Pursuant to article 212-13 of the AMF General Regulations, this Annual Report has been filed with the AMF on March 26, 2009 and may, as a consequence, be used in connection with a financial transaction provided it is accompanied by a prospectus registered with the AMF.
This Annual Report serves as AXA’s Document de Référence within the meaning of article 212-13 of the Autorité des marchés financiers (AMF) General Regulations.
This annual report includes AXA’s consolidated financial statements for the years ended December 31, 2008, 2007 and 2006. AXA’s consolidated financial statements, including the notes thereto, are included in Part V “Consolidated Financial Statements” of this Annual Report and have been prepared in accordance with International Financial Reporting Standards (referred to in this Annual Report as “IFRS”) and interpretations from the International Financial Reporting Interpretations Committee (referred to in this Annual Report as “IFRIC”) that were definitive and effective as at December 31, 2008, as adopted by the European Union prior to the balance sheet date. The Group does not, however, use the “carve out” option to avoid applying all the hedge accounting principles required by IAS 39. As a consequence, the consolidated financial statements also comply with IFRS as issued by the International Accounting Standards Board (“IASB”).
Additional factors which may affect AXA’s business 40 2.� ACTIVITy REPORT Insurance and Asset Management markets 47
The table of historical data set out below is only a summary. You should read it in conjunction with the consolidated financial statements and related notes for the years ended December 31, 2008, 2007 and 2006 included in Part V –“Consolidated Financial Statements” of this Annual Report.
INCOME STATEMENT DATA: In accordance with IFRS: Net investment result excluding financing expenses (a) (b) (36,068) 25,891 32,555 32,693 27,699
(b) includes investment income net of investment management costs, impairment, net realized investment gains and losses and net unrealized investment gains and losses on assets with financial risk borne by the policyholders and on assets designated as at fair value through profit & loss, including assets backing the UK with-profits business.
(d) The share capital increase with preferential subscription rights launched by AXA on June 14, 2006 to finance part of the acquisition of Winterthur resulted in the issue of 208,265,897 new shares at a price of €19.80 compared to a market price of €24.47. According to iAS 33, share issues carried out at a belowmarket price may give rise to an adjustment to the average number of shares during the period and in each period presented. As a consequence, the loss of value suffered by existing shares represents the value of the existing shareholders’ theoretical subscription right, and the issue can be regarded as a bonus issue in the amount of the total value of the subscription rights. An adjustment factor (1.019456) equal to the pre-transaction share price divided by the theoretical post-transaction value of the shares is applied to the weighted average number of shares outstanding in each period.
The following table sets forth information on the dividends declared and paid in the most recent five years.
(e) As of January 1, 2008 individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. Euro 0.48 per share for fiscal year 2007.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2009. As of January 1, 2009 individual shareholders who are residents of
AXA is a French “Société Anonyme à Directoire et Conseil de Surveillance” (a form of limited liability company with a Management Board and a Supervisory Board) existing under the laws of France. The Company’s registered office is located at 25 avenue Matignon, 75008 Paris, France and its telephone number is +33 (0) 1 40 75 57 00. For information on the principal trading markets for AXA’s ordinary shares, ADSs and ADRs, please see Part III “Corporate governance, executive compensation, major shareholders and related matters”, Section 3.5 “The Offer and Listing” included in this Annual Report. AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059. The Company’s number in the Paris Trade Registry is 572 093 920.
In 1982, les Mutuelles Unies took control of Groupe Drouot and following this transaction, the new Group began operating under the name of AXA.
In 1992, AXA acquired a controlling interest in The Equitable Companies Incorporated following the demutualization of Equitable Life. The Equitable Companies Incorporated, based in the United States, changed its name in 1999 to AXA Financial, Inc. (“AXA Financial”).
In 1995, AXA acquired a majority interest in National Mutual Holdings following its demutualization. National Mutual Holdings, based in Australia, subsequently changed its name to AXA Asia Pacific Holdings Ltd.
In 1998, AXA purchased the minority interest in its subsidiary AXA Royale Belge and, in 1999, AXA acquired Guardian Royal Exchange in Great Britain through its subsidiary Sun Life & Provincial Holdings (“SLPH”). The Guardian Royal Exchange acquisition allowed AXA to further strengthen its positions in both the United Kingdom and Germany.
In 2006, AXA acquired the Winterthur Group, which was then active in 17 countries and served approximately 13 million clients worldwide. This operation gave AXA the opportunity to strengthen its leading position in several European markets and to increase its presence in a number of high growth markets including in Central and Eastern Europe and Asia. During 2006, AXA also acquired (i) “Citadel” in Canada, (ii) Thinc Destini (subsequently renamed Thinc Group) in the United Kingdom, and (iii) MLC Hong Kong and Indonesia via its subsidiary AXA Asia Pacific Holdings. In addition, in December AXA completed the sale of AXA RE’s reinsurance business.
100% of AXA Netherlands, Winterthur Netherlands and DBV Netherlands, (iv) finalized a long-term partnership agreement with the Italian bank BMPS for the distribution of life, non-life and pension business in Italy, and (v) signed an agreement to acquire a 36.7% interest in Reso Garantia (“RESO”) representing AXA’s entry into the Russian market.
The Company is the holding company for the AXA Group, a worldwide leader in financial protection. Based on available information at December 31, 2008, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €91.2 billion for the year ended December 31, 2008. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at December 31, 2008 of €981.5 billion. Based on available information at December 31, 2007 and taking into account banking companies engaged in the asset management business, AXA was the world’s 4th largest asset manager 1.
The diversification of the AXA Group – both by geography and by business – is designed to mutualize and hedge the different types of risks to which the Group is exposed. For example, mortality risks are partly offset by longevity risks, and Life & Savings risks by Property & Casualty risks. In addition, geographic diversification helps reduce the concentration of risk and volatility of claims experience, which, in turn, helps limit the cost of economic capital needed to support the Group’s solvency position.
Set forth below is a simplified organization chart of AXA as of December 31, 2008. For additional information, please see Note 2 “Scope of consolidation” included in Part V “Consolidated Financial Statements” of this Annual Report. Please note that the percentages shown in the second column (“Ownership interest percentage”) represent the economic interest and the percentages shown in the third column (“Voting rights percentage”) represent the percentage of the company’s total voting power controlled by AXA.
Mexico insurance AXA Seguros, S.A. de compañia de Valores (d) 99.94% 99.94%
(g) Holding company that owns AXA France Vie, AXA France iARd, AVANSSUR, AXA corporate Solutions Assurance and Juridica. (h) company owned by AXA Mediterranean Holding, S.A. (Spain).
(k) 50% of ownership interest and 50% (+ one voting right) of voting rights. company owned by AXA Mediterranean Holding, S.A. (Spain). company that owns Quadrifoglio Vita S.p.A.
(l) 50% of ownership interest and 50% (+ one voting right) of voting rights. company owned by AXA Mediterranean Holding, S.A. (Spain). (m) Holding company that owns AXA ireland Limited and AXA insurance Limited.
Singapore insurance AXA Financial Services (Singapore) Pte Ltd (z) 53.42% 100%
South Korea insurance Kyobo AXA General insurance co, Ltd (aa) 92.36% 92.36%
(w) Holding company that owns The National Mutual Life Association of Australasia Limited, National Mutual Funds Management (Global) Limited and National Mutual international Pty Limited. AXA’s ownership interest and voting power in AXA Asia Pacific Group is divided between a direct holding of 44.10% and an additional 9.32% owned by AXA Sun Life PLc.
PRINCIPAl RATINGS OF THE GROUP AS AT MARCH 25, 2009 The Company and certain of its insurance subsidiaries are rated by recognized rating agencies. The significance and the meaning of individual ratings vary from agency to agency. At March 25, 2009, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
The ratings set forth above may be subject to revision or withdrawal at any time by the assigning rating agency. None of these ratings is an indication of the historic or potential performance of the ordinary shares, ADSs, ADRs or debt securities and should not be relied upon for purpose of making an investment decision with respect to any of these securities. The Company accepts no responsibility for the accuracy or reliability of the ratings.
The table below summarizes certain key financial data by segment for the last three years.
– Holdings and other companies 5 – 2 – 4 – –
Profit or loss on financial assets (under fair value option) & derivatives (2,501) (596) (228) (226)
NET INCOME FROM OPERATING SEGMENTS 942 100% 5,95� 100% 5,798 5,8�1 100%
The table below sets forth the total assets managed by AXA’s entities, including assets managed on behalf of third parties: AXA’s totAl AssEts UndEr MAnAgEMEnt At December �1,
(b) As described in Note 1.10 of “Part V – consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
Gross insurance Gross revenues liabilities at years ended December �1, December �1, (in Euro million, except percentages) 2008 2007 2006 (b) 2008
Of which Australia and New Zealand 1,719 3% 1,384 2% 1,254 3% 6,839
Of which: Fees and charges relating to investment contracts with no participating feature 662 740 608
(a) includes revenues from other activities (mainly commissions and related fees on mutual funds sales). (b) As described in Note 1.10 of “Part V – consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement. (c) in 2006, the Mediterranean and Latin American Region consisted of Spain, italy and Portugal. in 2007, this region also included Greece, Morocco and
of which Australia and New Zealand 378 545 420 35 51 38
(a) Annual Premium Equivalent (APE): Measure of new business volume. Represents 100% of regular premiums + 10% of single premiums, in line with EEV methodology. APE is Group share.
(b) New Business Value (NBV): The value of new business issued during the current year consists of the Value in Force of new business at the end of the year plus the statutory profit result of the business during the year. NBV is Group share.
MARKETS AND COMPETITION In the Life & Savings segment, AXA operates primarily in Western Europe (including France, the United Kingdom, Germany, Belgium, Switzerland and the Mediterranean Region), the United States and Japan. In addition, AXA offers investment and saving products as well as life and health products in a number of other jurisdictions including Australia and New Zealand, Asia (notably Hong Kong, Singapore, China and Indonesia), Central and Eastern Europe, Middle East and Latin America (Mexico). The products in these markets are offered through various distribution channels, including exclusive agents, salaried salesforces, brokers, independent financial advisers, and bank networks. See the “Distribution channels” section below.
The nature and level of competition vary among the countries in which AXA operates for all the types of individual and group Life & Savings products sold by AXA. Many other insurance companies offer similar products to those offered by AXA, and, in some cases, also use similar marketing techniques and distribution methods.
For additional information on markets, see section “Insurance and Asset Management Markets” included in “Part 2.3 – Activity Report” of this Annual Report.
Product types by nature of risk Investment and savings products include: • Deferred annuities, which may be purchased with either a single premium or regular premiums. A deferred annuity has two distinct periods: an accumulation period and an annuity payment period. Typically, more flexibility is permitted in premium payments for longer deferred periods. The premium generally can be invested either in the general account of the insurer, or in a choice of unit-linked funds. Also known as individual variable annuities in the United States, these products often include optional guarantees (for a fee) such as guaranteed minimum income benefit (GMIB), guaranteed minimum death benefit (GMDB) and guaranteed minimum withdrawal benefit (GMWB).
• Universal life products, which are unbundled products that include a significant death benefit component. Funds can be invested in unit-linked and / or general accounts.
Mutual funds offered by insurance companies are generally open-ended funds operated by an investment management company, in accordance with a stated set of objectives. AXA’s Life & Savings products may be distinguished between: • participating contracts, in which the policyholders participate in the excess assets over liabilities (the surplus) of – and therefore in the investment return and/or in part of the operating profits earned by – the insurance company issuing the contract by way of the payment of an interest or bonus payment. Such savings contracts are Euro denominated products or traditional products.
New product initiatives To attract and retain clients, especially in the segments identified as strategic, AXA has developed solutions designed to meet the needs of the targeted customer groups. In addition, new products have been designed to support AXA’s cross-selling strategy and thus improve client retention and enhance value for the clients. AXA also aims to reuse across markets successful products and experiences developed for individual country markets.
(1) Health products are classified either in Life & Savings or Property & casualty, depending on the features of the products but also market practice specific to each country. For example health product providing savings features or rider options are classified in the Life & Savings segment.
Gross insurance Gross revenues by main product lines liabilities years ended December �1, at December �1, (in Euro millon, except percentages) 2008 2007 2006 (b) 2008
Life contracts (including endowment contracts) 18,661 33% 18,095 31% 12,837 27% 143,304
Fees and charges relating to investment contracts with no participating features 662 740 608 39,975
Of which: Contracts with financial risk borne by policyholders (Unit-Linked) 18,435 33% 21,529 37% 18,512 38% 132,436
Brokers are independent firms who negotiate with insurance companies on behalf of customers. As opposed to exclusive agents, brokers can work with different insurance companies.
Independent financial advisors are individuals or firms that provide financial advice to customers and negotiate related policies with insurance companies on behalf of customers.
