3pts 5.2 %
■ Proportion of absences due to sickness 67.0 % 73.6 %
■ Proportion of long term sick absences 15.8 % 21.7 %
Absenteeism rate of salaried sales force 3.4 % +0.1pts 3.3 %
■ Proportion of absences due to sickness 60.2 % 66.2 %
■ Proportion of long term sick absences 13.8 % 7.9 %
(b) The increase in the number of trainees is due to the extended reporting capacities at local entity level.
Responsibility team coordinates a network of around 300 dedicated environmental managers and employees in local entities. This network monitors annual progress on its reduction targets through the internal reporting tool, which helps local entities evaluate their own action plans and targets. These managers then analyse indicators, identify performance targets and promote best practice sharing. To accompany these action plans, entities have put in place a wide variety of activities to raise awareness and train employees on environmental issues and risks (e.g. lunch and learn conferences, etc.). At
Responsibility, the “CR Week” which is rolled out by all local entities. Environmental awareness is one of the key topics addressed during this event.
Green IT program based on servers refreshes, data center consolidation and virtualization, PC refreshes and power management.
of fl oor space), fuel/steam (6% of fl oor space) and chilled water (2% of fl oor space). Of note, the proportion of renewable energy consumed by AXA’s premises is 39%.
emissions are related to energy consumption, 21% from business travel (air and train), 15% from AXA’s vehicle fl eet and 7% from paper. While multiple local entities over the years have developed greenhouse gas emissions standards for their business travels (air, train, vehicle fl eets); the Group in 2010 defi ned common environmental travel guidelines, which were rolled out across the Group in 2011. These will be updated in 2014. To encourage employees to reduce travel, the Group has installed 50 videoconferencing rooms since 2008. These have saved 38,217 trips and 42,162 tons of CO
AXA’s unsorted waste volume has decreased by 12% and sorted paper for recycling increased by 5% between 2012 and 2013. This shows that a signifi cant number of entities are sorting their waste (e.g. AXA US, AXA Germany, AXA China
Region, AXA France, etc.). In addition, the recycling of ink cartridges has increased from 51% to 61%. Indeed, in 2013,
Numerous offers with environmental added-value have been developed by various AXA entities in the Property &Casualty business segment: ■ in the retail product line: Motor insurance policies/ products encouraging low CO
emission vehicles (e.g. promoting electric, hybrid and low emitting), home insurance policies encouraging energy effi ciency (e.g. environmental appliances upgrades), renewable energy installations (e.g. wind, solar power, etc.), and environmental claims strategies (e.g. repair rather than replace auto spare parts). In addition, prevention devices (e.g. smartphone applications) to help raise customer and general public awareness are also being developed; ■ in the Commercial product line: • encouraging “green” buildings or car fl eets in the SME
In 2013, AXA has developed a strong position on climate risks, building on the work done in previous years, particularly in the area of risk research and education. Our ambition is to become a proactive thought leader on climate change, especially in light of some events that will take place in 2015, namely the new
UN “Hyogo framework”, and the UN Framework Convention on Climate Change 21st Conference of the Parties (COP 21) in
Commission’s Green Paper on the insurance of natural and man-made disasters. This is a milestone in the promotion of
“Sustainable Development Charter” (Fédération Française des Sociétés d’Assurances: AXA France, 2009) and Investor
In 2013, AXA signed the UNISDR Private Sector Commitment for Disaster Risk Reduction and is represented in their Advisory
Board Group. These principles cover 5 key areas around the role that the private sector can take to further encourage Disaster
AXA is also member of 2° Investing Initiative (multi-stakeholder think tank).
such as fuel tanks for backup electricity generators, or major air conditioning systems. In 2013, the Group reported 43 sites with a specifi c permit. Their impact on the neighbouring environment is minimal. Nevertheless, being classifi ed, those facilities benefi t from adequate maintenance and their compliance with local legal obligations is monitored regularly. The full range of expenditures incurred to promote environmental preservation is minor, local and of a heterogeneous nature, and as such, is not monitored at Group level. No specifi c provisions or guarantees covering environmental risks have been set aside, considering the limited litigation risks arising from the management of AXA’s direct environmental footprint. Furthermore, in 2013, 44 sites were reported to have some form of environmental certifi cation.
Business travel: airplane and train (c) Thousands of km 249,315 266,095
Business travel: AXA vehicle fl eet Thousands of km 265,382 271,172
(b) Includes electricity, natural gas, fuel, steam and covers 89,830 FTEs.
(h) This data has been collected from 82,331 FTEs. Some sites in Asia and America are not equipped with water meters, which prevents accurate measurement and≈excludes them from the reporting scope before extrapolation. However, entities are starting to better track their water consumption with the installation of water meters (e.g. data centers, AXA Ireland).
(i) Offi ce paper indicator covers 89,756 FTEs, whilst marketing and distribution covers 87,516 FTEs, as certain entities have not been able to report this data.
(k) Unsorted wasted covers 64,846 FTEs, which is low as many entities are currently unable to monitor this waste fl ow.
However, as a provider of insurance, savings and investment services, AXA promotes economic growth and social development through the support of 102 million clients, local communities and businesses. Indeed AXA’s business is to protect people and businesses, their belongings, their health, their savings, their assets over the long run, providing peace of mind through uncertainty and support when it is most needed.
Community involvement: social & cultural activities, philanthropy, education, employee volunteering Risk research & education
since 2011. Moreover, most AXA entities support local risk prevention projects through sponsorship, philanthropy or products in the fi eld of road safety, health prevention, climate change, accidents at work etc.