Distribution partnerships are generally structured as sales agreements between an insurance company and another company from the financial services industry, especially banks, or from another industry, such as car dealers. This may take the form of a joint venture between the insurance company and its partner or a pure contractual distribution arrangement.
AXA’s distribution strategy focuses on strengthening traditional channels and developing new ones, such as direct selling and partnerships. Staff hiring, retention of veteran staff, professionalism and commercial performance are the main initiatives to strengthen traditional distribution channels. To serve increasingly sophisticated and demanding customers, AXA believes that the diversification of its distribution channels through the development of new channels improves opportunities for increased penetration and more frequent contact with AXA’s target customer base.
Of which: (a) As described in Note 1.10 of “Part V – consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
(b) in 2006, Mediterranean and Latin American Region consisted of Spain, italy and Portugal. in 2007, this region also included Greece, Morocco and Turkey, and in 2008, Mexico and the Gulf Region.
The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross revenues in 2007, along with AXA’s ranking (by market share).
(1) Some countries classify health activity in the Property & casualty segment, while other countries classify it in the Life & Savings segment. AXA chooses to follow local classification.
PRODUCTS AND SERVICES AXA’s Property & Casualty insurance operations offer a broad range of products including motor, household, property and general liability insurance for both personal and commercial customers (targeting mainly small to medium sized companies) and, in certain countries, health products. In addition, AXA offers engineering services to support prevention policies in companies.
The table below sets forth gross revenues and gross insurance liabilities by major product for the periods and as at the dates indicated: ProPErty & cAsUAlty sEgMEnt: gross rEvEnUEs By ProdUct
(a) As described in Note 1.10 of “Part V – consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
DISTRIbUTION CHANNElS AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, brokers, salaried sales forces, direct sales and banks and other partnerships, including car dealers. In Europe, the same distribution channels are used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to the “Distribution channels” section in the Life & Savings segment of this Part 2.2.
Development of distribution channels is key to reach targeted customers and overall for the profitability of the activity.
Intermediaries, Other networks, including General agents independent advisers Direct Sales corporate partnerships and salaried salesforce & brokers and marketing and bank networks
(a) in 2008, the share of intermediaries, independent advisers and brokers increased due to the acquisition of Mexico in July 2008, for which products are fully distributed through these channels.
CEDED REINSURANCE AXA’s Property & Casualty operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks, in order to protect Group Solvency and reduce volatility on key financial indicators. A growing portion of AXA’s Property & Casualty insurance exposures are ceded internally to AXA Cessions, which organizes external reinsurance programs. Total gross premiums ceded by AXA’s Property & Casualty operations to third party reinsurers in 2008 amounted to €1,343 million (2007: €1,232 million).
INTERNATIONAL INSURANCE SEGMENT Operations in this segment are principally focused on large risks, reinsurance and assistance. The insurance products, offered by AXA Corporate Solutions Assurance include coverage to large national and international corporations mainly relating to property damage, third party liability, marine, aviation and transport, construction risk, financial risk, and directors and officer liability. In addition, AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios including risks underwritten by AXA RE for all periods prior to and including 2005 when AXA RE’s business was sold. Reinsurance operations (AXA RE) principally focus on property damage, third party liability, marine and aviation property, and third-party liability reinsurance. The reserves corresponding to the ceded business are fully reinsured by Paris Ré, with AXA RE however retaining the risk of any deviation (positive or negative) as compared to the reserves constituted as at January 1, 2006 in respect of occurrence years 2005 and prior.
The businesses of the International Insurance activities are described below. The International Insurance segment accounted for €2.8 billion, or 3% of AXA’s consolidated gross revenues for the year ended December 31, 2008 (2007: €3.6 billion or 4%).
AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to worldwide Property & Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance.
AXA Assistance provides assistance services including medical aid for travelers, automobile-related road assistance, home assistance and health-related services mainly to banking and insurance companies, tour operators, telecommunications operators, gas, water and electricity utilities and automobiles manufacturers. AXA Assistance has also developed its expertise in the home services market.
AXA liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios. This entity manages the internal run-off portfolios of AXA UK, AXA Germany and AXA Belgium, as well as a number of stand-alone run-off companies in the “Other International Activities” segment. In connection with the disposal of AXA’s reinsurance activities, AXA Liabilities Managers also manages the run-off of AXA RE as noted above.
The table below summarizes AXA’s consolidated gross revenues and gross insurance liabilities (gross of reinsurance) for the International Insurance segment for the periods and at the dates indicated: intErnAtionAl insUrAncE
(in Euro millon, except percentages) 2008 2007 2006 2008 of which
AXA Corporate Solutions Life Reinsurance 75 3% 82 2% 98 3% 666
AXA Assistance is one of the three leading worldwide assistance companies, in a market seeing the emergence of some specialized niche players 2.
PRODUCTS AND SERVICES AXA Corporate Solutions Assurance provides global insurance programs to large international corporations that require coverage for all their worldwide locations. AXA Corporate Solutions Assurance underwrites large insurance risks such as property damage, liability, construction risks, motor fleet, marine and aviation. AXA also offers loss-prevention and risk management services.
The table below presents the International Insurance segment’s gross revenues and gross insurance liabilities by major product for the periods and at the dates indicated: intErnAtionAl insUrAncE
AXA Assistance mainly operates as a business-to-business company although it also uses direct sales and marketing to sell its products. In countries in which AXA offers Property & Casualty insurance products such as France, Switzerland, Mediterranean and Latin American Region, Belgium, the United Kingdom and Germany, AXA distribution networks offer assistance services among their portfolio of insurance products. AXA Assistance aims at integrating service providers and developing capacities of distribution to final customers.
CEDED REINSURANCE AND RETROCESSION AXA Corporate Solutions Assurance reviews annually its exposure to ensure that the risks underwritten are diversified geographically and by lines of business in order to manage concentration risk. In 2008, AXA Corporate Solutions Assurance ceded €849 million of premiums (2007: €714 million) to third-party reinsurers.
(1) Sources: Lehman Brothers, Merrill Lynch, JP Morgan, KBW, Annual Reports. (2) Source: SNSA (National Syndicate of insurance companies).
Asset Management is important to AXA, from both a strategic and a profitability perspective. The development of Asset Management activities is a key part of AXA’s financial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the belief that its asset management expertise will enable AXA to benefit in the future from the expected growth in savings-related products in the markets in which it operates. The Asset Management segment accounted for €3.9 billion, or 4% of AXA’s consolidated gross revenues for the year-ended December 31, 2008 (2007: €4.9 billion or 5%).
AXA’s principal Asset Management companies are AllianceBernstein and AXA Investment Managers. These companies manage assets on behalf of institutional clients, retail investors and private clients, as well as on behalf of companies affiliated with AXA.
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on asset management companies only. AXA Group (including insurance companies) assets under management amounted to €981.5 billion, €1,281.4 billion, and €1,278.0 billion, as of december 31, 2008, 2007 and 2006 respectively.
At December 31, 2008, AllianceBernstein had €331.1 billion of assets under management, including €263.8 billion of assets managed on behalf of third party clients (2007: €543.5 billion and €461.1 billion, respectively).
At December 31, 2008, AXA IM had €484.9 billion of assets under management, including €151.2 billion of assets managed on behalf of third party clients (2007: €548.4 billion and €196.8 billion, respectively).
GERMAN bANK AXA Bank targets private customers in retail banking, and is an important element of pensions and asset management of AXA Germany. The Bank had approximately 76,000 customers at year-end 2008. The major activities of AXA Bank are mortgage loans, mutual funds and deposits. These products are sold exclusively through the tied agent network of AXA Germany.
ESTAblISHMENT OF ClAIMS RESERVES AXA is required by applicable insurance laws and regulations, and generally accepted accounting principles to establish reserves for outstanding claims (claims which have not yet been settled) and associated claims expenses that arise from its Property & Casualty and International Insurance operations.
lOSS RESERVE DEVElOPMENT TAblE The loss reserve development table shows movements in loss reserves between 1998 and 2008, based on previously applied accounting standards, in accordance with IFRS 4. All contracts concerned are insurance contracts as defined by IFRS.
The second line entitled “Gross reserves for unpaid claims and claim expenses developed in 2008 adjusted for changes in exchange rates and scope of consolidation” indicates the amount that would have been developed initially at the booking date had the exchange rates for the current year been used (for reserves recognized by AXA Group entities that do not use the Euro as their functional currency) and assuming an identical scope of consolidation to that used for the last diagonal of the table.
The surplus (shortfall) of the initial reserve with respect to the re-estimated gross final 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 2008 adjusted for changes in exchange rates and scope of consolidation) and the amount shown in the final diagonal under “Reserve re-estimated”.
(In Euro million except percentages) 1998 1999 (b) 2000 2001 2002 200� 2004 (c) 2005 2006 (d) 2007 2008
Gross reserves for unpaid claims and claims expenses developed initially at the booking date (c) 20,941 26,656 26,916 28,6�6 28,465 27,825 29,128 �1,168 41,�01 44,020 44,046
This line also includes the impact of the unwind of discount rate on annuities (which are developed from 2006 on) for an amount of €107 million for 2007 and €196 million for 2006.
(c) in 2004, AXA corporate Solutions Assurance US, AXA RE P&c insurance company and AXA RE P&c Reinsurance were transferred from 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 AXA RE P&c insurance company and AXA RE Reinsurance company were presented on an underwriting year basis and included in the AXA RE loss reserves development table.
lOSS RESERVES DEVElOPMENT TAblE: AXA RE On December 21, 2006, the AXA Group finalized an agreement to sell the AXA RE reinsurance business to Paris Ré Holding. Under the terms of the agreement, AXA retains exposure to any changes in the final 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 Ré, have not been developed.
Gross reserves for unpaid claims and claims expenses developed in 2008 (d) �,060 �,�96 �,45� 5,868 4,778 �,742 �,�14 4,25�
Re-estimated net claims reserves 2,145 2,185 2,042 2,700 2,034 2,251 2,233 2,086
(a) The loss reserves development table is presented on an underwriting year basis for AXA RE business. Accordingly reserves re-estimated and the excess of re-estimated reserves of the initial reserves include reserves for losses occurring up to twelve months subsequent to the original year-end. it is not appropriate to extrapolate future redundancies or future deficiencies based on the loss reserves development presented in the table, as conditions and trends that have affected the development of the liability in prior periods may not necessarily occur in future periods.
(c) in 2001, AXA RE’s claims reserves were adversely affected by the September 11 attacks. (d) in 2004, AXA corporate Solutions Assurance US, AXA RE P&c insurance company and AXA RE P&c Reinsurance were transferred from 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 AXA RE P&c insurance company and AXA RE Reinsurance company were presented on an underwriting year basis and included in the AXA RE loss reserves development table.
(in Euro million) December �1, 2008 December �1, 2007 December �1, 2006 (c)
– Of which future policy benefits annuity reserves 3,530 3,321 –
Total gross claim reserves and other reserves for Property & Casualty and International Insurance 48,477 48,754 49,0�5
(b) includes reserves on acceptations (€798 million in 2008, €699 million in 2007 and €771 million in 2006). (c) in accordance with iFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items impacting the allocation of Winterthur purchase price.
ENVIRONMENTAl, ASbESTOS AND OTHER EXPOSURES AXA regularly reviews environmental, asbestos and other related exposures to ensure that loss provisions take into account recent developments and information. Further details are provided in Note 14.7 “Environmental pollution and asbestos” included in “Part V – Consolidated Financial Statements” of this Annual Report.
For information relating to certain additional matters that may affect AXA’s business, see the “Risk factors” Section included in Part IV, and Part V “Consolidated Financial Statements” included in this Annual Report.
While the precise nature, scope and extent of legislative and regulatory initiatives growing out of the financial market crisis is not clear yet, management believes that many of the principal jurisdictions where the Group does business are likely to consider fundamental legislative and regulatory reforms to address the perceived “root causes” of the financial crisis. Management believes that these initiatives will likely revolve around common themes but may result in the enactment of a series of technically incoherent and inconsistent measures across the various jurisdictions where the Group does business, with broad potential implications for the Group and its business. Management believes that these initiatives are likely to revolve around the following areas and themes, among others: • Potential Reforms to Regulatory Structures – Proposal to establish a cross-border “supra-national” regulator to supervise the largest global financial institutions – Move towards a universal “FSA-type” regulatory structure in the US with an optional or mandatory Federal charter for insurance companies and increased powers for the US Federal Reserve and Treasury to broadly regulate financial institutions and systemic risk
– Similar proposals aimed at addressing the risk of “regulatory arbitrage” arising from fractured and inconsistent regulation of financial institutions both nationally and internationally.
• Potential Reforms to solvency, capital and liquidity requirements for financial institutions including limitations on excessive leverage
Management believes that 2009 is likely to see significant regulation in some or all of these areas, among others, and that the massive injection of government funds into a number of major financial institutions over the past months has broad potential implications, the full extent of which is not clear yet, for those institutions (and for the financial services sector more generally) in terms of the extent and nature of continuing government influence and control. The Group will monitor the evolution of these initiatives and their potential impact on our business closely over the coming months.
Financial institutions such as AXA, that have not received any form of government support or backing, find themselves increasingly competing directly against government supported or controlled financial institutions in many of their principal markets. This is an unprecedented situation with broad potential implications for the competitive landscape going forward. In this context, management is concerned about potentially abusive uncompetitive practices by its government supported or controlled competitors, for example, in attempting to use their government backing as a marketing advantage with consumers and/or taking advantage of government injected funds to aggressively “buy” revenues and market shares by underwriting risks on an unprofitable basis – in both cases to the detriment of pure private sector players such as AXA. Management is monitoring this situation very closely and will act to protect its interests where warranted.
INSURANCE RElATED REGUlATION While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s insurance subsidiaries operate have laws and regulations governing sales practices, standards of solvency, levels of capital and reserves, permitted types and concentrations of investments, business conduct, agent licensing, approval of policy forms and, for certain lines of insurance, approval or filing of rates. In certain jurisdictions, regulations limit sales commissions and certain other marketing expenses that may be incurred by the insurer. In general, insurers are required to file detailed annual financial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular or targeted examinations of the insurers’ operations and accounts and make requests for information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. This holding company legislation typically requires periodic disclosure concerning the corporation that controls the licensed insurer and other affiliated companies, including prior approval of transactions between the insurer and other affiliates such as inter-Group transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory regimes are designed to protect the interests of policyholders rather than shareholders.
REGUlATORy CAPITAl REqUIREMENTS The Company’s insurance subsidiaries are subject to regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specific regulatory capital requirements (including definition of admitted assets and methods of calculation) vary between jurisdictions, an insurer’s required capital can be impacted by a wide variety of factors including, but not limited to, business mix, product design, sales volume, invested assets, liabilities, reserves and movements in the capital markets, including interest rates and equity markets. Regulatory capital requirements may increase, possibly significantly, during periods of declining equity markets and/or lower interest rates such as those experienced during 2008.
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions including limiting or prohibiting the issuance of new business, prohibiting payment of dividends, and/or, in extreme cases, putting a company into rehabilitation or insolvency proceedings. A failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements may also result in the Company having to inject significant amounts of new capital into its insurance subsidiaries which could adversely affect the Company’s liquidity position, results of operations and financial position. For further information, please see Section 4.1 – “Risk Factors” – “The Company’s consolidated solvency margin declined significantly during 2008 and continued adverse capital market conditions may further negatively impact our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries which could have a material adverse affect on our business, liquidity, credit ratings, results of operations and financial position”.
EUROPE In Europe, AXA operates in most major markets, including France, Germany, the United Kingdom (“UK”) and Belgium through freestanding subsidiaries that are subject to a comprehensive regulatory regime based on the EU insurance directives on life insurance and insurance other than life insurance. These directives have been implemented in France, Germany, the UK and other European jurisdictions and are founded on the “home country control” principle, according to which the ongoing regulation of insurance companies, including their non-home country insurance operations (whether direct or through branches), is the responsibility of the home country insurance regulatory authority. The home country insurance regulator monitors compliance with applicable regulations, including regulations governing solvency, actuarial reserves, investment of assets, statutory accounting principles, internal governance and periodic reporting requirements. In France, ACAM monitors compliance with applicable regulations, the insurer’s capital base and actuarial reserves, as well as the assets of the insurer that support such reserves. Selling activities of non-home country insurance operations, however, are generally supervised by the regulator in the country in which the sale of the insurance product takes place. As a result of the implementation of these directives, an insurance company that has been licensed to conduct insurance business in one jurisdiction of the EU may do business directly or through branches in all other jurisdictions of the EU without being subject to additional licensing requirements in the other jurisdictions.
The EU has also adopted various directives concerning solvency margin requirements for insurers and insurance groups: • A 1998 EU directive, implemented into French law in 2002, requires insurance groups to calculate a consolidated solvency margin. In accordance with this directive, AXA must establish appropriate internal controls to ensure solvency sufficient to cover all of the Group’s insurance liabilities, inform the French insurance regulatory authorities annually of certain intra-group transactions, and calculate on a consolidated basis the capital needed to meet the respective solvency requirements of the Group’s insurance subsidiaries. Similar solvency requirements must be fulfilled by intermediate holding companies that own AXA Group insurance subsidiaries in different EU jurisdictions.
• A 2002 EU directive, implemented into French law in 2005, concerns the regulation and supervision of financial conglomerates and provides for the assessment of financial conglomerates capital requirements at the consolidated Group level, the supervision of risk concentration and intra-group transactions, and the prevention of double-leveraging of the capital of a parent holding company, i.e. once at the holding parent level and a second time at the subsidiary level (“double gearing”). Although the AXA Group is not currently deemed a financial conglomerate within the meaning of this legislation by the French insurance regulator, there can be no assurance that it will not become (or be deemed) a financial conglomerate in the future. Due to the lack of uniform interpretation of this legislation by local insurance regulators throughout the various EU jurisdictions, AXA’s Belgian subsidiaries have been deemed a financial conglomerate by the Belgian insurance regulator and it is possible that other European subsidiaries of the AXA Group may also be deemed financial conglomerates by local regulators thereby subjecting them to the requirements of this law.
Finally, there are numerous other legislative and regulatory initiatives within various European jurisdictions relating to a variety of matters, including such matters as distribution practices and changes to tax laws that may affect the attractiveness of certain of our products, which currently have favorable tax treatment.
UNITED STATES In the United States, regulation of the insurance business remains principally at the state level, with AXA’s insurance operations being subject to regulation and supervision by various states and territories. Within the U.S., the method of regulation vary between the different states but generally has its source in statutes that delegate regulatory and supervisory powers to a state insurance commissioner. While the extent of regulation varies by jurisdiction, most jurisdictions have laws and regulations governing approval of policy forms and rates, sales practices and business conduct, the standards of solvency that must be met and maintained (including risk-based capital measurements), the establishment and levels of reserves, the licensing of insurers and their agents, sales practices by agents, the nature of and limitations on permitted investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, and the form and content of reports of financial condition and results of operations to be filed.
Certain of AXA’s U.S. insurance, broker-dealer, investment adviser and investment management subsidiaries, including AXA Equitable Life Insurance Company (“AXA Equitable”), and certain life insurance policies and annuity contracts offered by them are subject to regulation under the Federal securities laws administered by the SEC and under certain state securities laws. The SEC conducts regular examinations of the operations of these companies, and from time to time, makes requests for information from them. The SEC, other governmental and regulatory authorities, including state insurance and securities regulators, and the Financial Institutions Regulatory Authority (“FINRA”) may institute administrative or judicial proceedings which may result in censure, fines, the issuance of cease-and-desist orders, the suspension or expulsion of a broker-dealer or member, its officers or employees or other similar sanctions. Over time, AXA Financial’s broker-dealer subsidiaries and its other subsidiaries have provided and, in certain cases continue to provide, information and documents to the SEC, FINRA, state attorneys general and other regulators on a wide range of issues. Ongoing or future regulatory investigations could result in fines, other sanctions and/or other costs.
Several U.S. states, including the state of New York, regulate transactions between an insurer and its affiliates under insurance holding company acts that establish certain reporting requirements and place restrictions on provision of services and on intercompany transactions. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, the issuing insurer is not maintaining adequate statutory surplus or capital. Life insurers in the United States are also subject to risk-based capital (“RBC”) guidelines, which provide a
The current, rapidly changing economic environment may increase the likelihood of substantial changes to federal tax law. Management cannot predict what, if any, legislation will actually be proposed or enacted based on these proposals or what other proposals or legislation, if any, may be introduced or enacted relating to AXA Financial’s business or what the effect of any such legislation might be.
On August 25, 1998, AXA, Winterthur Group and certain other European insurers signed a Memorandum of Understanding with certain U.S. insurance regulators and non-governmental Jewish organizations agreeing to the establishment of the International Commission on Holocaust Era Insurance Claims (“ICHEIC”). ICHEIC conducted an investigatory process to determine the status of life insurance policies issued to Holocaust victims between 1920 and 1945 and settled thousands of claims filed with the ICHEIC with respect to policies issued by the European insurers participating in ICHEIC. After having completed its archival research and audit processes as well as the payment of all valid claims submitted by Holocaust victims and their heirs, the ICHEIC concluded its work in March 2007. As a result of its participation in the ICHEIC process, AXA benefits from a statement of interest issued by the U.S. federal government which provides that ICHEIC should be recognized as the exclusive remedy for all Holocaust era insurance claims. This statement of interest is intended to protect AXA against future civil litigation in the U.S. by Holocaust claimants and to encourage judges handing this type of litigation to dismiss these claims. While this statement of interest provides AXA with a certain level of protection against future lawsuits of this type in the U.S., it does not offer complete protection and, consequently, AXA could still be subject to litigation in the U.S. brought by Holocaust claimants.
ASIA-PACIFIC AND OTHER JURISDICTIONS The other jurisdictions in which AXA operates, including those in the Asia-Pacific region, also have comprehensive regulatory regimes with which AXA must comply. In general, insurance laws and regulations grant supervisory authorities broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations or to revoke an insurer’s license to operate. Consequently, AXA’s insurance subsidiaries operating in the Asia-Pacific region could be subject to regulatory orders limiting, restricting or terminating their regulated business activities in the event they fail to meet local regulatory requirements. In addition to licensing requirements, AXA’s insurance operations in these jurisdictions are also generally regulated with respect to currency, policy terms and language, amount and types of security deposits, amount and type of reserves, amount and type of local investment and the share of profits to be paid to policyholders on participating policies. In certain jurisdictions, regulations governing constitution of technical reserves and similar regulations may prevent payment of dividends to shareholders and/or repatriation of assets.
AXA’s life-insurance products’ advantageous tax treatment may be eliminated or adversely impacted for certain products by changes in tax laws that are considered from time to time in jurisdictions in which AXA operates. For example, the Japanese legislature adopted a change in the tax treatment of Increasing Term Products that reduced tax advantages of these products and adversely affected sales of these products in the Japanese market. As in other regions of the world, regulators in the AsiaPacific region have broad discretion in their application of regulation and to investigate licensed insurers, on an individual or sector basis, to examine specific issues. For example, in Japan, the FSA ordered an extensive examination of claims payment practices in the life insurance sector during 2007. As part of this investigation, AXA Japan reviewed several hundred thousand life insurance payments over the prior 5 years to determine whether benefits had been paid correctly. The investigation uncovered a limited number of incidents, which have since been fully addressed, and the FSA decided not to pursue any administrative action against AXA Japan. In addition, in the fourth quarter of 2008 the FSA launched a formal investigation into the circumstances surrounding the collapse of an independent agent that was a distributor of AXA Life Japan products. The agent is alleged to have engaged in certain fraudulent and illegal sales practices over a period of several years and the FSA has requested that AXA Life submit a detailed report describing its relationship with the agent, whether AXA Japan and its personnel had any knowledge of the agent’s sales practices and proposed improvements to AXA Life Japan’s internal controls and procedures to more closely monitor and quickly detect questionable sales practices by independent agents that distribute its products. This investigation is on-going and AXA Life Japan is fully cooperating with the FSA in this matter. In addition, in 2008, the Government of Japan enacted a new Insurance Law which is expected to become effective in 2010. The main intent of the law is to further protect policyholders’ interest and to increase transparency for the policyholder. AXA Japan is preparing for the introduction of the law and assessing the potential impact on its business.
ASSET MANAGEMENT RElATED REGUlATION AllianceBernstein and AXA Investment Managers are subject to extensive regulation in the various jurisdictions in which they operate. These regulations are generally designed to safeguard client assets and to ensure adequacy of disclosure concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity and qualifications of the investment manager. These regulations also generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser, censures and fines.
AllianceBernstein and certain of its subsidiaries as well as certain U.S. subsidiaries of AXA Investment Managers and AXA Financial, Inc. are investment advisers registered under the United States Investment Advisers Act of 1940 (the “Investment Advisers Act”). Each of AllianceBernstein’s U.S. mutual funds is registered with the SEC under the U.S. Investment Company Act of 1940 (the “Investment Company Act”) and the shares of most of these funds are qualified for sale in all states in the United States and the District of Columbia, except for U.S. funds offered only to residents of a particular state. Certain subsidiaries of AllianceBernstein and AXA Financial, Inc. are also registered with the SEC as transfer agents and broker-dealers that are subject to minimum net capital requirements. Asset management services rendered by AllianceBernstein and/or AXA Investment Managers to AXA Group insurance companies (and other types of transactions between these companies), are subject to various insurance laws and regulations in the various jurisdictions where these insurance company clients are domiciled. These regulations generally require that the terms of transactions between the investment manager and its client be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to unaffiliated clients for similar services or, in certain cases, which include ancillary service agreements, based on cost reimbursement.