Since 2007, €105 million have been committed to support 401 research projects, carried out in 27 countries. AXA Research
AXA employees worldwide support disadvantaged people through “AXA Hearts In Action”, the Group’s employee volunteering program. In 2013, 32,000 AXA Hearts In Action volunteers around the world made their skills and time available to help underprivileged people. AXA donated more than 76,000 working hours to allow employees to volunteer.
à l’Initiative Economique (which helps people excluded from the usual circuits set up their own business) and a French mutual insurer, MACIF, offers since 2007 basic covers sold at cost;
Health) products were launched in 2009. In 3 years, including a 2009 pilot phase, 1.7M lives were insured and sold through different networks of NGOs, community groups or mobile phone retail distributors; ■ Mediterranean Region: in 2012, AXA and Grameen Jameel
Microfi nance Ltd have signed a cooperation protocol to develop and provide micro-insurance products to clients in the Middle-east, North Africa and Turkey.
AXA IM has also expanded proxy voting coverage to include listed companies on a global basis and leads engagement efforts on specifi c themes and companies. Finally, the RI team conducts thematic research in order to investigate material
“Impact Investment” project, which aims to allocate capital to investment strategies whose goal is to focus on assets that address key sustainability concerns such as renewable energy, poverty, health or risk prevention. The AXA Group is also a UN
AXA is a major purchaser of products and services for the purpose of its internal operations as well as services provided to its policyholders. The volume of purchases equalled €10 billion in 2013. The buyers are required to sign a specifi c Procurement code of ethics in addition to the Group
These criteria enable the Group to improve service quality and reduce some supply chain risks.
AXA joined the United Nations’ Global Compact in 2003, formally committing to upholding and protecting principles for human rights. The fi rst chapter of the aforementioned Group
I Report by one of the Statutory Auditors, appointed as an independent third party, on the consolidated environmental, labour and social information presented in the management report For the year ended at December 31, 2013
In our capacity as Statutory Auditor of the company AXA, appointed as an independent third party, whose admissibility of the certifi cation demand has been accepted by the COFRAC, we hereby report to you on the consolidated environmental, labour and social information for the year ended December 31, 2013, presented in the management report (hereinafter the “CSR Information”), in accordance with Article L.225-102-1 of the French Commercial Code (Code de commerce).
The Board of Directors is responsible for preparing the company’s management report including CSR Information in accordance with the provisions of Article R.225-105-1 of the French Commercial Code and with the Social Data Report referential and the
Environmental Reporting Protocol used by the company (hereinafter the “Guidelines”), summarised in the management report and available on request from Group HR Metrics & Business Analysis Department and the Corporate Responsibility Department.
Our work was carried out by a team of 6 people between the end of October 2013 and the end of February 2014 and took around 10 weeks. We were assisted in our work by our specialists in corporate social responsibility.
We performed our work in accordance with the professional auditing standards applicable in France, with the Decree of 13 May 2013 determining the conditions in which the independent third party performs its engagement and for the reasoned opinion on fairness, with ISAE 3000.
Article L.233-1 and the entities it controls as defi ned by Article L.233-3 of the French Commercial Code within the limitations set out in the methodological information described at the bottom of the data tables “Social data 2013 – AXA Group” and “AXA Group environmental indicators” of the Appendix VII of the management report.
Based on this work and given the limitations mentioned above, we attest to the completeness of the required CSR Information in the management report.
Information that is exhaustive and consistent, and familiarise ourselves with the internal control and risk management procedures involved in preparing the CRS Information.
With regard to the CSR Information that we considered to be the most important (detailed in appendix): ■ at parent entity level, we consulted documentary sources and conducted interviews to substantiate the qualitative information
For the other consolidated CSR information, we assessed consistency based on our understanding of the company.
■ Work accidents, in particular frequency and gravity as well as work disease
■ Measures taken in favour of the equality between men and women
■ Respect of the freedom of association and of the right of collective bargaining
ENVIRONMENTAL INFORMATION: ■ Company organization to take into account environmental issues
■ Energy consumption and measures taken to improve energetic effi ciency and the use of renewable energy
■ Inclusion of social and environment issues in the purchase policy
established pursuant to Articles L.225-100 and L.225-100-2 of the French Commercial Code.
Annual Report (Registration Document) fi led with the AMF on March 21, 2014
Pages 3. Selected fi nancial information 4 to 5 5. Information about the issuer 5.1 History and development of the issuer 6 to 7 7. Organizational structure 7.1. Brief description of the Group 6 to 9 7.2. List of signifi cant subsidiaries 217 to 222 8. Property, plants and equipment n/a 9. Operating and fi nancial review 10. Capital resources 10.2. Sources and amounts of cash fl ows 87 to 92; 196 to 197; 256 10.3. Borrowing requirements and funding structure 87 to 92; 277 to 278 10.4. Restrictions on the use of capital resources 87 to 92 10.5. Anticipated sources of funds needed 87 to 92 11. R&D, patents and licenses n/a 13. Profi ts forecasts or estimates n/a 14. Administrative, Management, and Supervisory bodies and senior management 14.1. Information on members of the Administrative, Management or Supervisory bodies 94 to 111 14.2. Administrative, Management and Supervisory bodies’ confl icts of interests 105; 136 to 137 15. Remuneration and benefi ts 15.1. Amount of remuneration paid 113 to 140 15.2. Amounts set aside or accrued to provide pension, retirement or similar benefi ts 139
Statement made by the person responsible for the Annual Financial Report 352
Report of the Statutory Auditors on the consolidated fi nancial statements of the Group 330 to 331