• Certain European jurisdictions have enacted legislation that impacts investment of the Group’s proprietary assets and may also affect the Group’s asset management activities for third-party clients in those jurisdictions, including by restricting investment in financial instruments issued by companies engaged in certain activities. These types of legislation, which often vary from one jurisdiction to another, increase compliance costs and risks for the Group in the various European jurisdictions where it operates.
Insurance and Asset Management markets lIFE & SAVINGS France 1. The French Life Insurance market declined by 11% in 2008, especially on Individual lines business (–12%) whereas Group Life business decreased by 1%. This negative market evolution was principally due to the financial crisis and the economic downturn. In this context, AXA outperformed the market on individual savings business (–5%), despite a drop in unit-linked funds sales. AXA underperformed the market on Group business, as a result of an exceptional level of large retirement contracts in 2007 (€777 million vs. €187 million in 2008), partly compensated by Group Life and Health performance in 2008 (respectively +8% and +11%) thanks to a good level of new Health contracts. AXA ranked third in the French Life & Savings market in 2008.
Japan 4. The Life insurance market declined by 3% due to lower annuity sales following turbulent market conditions. Bancassurance sales also suffered as a result of the new regulatory constraints making insurance products with strong investment characteristics more difficult to sell. Falling asset values combined with decreasing interest rates should trigger many insurers to review their annuity product features. Competition in the high margin medical segment continued to intensify with both life & non-life insurers continuing to aggressively target this market. The industry did welcome the conclusion of the review into Increasing Term (a key product for a number of insurers) tax deductibility which, while halving deductibility for new business, resolved uncertainty and enabled the industry to relaunch the product. As in 2007, AXA ranked 10th in the market based on premium income (3rd for number of inforce Medical policies). AXA’s market share was 2.8%.
Germany 5. The Life & Savings market increased by 1% in 2008. The trend away from traditional products in favor of unit-linked annuity products continued, but inverted in the last quarter due to the financial crisis. The increase in short-term and mediumterm investment products, which compete directly with banking products, continued in 2008 (+35% in terms of single premiums). The core products of the Retirement Earnings Law (“Alterseinkünftegesetz”), the “Rürup” pensions, declined by 10% in terms of regular premiums. In the “Riester” business, the regular premiums increased by 71% thanks to fiscal incentive in 2008. German Private Health insurance market grew by 3%. In 2007, AXA ranked 5th in the Life market (considering all companies part of the Group of Public Insurers independently) and 4th in the Health market.
Association of British insurers. (4) Source: insurance Research institute. Statistics of Life insurance Business in Japan. Fiscal Year 2007. Premium income growth in 2007 excludes Kampo
Life which reported for the first time in FY2007. (5) Source: GdV (March 2009).
Switzerland. The Life market was flat 1. In Group Life, growth was slightly positive mainly caused by intrinsic drivers such as salary increases. Switzerland was still impacted by competitive re-investment activities of autonomous pension “foundations” even though they started suffering from the financial crisis due to their higher exposure to equities than traditional companies like AXA Winterthur. AXA Winterthur held the leading position in Group Life with a market share remaining above 30%. In Individual Life, the financial markets turmoil in 2008 increased sales in guaranteed traditional products with annual premiums and the low interest rate level reduced the attractiveness of traditional single premium products. Although large portfolios matured in traditional Insurance business in 2008, the low reinvestment rate resulted in a slightly negative assumed growth rate in Individual Life. AXA Winterthur ranked second in Individual Life with a market share remaining above 14%.
Financial Protection product markets in Australia have experienced solid growth during 2008 with inforce premiums increasing 13% 15. This was the result of a shift in focus to financial protection and insurance needs in the midst of falling asset values. In New Zealand inforce premiums for insurance increased by 5% 16 reflecting strong group sales. The top 10 companies continued to dominate the market, accounting for almost 90% of inforce annual premiums. AXA maintained its 6th ranking in financial protection with 9% market share in Australia and third in New Zealand with 13% market share 17.
(1) Source: FOPi (Federal Office of Private insurance). (2) Source: Assuralia (Belgian Professional Union of insurance companies). derived from the nine months ended September 30, 2008 figures. (3) Source : AXA Belgium.
South East Asia & China. The climate deteriorated towards the end of 2007 as a result of issues in the US economy. The life insurance business in China performed well in the first nine months of 2008 growing by 67% 1 in total premiums largely on the back of strong bancassurance business. AXA was number thirty-three for inforce premiums and twenty-seven for new business 2. The life insurance sector in Indonesia also performed well in the first half of the year with 39% � growth in terms of new business index. AXA was number six for inforce premiums and three for new business 4. Thailand, a market with a relatively low Life insurance penetration of 3%, grew to €633 million 4 in annual Life premiums for the first eight months of 2008. AXA was number eight for inforce premiums and seven for new business 4. The Philippines remained a similarly attractive market 5 with very low Life insurance penetration of 1.1%. AXA was number two for total premium income 4. Singapore, which is characterized by large bank deposits and an affluent but underinsured population, recorded new business index of over €800 million 6 for the nine months ended September 2008. AXA was number nine for inforce premiums and eleven for new business 4.
(5) Source: Watson Wyatt report, September 2008. (6) Source: Singapore LiA Statistics.
(8) Polish Financial Supervision Authority site. (9) Report of the Association of Hungarian insurance companies (Mabisz). (10) czech association of insurance companies. (11) Source: FFSA.
INTERNATIONAl INSURANCE AXA Corporate Solutions Assurance is the AXA Group subsidiary dedicated to worldwide Property and Casualty insurance of large national and multinational corporations, and to Aviation, Marine and Space insurance. Since 2005, after several years of rate increases and program restructurings, the market had experienced soft underwriting conditions on these lines of business. 2008 confirmed the slowdown of this trend and a general upturn of pricing cycle is expected with January 1, 2009 renewals already showing rate increases in specialty lines of business. AXA Corporate Solutions Assurance is among the top five large corporate risks insurers in Europe 18.
(1) italian Association of insurance companies: ANiA (Nov 2008). (2) Spanish Association of insurance companies.
(3) Source: Turkish Association of insurance companies as of dec 2007. (4) istituto de Seguros de Portugal.
ASSET MANAGEMENT In 2008, the decline in global equity markets accelerated throughout the year, as the crisis in the financial markets expanded to the broader economy. With the US recession, investors increasingly moved away from risk and all global equity markets were impacted, as many investors were forced to raise cash and continued to look for safe havens. As a result, the 4th quarter of 2008 saw a continuation of significant stock price declines and credit market turmoil. As risk and deleveraging became the dominant criteria driving many investment decisions, stock price movements became strongly correlated. Given the anticipated increase in weak economic underpinnings, corporate earnings will continue to be negatively impacted into the foreseeable future, making global asset management a difficult, yet highly opportunistic, endeavor.
One year and a half after the start of the subprime crisis in the United States, the world’s economy entered in a global recession at the end of 2008. In 2008, the crisis evolved from a liquidity crisis to a banking system solvency crisis, resulting in a financial disaster, many bank failures in the United States and nationalisations in Europe and finally unprecedented volatility in both equity and fixed income markets (both corporate and government debts).
The autumn marked a radical change in the conduct of economic policy. Most major central banks made a concerted reduction of 50bps on October 8, 2008. The Bank of England then reduced its rate from 4.5% to 2% in less than two months. The ECB did the same, setting its repo rate at 2.50%. Even the Bank of Japan reduced its rate from 0.50% to 0.10% in an attempt to slow down the appreciation of its currency. On December 16, the Fed took a historic step towards quantitative monetary policy, announcing a target range of 0 to 0.25%. Governments also reacted, announcing economic recovery plans in the United States, China, Japan and Europe. The United States stimulus plan, approved in February 2009, amounted to $787 billion, or approximately 6% of GDP. In Europe, numerous countries have embarked on budgetary packages amounting to around 1.5% of GDP.
bond markets Regarding government debt, the Autumn’s coordinated easing gave rise to a rapid softening in long-term rates in all markets. In the Euro zone, the 10-year Bund yield ended the year at a historic low (2.95% against 4.30% at the beginning of the year) thus wiping out the losses incurred through heightened expectations of inflation at the beginning of the year. In the United States, yields fell from 4% on January 1 to 2.21% at the end of the year.
Credit markets were strongly impacted, both on the investment grade and below investment grade fronts. Investment grade paper was subjected to the structured product de-leveraging process and the distrust of the finance sector. In Europe, the iTRAXX (series 8) spreads widened by 150bps over the year. The second half-year was more unfavorable to High Yield bonds because of the difficulties of the United States automobile sector and the increase in default rates in emerging debt (defaults by the Seychelles
On February 12, 2008, AXA announced it had reached an agreement with ING for the acquisition of 100% of the share capital of its Mexican insurance subsidiary Seguros ING, for a price of $1.5 billion (€959 million). In 2007, Seguros ING was the third largest Mexican insurer (12% total market share, 5.5 million clients), with leading positions in key markets, such as Motor (2nd largest player with a 17% market share) and Health (2nd largest player with a 19% market share). AXA intends to accelerate and complete the initiated turnaround of Seguros ING by dedicating seasoned management capabilities and leveraging the Group’s global platforms and expertise, notably in IT and reinsurance. Upon completion of the transaction, Seguros ING was integrated to AXA’s Mediterranean and Latin American Region and will benefit from its know-how in underwriting, claims management, client segmentation, service and brand management. AXA financed the transaction with internal resources. This acquisition closed on July 22, 2008.
On March 19, 2008, AXA United Kingdom completed the purchase of 100% of the share capital of SbJ Group. The acquisition of SBJ will complement and enhance AXA’s United Kingdom advisory and broking capability, bringing a number of strengths to the Group, including increased scale, a wider national presence and access to new market areas. SBJ, with its strong management team and high quality staff, will represent significant progress towards AXA’s stated strategic aim of building a leading presence in the advisory and broking markets. The businesses will continue to operate independently from AXA’s insurance company interests.
On March 22, 2007, AXA United Kingdom acquired the United Kingdom’s only 100% online insurer, Swiftcover, jointly owned by international insurer Primary Group and Swiftcover’s management. The upfront cash consideration for Swiftcover amounted to £75 million, with an additional potential earn-out of £195 million maximum over the next 4 years, based on policy volume and combined ratio level.
On June 8, 2007, AXA and BNP Paribas announced they had reached an agreement for the establishment of a partnership on the Ukrainian Property & Casualty insurance market. On November 23, 2007, AXA acquired from BNP Paribas’ subsidiary UkrSibbank, a 50% stake in its insurance subsidiary: Ukrainian Insurance Alliance (UIA). The purchase price amounted to €12 million.
On July 5, 2007, AXA finalized definitive settlements with all claimants in litigations seeking nullity and avoidance (Nichtigkeits- und Anfechtungsklagen) of the squeeze-out resolutions adopted by the general meetings of AXA Konzern AG and Kölnische Verwaltungs-AG für Versicherungswerte on July 20 and July 21, 2006, respectively. Following the completion of these settlements, the squeeze-out resolutions have been registered in the commercial register of AXA Konzern AG and Kölnische Verwaltungs-AG für Versicherungswerte on July 5, 2007. Thus, these squeeze-out resolutions are now effective and AXA holds 100% of the shares of these two subsidiaries. Following registration of these squeeze-outs, further litigation with minority shareholders on valuation issues is expected in a compensation review procedure (Spruchverfahren) under German law. The total investment to reach a 100% ownership in AXA Konzern, KVAG, AXA Lebensversicherung and Deutsche Ärzteversicherung starting from the situation as at January 1, 2006 amounted to €367 million.
On September 12, 2007, AXA and bao Minh Insurance Corporation (“bao Minh”) announced that they reached an agreement to establish a strategic partnership in the Vietnamese insurance market. As part of this agreement, AXA acquired a 16.6% stake of the share capital of Bao Minh for a total amount of VND 1,194 billion (€54 million) on September 26, 2007.
In 2006 In March 2006, AXA Canada acquired Winterthur Canada Financial Corporation, whose main asset was The Citadel General Assurance Company (“Citadel”). The acquisition was financed internally by the AXA Group. The purchase price amounted to €221 million.
On May 8, 2006, AXA Asia Pacific Holdings announced it had completed the acquisition of MlC Hong Kong and MlC Indonesia. The purchase price amounted to €340 million.
On December 22, 2006, AXA Asia Pacific Holdings (AXA APH) reached an agreement with AXA SA to acquire winterthur life Hong Kong limited (wlHK). This followed the announcement of the completion of AXA SA’s acquisition of the Winterthur Group from Credit Suisse. AXA APH acquired WLHK for consideration in the range of HK$1.7 billion to HK$2.4 billion ($AUD 278 million to $AUD 393 million). HK$1.9 billion ($AUD 311 million) were payable on completion. This amount was subject to an adjustment based on the future performance of the business measured in 2009. AXA APH obtained shareholder approval for this acquisition at the Annual General Meeting in 2007 and the transaction was completed in Q2, 2007. In addition, AXA APH declined the opportunity to acquire Winterthur’s Indonesian life insurance operations and Japanese operations.
On October 23, 2006, AXA United Kingdom announced that it had reached an agreement with the Board and two main institutional shareholders of Thinc Destini Group Ltd (renamed Bluefin Advisory Services from December 31, 2008) to acquire the entire share capital of Thinc. Under the terms of the agreement with the two main institutional shareholders and the Offer, the shareholders of Thinc shared up to £70 million based primarily on the financial performance of the business during 2009. The maximum amount was subject to certain deductions as detailed in the terms of the Offer. AXA United Kingdom had also agreed to fund the repayment of Thinc’s existing indebtedness, which arose primarily due to Thinc’s acquisition of a number of IFA businesses, and provide further working capital to the Thinc Group, up to an aggregate amount of £30 million. The transaction which was subject to the satisfaction or waiver of certain conditions, including the Offer being accepted by Thinc ordinary shareholders holding at least 90 per cent of the issued Thinc ordinary shares closed on November 10, 2006.
CAPITAl OPERATIONS At December 31, 2008, AXA had an outstanding hedging program on its direct equity exposure in Property & Casualty businesses and non participating Life businesses set up in order to reduce the exposure of AXA’s shareholders’ equity to equity investments and to limit the Solvency I coverage ratio volatility.
• €9 billion put spread on Eurostoxx 50 maturing in April 2009 in order to lower the strike of the put options sold to a [2,475; 2,520] range.
For several years, the AXA Group has been offering to its employees in and outside of France, the opportunity to subscribe for shares issued by way of a capital increase reserved for employees. In 2008, employees invested a total of €460 million leading to a total of 24.7 million newly issued shares. Employee (including agents) shareholders represented 5.8% of the outstanding share capital as of November 28, 2008.
In January 2009, AXA restructured its equity hedging program in order to lock in the positive mark-to-market impact resulting from the strong drop in equity markets and unwound €11 billion out of the first €14 billion tranche and the full €9 billion second tranche. This resulted in a €46 million gain net of tax on the mark-to-market since December 31, 2008. As of mid-March 2009, AXA’s remaining position consists of €250 million put spreads financed by the sale of call options on FTSE 100 and €2.5 billion put spreads on Eurostoxx 50 both maturing in March 2010.
The financial impact for AXA of the Klaus storm in France and Spain in early 2009 is expected to be approximately €–0.2 billion before tax.
(1) The total capital increase of AXA APH could reach up to approximately AUd890 million, depending upon market conditions. in that case, AXA APH will reimburse a higher amount of outstanding debt to AXA SA.
2006 2006 (in Euro million) 2008 2007 Restated (d) Published 2008/2007
Total life & Savings New business APE 1 reached €6,789 million, down 12% compared to 2007. On a comparable basis, APE decreased by 9%, mainly due to the United States and Australia but also the United Kingdom, Belgium and Japan, partly offset by Switzerland and Central Eastern Europe.
The United States APE decreased by €420 million (–20%) to €1,540 million driven primarily by a 15% decrease in Variable Annuities, reflecting challenging market conditions, and an anticipated decrease in Life for Fixed Universal Life products following price increases in 2007.
The United Kingdom APE decreased by €89 million (–6%) to €1,287 million as a result of: • 21% lower Onshore and Offshore bond premiums following recent tax changes and market turmoil. • 14% lower Individual and Executive Pensions businesses following falls in the stock market leading to lower transfers and average values.
(€+75 million), partly offset by the non repeat of 2007 increase in “low margin” coinsurance business (€–33 million). • Individual Life improved by €6 million (+11%) to €69 million mainly resulting from the positive development regular premiums both unit-linked (+22% or €+2 million) and non unit-linked (+10% or €+3 million), and the positive impact of mutual fund sales (€+1million) launched late in 2007.
belgium APE decreased by €81 million (–24%) to €260 million due to the decrease in Individual Life sales (–28% to €222 million) for both unit-linked and non unit-linked products, partly offset by higher sales in Group life (+13% to €38 million).
Autralia/New-Zealand APE decreased by €156 million (–29%) to €378 million mainly due to a drop in Mutual Fund and AllianceBernstein Joint Venture sales following negative market conditions in 2008 and the favorable legislation change in 2Q07 (peak in sales last year). These negative impacts were partially offset by the inclusion of some significant wholesale premiums (€+29 million) from institutional clients seeking more conservative investments, and by Accumulator product sales.
Property & Casualty gross revenues were up 4% to €26,039 million, or +3% on a comparable basis mainly driven by Mediterranean & Latin American Region (+6% to €6,414 million) and France (+3% to 5,595 million).
Motor revenues grew by 2% mainly driven by (i) the Mediterranean & Latin American Region up 2%, driven by Turkey and the Gulf Region, (ii) France up 3% reflecting higher net inflows (+133k new contracts stemming from all distribution channels) in a competitive market, (iii) Asia (including Japan and South Korea) up 12% confirming its strong momentum, and (iv) the United Kingdom & Ireland up 2%, driven by +34% growth (or €66 million) in Swiftcover direct business, offset by a decrease of intermediated business linked to price increase to address profitability and competition driving down prices in Ireland, partly offset by (v) Germany (–3%) as a result of contract losses in the context of market price pressure.
Non-Motor revenues increased by 3% mainly driven by (i) France up 5% driven by positive net inflows (+71k) combined with an increase in the average premium in Household, and (ii) the Mediterranean & Latin American Region up 6% driven by Property (+6%, mainly in Spain), and Health (+5%, driven by a new successful segmentation in Mexico).
(1) Annual Premium Equivalent (APE) is new regular premium plus one tenth of single premiums, in line with EEV methodology. APE is Group Share.
Commercial lines (�9% of P&C gross revenues) recorded a �% growth on a comparable basis driven by both Motor (+3%) and Non-Motor (+3%).
Non-Motor revenues were up 3%, driven by (i) Mediterranean & Latin American Region (+13%) due to the positive contribution from Health up 45% mainly driven by new corporate contracts issued in the Gulf Region and Mexico, (ii) France (+4%) mainly driven by a strong portfolio development in Construction (+9%), and a moderate growth in Property (+2%) and Liability (+3%) in a context of competitive markets, and (iii) Belgium (+3%) driven by all lines except in Property.
Asset management revenues decreased by 19% or –14% on a comparable basis to €3,947 million driven by lower management fees (–11%) due to lower average Assets Under Management (AUM) (–8% on a comparable basis) and a drop in performance fees (–29%) in a context of financial crisis.
Alliancebernstein revenues were down 14% to €2,511 million driven by the decrease in management fees (–14%) in line with lower average AUM, in performance fees (–85%), in distribution fees (–20%) and in others fees (–16%). Institutional Research Services continued to grow with fees up 11%. AUM decreased by €212 billion from year end 2007 to €331 billion at the end of 2008, driven by market depreciation of €–200 billion and net outflows of €–30 billion, partly offset by a positive exchange rate impact of €18 billion.
AXA Investment Managers revenues decreased by €236 million (–14%) to €1,436 million. Excluding distribution fees (retroceded to distributors), gross revenues decreased by €89 million (–6%) mainly due to an unfavorable client and product mix and the decrease in retail business, while average AUM remained stable. AUM decreased by €63 billion from year-end 2007 to €485 billion at the end of 2008 as €2 billion net new money, and €17 billion change in scope, were more than offset by €–61 billion negative market impact due to the equity market turmoil, and €–20 billion unfavorable exchange rate impact.
Fees and revenues from investment contracts with no participating feature 662 740 608 608
Change in unearned premium reserves net of unearned revenues and fees (208) (609) (474) (498)
(a) For the periods ended december 31, 2008, december 31, 2007 and december 31, 2006, the change in fair value of assets backing contracts with financial risk borne by policyholders impacted the net investment result for respectively €–43,687 million, €+7,476 million and €+15,158 million, and benefits and claims by the offsetting amounts respectively.
Group underlying earnings amounted to €4,044 million. On a constant exchange rate basis, underlying earnings decreased by €857 million (–17%), mainly driven by Life & Savings partly offset by Property & Casualty.
life & Savings underlying earnings amounted to €1,508 million. On a constant exchange rate basis, Life & Savings underlying earnings were down €–1,147 million (–43%) mainly attributable to the United States (€–1,125 million), Germany (€–139 million), and the United Kingdom (€–113 million), partly offset by France (€+144 million), Belgium (€+46 million) and Switzerland (€+46 million).
(ii) Higher expenses (€–259 million or up 4%) with acquisition expenses up €26 million (+1%) and administrative expenses up €233 million (+7%). Acquisition expenses were impacted by €–23 million reclassification of charges from fees & revenues in the United Kingdom and €–117 million higher amortization of DAC offsetting higher unearned revenue reserve (URR) release in France. Excluding (i) the impact of these reclassed items and (ii) €105 million higher expenses coming from acquisitions of the financial advisor Genesys in Australia and the brokerage company SBJ in the United Kingdom, expenses increased by €14 million (+0%), with: a. Acquisition expenses down €114 million (or –4%) mainly driven by €79 million lower DAC amortization in the United States, reflecting €690 million reactivity mainly to lower margins on Variable Annuity guarantees partly offset by €–610 million adjustment reflecting an unlocking and amortization reset to reflect a long-term average Separate Account return of 9%.
(iii) A higher level of VbI amortization (€–89 million or up 26%) mainly attributable to (i) a €66 million increase in the United Kingdom due to the impact of 2008 market conditions and (ii) a €25 million increase in Japan driven by assumption changes, partly offset by the natural decline in VBI balance and the non recurring impact of 2007 old Medical Whole Life conversion campaign.
These evolutions were partly offset by: (iv) Higher investment margin (€+5 million or up 0%) as the €153 million lower investment income was more than offset by the €157 million lower policyholders’ participation. Excluding the United Kingdom (where the split between investment income and policyholders’ participation is not meaningful due to the With Profit business), investment margin was down €22 million (–1%) with: a. Investment income down €–78 million (–1%) mainly in the United States (€–170 million reflecting lower interest rates along with lower returns on alternative investments) and Japan (€–105 million mainly driven by lower dividends on alternative assets due to poor financial market conditions), partly offset by France (€+246 million due to higher investment revenues, mainly on bonds due to a volume effect and higher yields), partly offset by b. Policyholders’ participation down €56 million (–1%) notably driven by Japan (down €101 million).
(v) Higher Fees & Revenues (€+13 million or 0%). Fees & Revenues were impacted by €+117 million of URR release in France (offset by DAC amortization) and €–3 million net reclassification to expenses and technical margin in the United Kingdom. Excluding (i) the impact of these reclassed items and (ii) €96 million higher fees & revenues coming from acquisitions of the financial advisor Genesys in Australia and the brokerage company SBJ in the United Kingdom, Fees & Revenues were down €197 million (–3%) driven by: a. Loadings on premiums and Mutual Funds up €108 million (+3%), mainly due to France (€+58 million as a result of a €+92 million increase of loadings on non unit-linked premiums, partly offset by a €–33 million decrease on unit-linked premiums) and Japan (€+37 million due to an improved business mix, especially on medical products).
(vi) lower tax expenses and minority interests (down €673 million or –60%). Excluding €23 million of lower positive tax one-offs (mainly €58 million lower in Germany, €26 million lower in Belgium, and €17 million lower in the United States, partly offset by €73 million higher in the United Kingdom), tax expenses and minority interests decreased by €696 million (–55%), mainly driven by lower pre-tax earnings in the United States, the United Kingdom, Germany and Australia.
Property & Casualty underlying earnings amounted to €2,394 million. On a constant exchange rate basis, Property & Casualty underlying earnings increased by €575 million (+31%) fuelled by an improved combined ratio (down 1.9 points to 95.5%). Excluding the change in scope related to AXA MPS (€7 million), Gulf (€12 million) and Mexico (€6 million), Property & Casualty underlying earnings increased by €550 million (+30%) fuelled by an improved combined ratio in almost all countries (down 2.1 points to 95.4%).
(ii) Higher investment result (€+260 million), or up €210 million (+10%) excluding the contribution of AXA MPS (€+7 million), Gulf (€+5 million) and Mexico (€+38 million), driven by higher fixed income asset base and yield.
banking segment’s underlying earnings decreased by €3 million (–8%) to €33 million, driven by AXA Banque in France (€–12 million resulting mainly from commercial development costs in savings and current accounts combined with a slight fall on lending activity in the context of the financials crisis) and the Swiss Bank (€–22 million due to start up costs), partly offset by AXA Bank Europe (€+29 million notably due to a higher interest margin).
(ii) United Kingdom holdings (€–77 million) primarily resulting from the non recurrence of a 2007 €64 million release of a deferred tax provision held against proposed dividend payment from Ireland to the United Kingdom.
(ii) €–790 million lower net realized gains excluding impairments, to €792 million in 2008, mainly driven by €575 million lower realized gains on equities as well as €112 million higher realized losses on debt securities (mainly due to the United States and Switzerland).
d. €–425 million of foreign exchange impacts (including foreign exchange derivatives and impairments), mainly offset by positive changes booked in shareholders’ equity.
Net income (Euro per Ordinary Share) 0.44 0.44 2.76 2.73 2.54 2.49 2.54 2.49 –84.0% –83.9%
Adjusted earnings (Euro per Ordinary Share) 1.67 1.66 2.86 2.84 2.50 2.45 2.56 2.51 –41.7% –41.4%
(a) From HY 2008, EPS calculation takes into account interest payments and foreign exchange impacts related to perpetual debts classified in shareholders equity with retrospective application.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income attributable to AXA’s Life & Savings segment for the periods indicated: liFE & sAvings sEgMEnt (a)
Fees and revenues from investment contracts without participating feature 662 740 608 608
Technical charges relating to insurance activities (b) (18,380) (69,987) (68,236) (69,052)
Valuation allowances on tangible assets – 1 7 7 change in value of goodwill (4) – – –
consolidAtEd gross rEvEnUEs 2006 2006 (in Euro million) 2008 2007 Restated (b) Published
(a) Mediterranean & Latin American Region includes italy, Spain, Portugal, Greece, Turkey, Morocco and Mexico. (b) Restated in full year 2006 means the restatement of The Netherlands’ activities as discontinued businesses.
Net capital gains or losses attributable to shareholders net of income tax 311 269 204
Profit or loss on financial assets (under FV option) & derivatives (561) (91) 110
Gross revenues decreased by €754 million (–5%) to €14,298 million. On a comparable basis (excluding Neuflize Vie which is consolidated using the equity method starting 01/01/08 versus proportionate before), gross revenues decreased by €380 million (–3%) as a result of: (i) a decrease in individual savings (–5%) which however, outperformed the market (estimated between –9% and –11%) (ii) a decrease in Group Retirement (–30%) due to an exceptional volume of large contracts in 2007 not repeated in 2008 (iii) an increase in individual health (+15%) and in Protection Group insurance (+9%), both due to positive net inflows.
As a consequence the underlying cost income ratio decreased by 1.7 points to 71.6%.
As a consequence, underlying earnings increased by €144 million (+27%) to €675 million.
• Life premiums (18% of gross revenues) decreased by 6% primarily driven by a decrease in First Year premiums from anticipated declines in Fixed Universal Life product sales following price increases in 2007.
Investment margin decreased by €217 million (–31%) to €487 million. On a constant exchange rate basis, investment margin decreased by €181 million (–26%). Investment income decreased by €170 million reflecting lower interest rates along with lower returns on alternative investments. Interest and bonus credited increased by €11 million reflecting adjustment for pre-demutualization participating annuity business.
Net technical margin fell by €1,451 million (–311%) to €–984 million. On a constant exchange rate basis, net technical margin decreased by €1,523 million (–327%) mainly attributable to €1,519 million lower profits from guarantees associated with Variable Annuity products, mainly explained by underperformance of certain Separate Account funds versus hedge indices, the impact on fund balances of credit spread widening and higher equity market and interest rate volatility.
Expenses decreased by €214 million (–13%) to €–1,433 million. On a constant exchange rate basis, expenses decreased by €108 million (–7%) due to: • Expenses, net of capitalization (including commissions and DAC capitalization) decreased by €29 million with a 5% decrease in general expenses primarily due to expense management initiatives and changes to employee benefit plans.
• DAC amortization decreased by €79 million, reflecting €690 million reactivity mainly to lower margins on Variable Annuity guarantees partly offset by €–610 million adjustment reflecting an unlocking and amortization reset to reflect a long-term average Separate Account return of 9%.
Net income decreased by €1,159 million (–134%) to €–296 million. On a constant exchange rate basis, net income decreased by €1,181 million (–137%) primarily due to the decrease in adjusted earnings partially offset by an increase in the mark-to-market of interest rate related derivatives due to lower underlying interest rates and the non recurrence of 2007 negative exceptional items.
Net capital gains or losses attributable to shareholders net of income tax (71) (26) 10
• 10% higher Corporate Pensions business due to the success of the new proposition leading to large corporate scheme deals.
Fees & revenues decreased by €101 million (–11%) to €787 million. On a constant exchange rate basis, fees & revenues increased by €28 million. Excluding reclassifications offset in expenses (€–23 million) and technical margin (€+26 million), fees & revenues increased by €31 million (+3%) mainly due to: • €62 million growth in the United Kingdom brokerage business recently re-launched. • Partly offset by €31 million lower loadings on premiums and fees on account balances.
Expenses decreased by €42 million (–4%) to€–924 million. On a constant exchange rate basis, expenses increased by €110 million. Excluding the reclassification from fees and revenues (€+23 million), expenses increased by €86 million (+9%) primarily due to: • €57 million increase in project costs including significant strategic initiatives such as the wealth management wrap platform and Architas investment sub-advisory platform. • €58 million linked to the expansion of the brokerage business.
Income tax benefits increased by €34 million (+110%) to €65 million. On a constant exchange rate basis, income tax benefits increased by €45 million (+145%) as a result of higher release of tax provisions.
Underlying earnings decreased by €133 million (–52%) to €122 million. On a constant exchange rate basis, underlying earnings decreased by €113 million (–44%).
(1) Undiscounted deferred tax provided on unit-linked assets while the unit-linked liability reflects the expected timing of the payment of future tax therefore using a discounted basis.
(in Euro million) 2008 2007 2006 investment margin (1) 3 –
Underlying operating earnings before tax �92 41� 426 income tax expenses / benefits (150) (154) (164)
Profit or loss on financial assets (under FV option) & derivatives (478) (96) (37)
Gross Revenues decreased by €488 million (–10%) to €4,628 million. On a comparable basis and excluding (i) volatile group pension transfers (€63 million versus €46 million last year) and (ii) conversions including the non-recurring 1Q07 Medical Whole Life upgrade campaign (€55 million versus €142 million last year), revenues declined by €163 million (–3%). • Life (43% of gross revenues): revenues decreased by €83 million (–4%) to €1,930 million mainly due to lower revenues from lower margin products not actively promoted (Endowment, Whole Life and Group) and lower Term products revenues due to a regulator review of the tax deductibility; • Investment & Savings (31% of gross revenues): revenues decreased by €161 million (–10%) to €1,389 million mainly due to lower sales of variable annuity products following turbulent market conditions and heavier regulatory sales process; • Health (26% of gross revenues): revenues increased by €81 million (+7%) to €1,193 million following strong Medical Whole Life, Medical Rider and Cancer product sales in recent years.
Investment Margin decreased by €4 million to €–1 million, with €–101 million lower policyholders’ credited interests following €–105 million lower investment income, mainly driven by lower dividends on alternative assets due to poor financial market conditions.
Fees & Revenues increased by €21 million (+2%) to €1,013 million. On a constant exchange rate basis, fees & revenues increased by €43 million (+4%) due to in-force growth and improved business mix of Medical products.
VbI Amortization increased by €23 million (+30%) to €–99 million. On a constant exchange rate basis, VBI amortization increased by €25 million (+33%) driven by the impact of assumption changes, partially offset by the natural decline in VBI balance and the non recurring impact of 2007 old Medical Whole Life conversion campaign.
As a consequence, the underlying cost income ratio increased by 1.3 points to 64.7%.
Underlying earnings declined by €16 million (–6%) to €238 million, or declined by €11 million (–4%) on a constant exchange rate basis.
IFRS principles whereby the financial statements of the subsidiary shall be adjusted to reflect the effects of significant events that would have been recognized with a closing date aligned on the AXA Group, AXA Japan’s 2008 accounts were adjusted with a provisional loss related to the activity from October to December 2008. This adjustment reflected mainly the impact of the further increase of credit spreads on the CDS and corporate bonds portfolio during this period.
Underlying operating earnings before tax 106 �21 171 income tax expenses / benefits (63) (134) (99)
APE increased by €10 million (+2%) to €468 million. On a comparable basis (change in Group share due to the minority buyout and merger of health companies), APE remained stable mainly due to Riester step-up effect (increase in retirement premiums due to higher fiscal incentive for policyholders in 2008) of €+30 million, which was offset by lower endowment and annuity business in Life and decrease in Health business due to the 2007 Reform (waiting period for salaried employees to enter Private Health Insurance extended from one to three years).
Investment margin decreased by €35 million (–25%) to €104 million as higher income from fixed maturities and alternative investments was offset by higher policyholder participation.
Net technical margin fell by €136 million (–121%) to €–24 million mainly due to significant negative result from variable annuity products’ guarantees due to extreme interest rate and equity volatility levels, as well as lower disability result in Life and higher claims paid in Health.
Expenses increased by €51 million (+37%) to €–187 million due to lower expenses allocated to policyholders.
Amortization of VbI decreased by €15 million (–65%) to €–8 million due to the lower investment return experience.
As a result, the underlying cost income ratio increased by 31.5 points to 64.6%.
Income tax expenses decreased by €72 million (–53%) to €–63 million as a result of lower pre-tax income and tax rate in 2008 compared to prior year (32% compared to 40%), partly offset by lower non-recurring favorable tax impacts.
Profit or loss on financial assets (under FV option) & derivatives (56) (10) –
Average exchange rate: 1.00 € = Swiss Franc 1.5866 1.6420 1.6420
(a) AXA Switzerland was not in the scope of APE in 2006. Starting 2007, and as a result of Winterthur acquisition AXA Switzerland is in the scope of APE.
Gross revenues increased by €363 million (+9%) to €4,495 million. On a comparable basis, gross revenues increased by €215 million (+5%) to €4,482 million: • Group Life (84% of gross revenues) increased by €228 million (+7%) to €3,779 million due to €+168 million in single premiums
(+9%) and €+60 million in regular premiums (+4%). • Individual Life (16% of gross revenues) decreased by €17 million (–2%) to €717 million driven by higher maturities on non unitlinked regular premium contracts and the drop in unit-linked single premiums (–21%) in a difficult financial market environment.
Net technical margin increased by €8 million (+6%) to €145 million. On a constant exchange rate basis, net technical margin increased by €3 million (+2%).
Income tax expenses increased by €13 million (+27%) to €–63 million. On a constant exchange rate basis, income tax expenses increased by €11 million (+23%).
Underlying earnings increased by €54 million (+33%) to €218 million. On a constant exchange rate basis, underlying earnings increased by €46 million (+28%).
Adjusted earnings decreased by €176 million (–118%) to €–27 million. On a constant exchange rate basis, adjusted earnings decreased by €175 million (–117%) resulting from higher capital losses and impairments (€–222 million) partly offset by the increase in underlying earnings (€+46 million).
Underlying operating earnings before tax 167 107 87 income tax expenses / benefits (30) (17) (22)
Gross revenues decreased by €512 million (–17%) to €2,563 million. On a comparable basis, gross revenues decreased by €513 million (–17%) to €2,559 million. • Individual Life and Savings revenues (76% of gross revenues) decreased by 20% to €1,957 million driven by the decrease in unit-linked products (–55% to €194 million) partly due to the lower performance of the structured products. The non unit-linked products’ revenues declined by 14% to €1,460 million mainly due to the fall in Crest products line. Traditional life products’ revenues decreased by 3% to €303 million.
APE decreased by €80 million (–24%) to €260 million. On a comparable basis, APE decreased by €81 million (–24%) to €260 million due to the decrease in Individual Life sales (–28% to €222 million) for both unit-linked and non unit-linked products, partly offset by higher sales in Group life (+13% to €38 million).
Investment margin increased by €49 million (+35%) to €193 million as a result of higher fixed income revenues and lower average credited rates, including policyholder bonus, due to a change in product mix.
Fees & revenues decreased by €19 million (–11%) to €144 million mainly due to lower fees on unit-linked account balances (–34% to €14 million).
As a result, underlying earnings increased by €46 million (+51%) to €136 million.
Adjusted earnings decreased by €634 million (–214%) to €–338 million mainly due to a strong increase in equities impairments partly offset by the rise in underlying earnings.
Underlying operating earnings before tax 185 100 88 income tax expenses / benefits (45) (21) (24)
Net capital gains or losses attributable to shareholders net of income tax (40) 19 7
The Mediterranean and latin American Region includes the following changes in scope in 2008: • AXA MPS consolidated as of 01/01/2008 • Mexico consolidated as of 01/07/08 • Turkey buyout of minority shareholders as of 01/07/08 For volume indicators, the comparable basis reflects 2008 scope.
Gross revenues increased by €2,898 million (+151%) to €4,822 million. On a comparable basis, gross revenues increased by €+181 million (+4%) mainly driven by traditional savings products in Spain (€+162 million, mainly short term products such as Flexiplus and Deposito Flexible) and by Accumulator sales in MPS (€167 million) partly offset by the lower contribution from Index Linked products (€–163 million) in Italy.
Net technical margin increased by €17 million to €68 million of which €28 million from AXA MPS and Mexico. On a constant exchange rate basis and excluding AXA MPS and Mexico, net technical margin decreased by €10 million (–20%) mainly due to an exceptional provision in Italy.
Amortization of VbI increased by €33 million to €–41 million, of which €31 million from AXA MPS and Mexico. On a constant exchange rate basis and excluding AXA MPS and Mexico, amortization of VBI increased by €2 million (+20%).
Underlying cost income ratio increased by 0.5 point to 68.7%. On a constant exchange rate basis and excluding AXA MPS and Mexico, the underlying cost income ratio decreased by 3.4 points to 64.9%.
Income tax expenses increased by €24 million to €–45 million, of which €16 million from AXA MPS and Mexico. On a constant exchange rate basis and excluding AXA MPS and Mexico, income tax expenses increased by €7 million (+35%) due to the higher pretax earnings and an exceptional deduction in Spain in 2007, partly offset by a tax rate decrease in some countries in 2008.
Minority interests increased by €26 million driven by AXA MPS, partly offset by minority shareholders’ buyout in Turkey.
Underlying earnings increased by €35 million to €108 million of which €27 million from AXA MPS, Mexico and the buyout of minority shareholders in Turkey. On a constant exchange rate basis and excluding AXA MPS, Mexico and the buyout of minority shareholders in Turkey, underlying earnings increased by €8 million (+11%).
The Netherlands – – – 527 central and Eastern Europe 467 423 – –
(a) South East Asia includes indonesia, Thailand, Philippines and Singapore. (b) Restated means the restatement of The Netherlands’ activities as discontinued businesses.
Net realized capital gains or losses attributable to shareholders (161) 83 22 43
Profit or loss on financial assets (under fair value option) & derivatives 21 (10) 6 7
Underlying earnings decreased by €68 million (–69%) to €31 million. On a constant exchange rate basis, underlying earnings decreased by €66 million (–67%). On a 100% ownership basis, the evolution of underlying earnings was as follows: • Investment margin decreased by €16 million (–56%) to €13 million. On a constant exchange rate basis, investment margin decreased by €16 million (–53%) due to lower returns and lower asset base.
• Net technical margin fell by €33 million to €–27 million. On a constant exchange rate basis, net technical margin decreased by €35 million driven by the negative impact from a drop in discount rates (€–21 million) and by less favorable claims experience (€–19 million).
• Expenses increased by €42 million (+8%) to €–585 million. On a constant exchange rate basis, expenses increased by €80 million (+15%) mainly due to the acquisition of Genesys, including advisers retention bonus and integration, together with restructuring costs for the A&NZ business. Excluding these, expenses decreased by €2 million (–0%) on a comparable basis.
Adjusted earnings decreased by €232 million (–143%) to €–70 million. On a constant exchange rate basis, adjusted earnings decreased by €236 million (–146%) due to lower underlying earnings and higher realized losses and impairments on equity.
APE decreased by €27 million (–20%) to €112 million. On a comparable basis, APE decreased by €18 million (–13%) due to a reduction in investment and savings products (€–25 million) in an uncertain market environment, partially offset by increased sales of life and health products (€+12 million).
Net income decreased by €44 million (–31%) to €97 million. On a constant exchange rate basis, net income decreased by €37 million (–26%), reflecting the lower adjusted earnings partly offset by the net positive impact of marked to market derivatives.
Overall, the underlying cost income ratio decreased by 6.0 points to 92.5%.
Adjusted earnings decreased by €8 million to €–6 million. On a constant exchange rate basis, adjusted earnings decreased by €7 million, as higher underlying earnings were more than offset by higher capital losses and impairments on equities and fixed income securities.
Net income decreased by €8 million to €–9 million. On a constant exchange rate basis, net income decreased by €7 million in line with adjusted earnings.
Canada Gross revenues decreased by €14 million (–12%) to €108 million. On a constant exchange rate basis, revenues decreased by €7 million (–6%) mainly reflecting the sale of AXA Services Financiers in 2007 partly offset by growth in Group Health (€+2 million).
Underlying earnings and adjusted earnings amounted to €7 million, an increase of €5 million (+247%) on a constant exchange rate basis, as 2007 was negatively impacted by a change in tax regulation.
Underlying earnings and adjusted earnings both increased by €6 million (+119%) on a constant exchange rate basis to €10 million as a result of higher premium income and funds under management, and higher profit margin due to product re-pricing in Indonesia and Thailand.
Net income increased by €12 million to €6 million as 2007 was negatively impacted by China’s entry in the scope of consolidation (one-time recognition of past losses).
Change in unearned premium reserves net of unearned revenues and fees (244) (�62) (1�9) (142)
Profit or loss on financial assets (under fair value option) & derivatives (656) 4 70 71
Net realized capital gains or losses attributable to shareholders (665) 562 440 441
Net capital gains or losses attributable to shareholders net of income tax (83) 93 70
Expense ratio rose by 0.3 point to 24.5% due to (i) change in business mix towards products with higher commission rates, (ii) IT and marketing investments, (iii) Nationale Suisse Assurance integration costs, and (iv) increase of taxes.
As a result, the combined ratio improved by 4.0 points to 93.0%.
Net investment result increased by €73 million (+15%) to €569 million mainly driven by higher bonds’ revenues due to higher asset base and yield.
Income tax expenses were up by €109 million (+48%) to €–339 million in line with increase in taxable operating income.
Underlying operating earnings before tax �97 �11 501 income tax expenses / benefits (90) (49) (114)
Net capital gains or losses attributable to shareholders net of income tax (227) 71 75
Profit or loss on financial assets (under FV option) & derivatives 7 (5) (9)
• Other lines (1% of the gross revenues) were up 32% to €54 million mainly reflecting growth in brokerage business.
Expense ratio rose by 0.8 point to 35.7%. Acquisition costs ratio was down 0.7 point following the renegotiation of commission rates with delegated authority brokers in the United Kingdom partly offset by the redundancy scheme costs in Ireland. Administrative expenses ratio increased by 1.5 points due to higher IT costs (+0.7 point), growth through acquisition of a subsidiary in Health (+0.5 point) and the redundancy scheme costs in Ireland (+0.2 point).
Net income decreased by €245 million (–80%) to €62 million. On a constant exchange rate basis, net income decreased by €237 million (–77%) reflecting adjusted earnings evolution.
Profit or loss on financial assets (under FV option) & derivatives (146) 29 26
Gross revenues increased by €23 million (+1%) to €3,554 million. On a comparable basis, gross revenues increased by €24 million (+1%). • Personal lines (63% of gross revenues) decreased by 1% as a result of contract losses in Motor in the context of market price pressure partly offset by growth in Property mainly due to the packaged product ‘Profischutz’ for professionals as well as tariff increases.
Net technical result increased by €105 million (+10%) to €1,198 million. • Current accident year loss ratio decreased by 2.5 points to 76.2% driven by a lower impact of natural events. • All accident year loss ratio decreased by 2.8 points to 66.1% due to the improved current accident year loss ratio and a positive prior year reserve development.
Net investment result rose by €55 million (+16%) to €394 million mainly due to higher income from fixed income as a result of new investment in bonds benefiting from higher spreads partly offset by lower dividends from equities.
Income tax expenses increased by €32 million (+44%) to €–106 million due to the improved net investment result and lower tax-free dividends as well as lower non recurring favorable tax impacts.
As a consequence, underlying earnings increased by €30 million (+9%) to €355 million.
Net income decreased by €283 million (–69%) to €127 million due to lower adjusted earnings and unfavorable change in fixed income assets fair value as well as negative foreign exchange impact.
(in Euro million) 2008 2007 2006 current accident year loss ratio (net) 80.9% 77.6% 78.1%
Underlying operating earnings before tax 255 290 245 income tax expenses / benefits (75) (73) (98)
Net income from investments in affiliates and associates – – –
Gross revenues increased by €26 million (+1%) to €2,156 million. On a comparable basis, gross revenues increased by €27 million (+1%) to €2,139 million. • Personal lines (62% of total revenues) were up 1% driven by Non Motor (+2%) mainly resulting from price increases partly offset by lower volume in Property. • Commercial lines (38% of total revenues) were up 3% as a result of increases in all lines except in Property.
• All accident year loss ratio increased by 1.5 points to 69.0% reflecting the deterioration of the current accident year loss ratio partly offset by a higher prior years result (€+40 million) mainly in Workers’ compensation.
Income tax expenses increased by €1 million (+2%) to €–75 million mainly due to the non recurrence of a €10 million positive impact in 2007 resulting from the favorable court decision for insurance companies on RDT (Revenus Définitivement Taxés: tax exemption on 95% of dividends on equities) and a new tax allocation between Life and P&C.
Profit or loss on financial assets (under FV option) & derivatives (37) (16) (1)
Gross revenues increased by €1,139 million (+22%) to €6,437 million, or €6,414 million after intercompany eliminations. On comparable basis, gross revenues increased by €391 million (+6%) mainly supported by the strong performance in the fast developing countries (Mexico +24%, Gulf Region +58%, Turkey +9% and Morocco +12%). • Personal lines (65% of total revenues) were up 3% to €4,190 million due to (i) Motor up 2% driven by Turkey and Gulf Region, and (ii) Non-motor up 6% driven by Property (+6%, mainly in Spain), and Health (+5%, driven by a new successful segmentation in Mexico).
• The all accident year loss ratio decreased by 3.4 points to 68.5%. On a constant exchange rate basis and excluding AXA MPS, Gulf Region and Mexico, the all accident year loss ratio decreased by 4.0 points to 68.0% thanks to a favorable prior year reserves development.
Adjusted earnings decreased by €19 million to €515 million of which €+34 million from AXA MPS, Gulf Region, Mexico and the buyout of minorities in Turkey. On a constant exchange rate basis and excluding AXA MPS, Gulf Region, Mexico and the buyout of minorities in Turkey, adjusted earnings decreased by €49 million (–9%), as the increase in underlying earnings was offset by higher impairments on equities.
Net income increased by €19 million to €447 million of which €+50 million from AXA MPS, Gulf Region, Mexico and the buyout of minorities in Turkey. On a constant exchange rate basis and excluding AXA MPS, Gulf Region, Mexico and the buyout of minorities in Turkey, net income decreased by €27 million (–6%) as the lower adjusted earnings and the negative impact of change in fair value on mutual funds were partly offset by lower Winterthur integration costs (€43 million).
Net capital gains or losses attributable to shareholders net of income tax (170) (6) 2
Average exchange rate: 1.00 € = Swiss Franc 1.5866 1.642 1.572
• The all accident year net loss ratio decreased by 6.1 points to 69.1% reflecting the lower current year loss ratio and the increase in prior year results (€+44 million) mainly on long tail business lines.
Underlying earnings increased by €114 million (+91%) to €238 million. On a constant exchange rate basis, underlying earnings increased by €106 million (+85%).
Net income decreased by €98 million (–117%) to €–14 million. On a constant exchange rate basis, net income decreased by €98 million (–117%) including change in fair value on mutual funds (€–28 million), and foreign currency impact and related derivatives (€–11 million).
Profit or loss on financial assets (under fair value option) & derivatives (6) 1 (2) (1)
The combined ratio increased by 3.7 points to 92.7% mainly driven by the bad weather conditions in 2008.
Net income decreased by €75 million on a constant exchange rate basis to €55 million mainly as a result of lower adjusted earnings and higher foreign exchange losses.
Gross revenues increased by €124 million (+61%) to €326 million. On a comparable basis, gross revenues increased by €38 million (+10%), driven by the growth of the Motor portfolio.
The combined ratio was 101.9%, including unfavorable reserve developments on previous years and the impact of productivity gains and costs savings.
Japan Gross revenues increased by €28 million (+17%) to €195 million. On a comparable basis, gross revenues increased by €17 million (+10%), thanks to higher volumes in Motor business.
The combined ratio improved by 3.8 points to 98.7%, notably owing to favorable reserve developments on prior years and the decrease in the expense ratio thanks to a positive volume effect.
Underlying earnings increased by €6 million, on both current and constant exchange rate bases, to €6 million driven by the improvement of the combined ratio.
The combined ratio improved by 1.6 points to 92.1% mainly arising from a better claims experience in Property and Workers’ compensation.
Underlying earnings increased by €2 million (+22%) on constant exchange rate basis mainly due the combined ratio improvement.
Adjusted earnings and net income were stable at €10 million with higher underlying earnings and lower realized capital gains.
The combined ratio improved by 0.9 point, mainly attributable to the non-recurrence of 2007 large claims.
Net income decreased by €8 million in line with adjusted earnings.
(a) including €–6 million in 2008 (€896 million in full year 2007 and €1,217 million in full year 2006) of business fronted by AXA RE and fully reinsured by Paris RE (fronting arrangement set in place in the context of the sale of AXA RE’s business to Paris RE).
Net realized capital gains or losses attributable to shareholders (16) 23 60
Profit or loss on financial assets (under fair value option) & derivatives (71) (1) (1)
(a) including AXA RE and other non life run-off businesses managed by AXA Liabilities Managers and AXA corporate Solutions Life Reinsurance company.
Gross revenues increased by €147 million (+8%) to €1,970 million, or €1,954 million after intercompany eliminations. On a comparable basis, gross revenues increased by €111 million (+6%) driven by portfolio development and positive volume effect in Construction, Marine and Liability in a context of tough pricing environment.
Net technical result increased by €7 million (+3%) to €227 million. • The current accident year net technical result decreased by €56 million to €45 million reflecting several large losses in
As a consequence, the all accident year loss ratio increased by 0.5 point to 88.2%.
Expense ratio increased by 0.9 point to 13.2% resulting from a change in business mix towards products with higher commission rate and the launch of new branches in Singapore, Hong Kong and Switzerland.
Adjusted earnings decreased by €19 million (–16%) to €105 million. On a constant exchange rate basis, adjusted earnings decreased by €25 million (–20%) as the underlying earnings increase was more than offset by higher impairment charges in a context of adverse financial markets.
Adjusted earnings and net income decreased by €4 million to €16 million and €15 million, respectively, mainly driven by a €–3 million higher impairment charge.
Net income decreased by €36 million (–43%) to €48 million. On a constant exchange rate basis, net income decreased by €46 million (–54%), driven by lower adjusted earnings and a negative change in fair value of consolidated funds partially offset by net realized and unrealized foreign exchange gains in non-life run off activities.
Gross revenues decreased by €651 million (–20%) to €2,627 million, or €2,511 million after intercompany eliminations. On a comparable basis, gross revenues decreased by €435 million (–14%) driven by the decrease in management fees (–14%) in line with lower average assets under management, in performance fees (–85%), in distribution fees (–20%) and in others fees (–16%). Institutional Research Services continued to grow with fees up 11%.
Net investment result decreased by €127 million to €–125 million. On a constant exchange rate basis, net investment result decreased by €136 million. Excluding the decrease in market value of incentive compensation investments (which is offset in general expenses), net investment result decreased by €13 million.
Income tax expenses decreased by €162 million (–52%) to €–151 million. On a constant exchange rate basis, income tax expenses decreased by €151 million (–48%) due to a deferred tax liability release on undistributed foreign earnings (€62 million) and the decline in pre-tax earnings.
Adjusted earnings increased by €3 million (+1%) to €318 million. On a constant exchange rate basis, adjusted earnings increased by €26 million (+8%) in line with underlying earnings.
Net income decreased by €68 million (–22%) to €245 million. On a constant exchange rate basis, net income decreased by €50 million (–16%) as a result of adjusted earning evolution, offset by €–49 million unfavorable change in fair value of assets and €–38 million of non-recurring tax impact from AllianceBernstein units transfer in 2008.
Net capital gains or losses attributable to shareholders net of income tax – – –
Profit or loss on financial assets (under FV option) & derivatives (118) 3 10
General expenses decreased by €203 million (–13%) to €1,375 million, or by €148 million (–9%) on a constant exchange rate basis. Excluding distribution fees (commissions paid to third party distributors), general expenses decreased by €32 million (–3%), mainly due to lower staff incentive.
Income tax decreased by €12 million (–9%) to €129 million, or by €3 million (–2%) on a constant exchange rate basis, notably impacted by a €24 million positive non recurring tax impact from real estate funds.
Underlying and adjusted earnings decreased by €5 million (–2%) to €271 million. On a constant exchange rate basis, underlying and adjusted earnings increased by €8 million (+3%).
Underlying earnings increased by €29 million (+73%) to €69 million, mainly due to a higher interest margin (€+42 million) and higher realized capital gains on the bond portfolio (€+16 million) partly offset by an increase in expenses (€–17 million), following the expansion of the banking activity to other countries, lower reversal of provision on credit losses (€–6 million) resulting from the implementation of Basel II in 2007, and the impact of AXA Hedging Services (€–4 million).
Net income decreased by €37 million (–298%) to €–24 million, driven by the decrease in adjusted earnings (€–29 million) and the unfavorable change in fair value of mutual funds and other assets covered with a fair value hedge or natural hedge (€–24 million), partly offset by lower Winterthur integration costs (€+15 million).
AXA bANqUE (FRANCE) Net banking revenues increased by €33 million (+38%) to €118 million. On a comparable basis, net banking revenues increased by €20 million (+25%) to €102 million net of intercompany transactions mainly due to the favorable impact of the macro-hedge derivative on interest rates (€+36 million) partly offset by the development cost of the commercial activity in savings and current accounts.
Net income increased by €15 million to €11 million, reflecting a €27 million more favorable impact of the change in fair value of macro-hedge derivatives instruments (from €–4 million to €23 million).
OTHERS AXA bank (Germany) Net banking revenues decreased by €11 million (–45%) to €13 million. On a comparable basis, net banking revenues decreased by €8 million (–43%) due to a reduced commission margin mainly from lower fees on mutual fund business, credit business and higher commissions paid for new term accounts as well as a bond impairment.
Adjusted earnings and net income decreased by €2 million to €–4 million due to a bond impairment.
The Holdings and other companies consist of AXA’s non-operating companies, including mainly AXA parent company, AXA France Assurance, AXA Financial, AXA Asia Pacific Holdings, AXA United Kingdom Holdings, AXA Germany Holdings, AXA Belgium Holdings, CDOs and real estate companies.
Profit or loss on financial assets (under fair value option) & derivatives (535) (365) (341) (341)
• €–30 million related to the time value of equity derivatives.
Other French holdings Underlying earnings decreased by €7 million. On a constant exchange rate basis, underlying earnings decreased by €6 million mainly due to lower investment income.
Adjusted earnings increased by €3 million. On a constant exchange rate basis, adjusted earnings increased by €4 million resulting from €10 million higher net realized capital gains.
Adjusted earnings increased by €16 million (+15%) to €–89 million. On a constant exchange rate basis, adjusted earnings increased by €9 million (+8%) in line with underlying earnings.
Net income increased by €18 million (+16%) to €–94 million. On a constant exchange rate basis, net income increased by €12 million (+10%) due to the higher adjusted earnings and an increase in the mark-to-market of interest rate related derivatives due to lower underlying interest rates in 2008, partially offset by the non-recurrence of an after-tax gain in 2007 on the sale of Frontier Trust.
AXA UK Holdings Underlying earnings decreased by €66 million to €–67 million. On a constant exchange rate basis, underlying earnings decreased by €77 million primarily resulting from the non recurrence of a 2007 €64 million release of a deferred tax provision held against proposed dividend payment from AXA Ireland to the United Kingdom.
Net income decreased by €267 million on a constant exchange rate basis to €–252 million reflecting adjusted earnings evolution together with a €189 million exchange rate loss primarily arising from the revaluation of Euro-denominated inter-company loans.
German Holding companies Underlying earnings increased by €34 million (+96%) to €–1 million mainly due to €11 million lower administrative expenses and €+36 million decline in interest expense, due to redemption of loans, partly offset by €–12 million lower investment income.
Adjusted earnings decreased by €5 million (–13%) to €–43 million driven by the improvement of underlying earnings (€+34 million) offset by higher impairments in equities (€–41 million).
Adjusted earnings decreased by €5 million (–29%) to €–21 million due to an equity impairment.
Net income decreased by €483 million (–105%) to €–21 million due to the non-recurrence of the 2007 sale of the Dutch activities.
As we look forward to 2009, a lower starting asset base will affect the Life & Savings and our Asset Management businesses, whereas the Property & Casualty and International Insurance businesses should continue to deliver solid underlying earnings.
Derivatives related to invested assets: • include all foreign exchange derivatives, except the ones related to currency options in earnings hedging strategies which are included in underlying earnings, • exclude derivatives related to insurance contracts evaluated according to the “selective unlocking” accounting policy, • and also exclude derivatives involved in the economic hedging of realized gains and impairments of equity securities and real estate backing general account and shareholders’ funds, for which cost at inception, intrinsic value and pay-off flow though adjusted earnings, and only time value flows through net income when there is no intention to sell the derivatives in the short term (if not, flows through adjusted earnings).
EARNINGS PER SHARE Earnings per share (EPS) represent AXA’s consolidated earnings (including interest charges and foreign exchange impacts related to perpetual debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares. Diluted earnings per share (diluted EPS) represent AXA’s consolidated earnings (including interest charges and foreign exchange impacts related to perpetual debts recorded through shareholders’ equity), divided by the weighted average number of outstanding ordinary shares, on a diluted basis (that is to say including the potential impact of all outstanding dilutive stock options being exercised performance shares, and conversion of existing convertible debt into shares, provided that their impact is not anti-dilutive).
RETURN ON EqUITy (“ROE”) The calculation is prepared with the following principles: • For net income ROE: Calculation is based on consolidated financial statements, i.e. shareholders’ equity including perpetual debt (“Super Subordinated Debts” TSS / “Perpetual Subordinated Debts” TSDI) and Other Comprehensive Income “OCI”, and net income not reflecting any interest charges on TSS / TSDI.
lIFE & SAVINGS MARGIN ANAlySIS Life & Savings margin analysis is presented on an underlying basis.
Even though the presentation of Margin Analysis is not the same as the Statement of Income (underlying basis), it is based on the same GAAP measures as used to prepare the Statement of Income in accordance with IFRS. As a result, the operating income under the Margin Analysis is equal to that reported in AXA’s Statement of Income for the segment.
There are certain material differences between the detailed line-by-line presentation in the Statement of Income and the components of Margin Analysis as set out below. • For insurance contracts and investment contracts with Discretionary Participation Features (DPF): (i) Gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net Technical Margin”.
Underlying Fees & Revenues include: (i) Revenues derived from mutual fund sales (which are part of consolidated revenues), (ii) Loading charged to policyholders on premiums / deposits and fees on funds under management for separate account (unitlinked ) business, (iii) Loading on (or contractual charges included in) premiums / deposits received on all non unit-linked product lines, (iv) Deferral income such as capitalization net of amortization of URR (Unearned Revenue Reserve) and UFR (Unearned Fee
Reserve), (v) Other fee revenues, e.g., fees received on financial planning or sales of third party products.
(iii) GMxB (Variable Annuity guarantees) Active Financial Risk Management is the net result from GMxB lines corresponding to explicit charges related to these types of guarantees less cost of hedge. It also includes the unhedged business result,
(vi) Other changes in insurance reserves are all the reserves strengthening or release coming from changes in valuation assumptions, additional reserves for mortality risk and other technical impacts such as premium deficiency.
(iv) Administrative expenses, (v) Claims handling costs, (vi) Policyholder bonuses if the policyholder participates in the expenses of the company.
life & Savings underlying cost income ratio: Underlying expenses plus underlying VBI amortization divided by “underlying” operating margin, where “Underlying” operating margin is the sum of (i) Underlying Investment margin; (ii) Underlying Fees and revenues, and (iii) Underlying Net technical Margin (all items defined above).
PROPERTy & CASUAlTy (INClUDING AXA CORPORATE SOlUTIONS ASSURANCE) Underlying net investment result includes the net investment income less the recurring interests credited to insurance annuity reserves.
Current accident year loss ratio net of reinsurance is the ratio of: (i) current year claims charge gross of reinsurance + claims-handling costs + result of reinsurance ceded on current accident year excluding the recurring interests credited to the insurance annuity reserves, to (ii) Earned revenues, gross of reinsurance.
Underlying expenses include two components: expenses (including commissions) related to acquisition of contracts (with the related acquisition ratio) and all other expenses (with the related administrative expense ratio). Underlying expenses exclude customer intangible amortization and integration costs related to material newly acquired companies.
Underlying Cost Income Ratio: (general expenses including distribution revenues) / (gross revenues excluding distribution revenues).
Over the past several years, AXA has expanded its core operations (insurance and asset management) through a combination of organic growth, direct investments and acquisitions. This expansion has been funded primarily through a combination of (i) dividends received from operating subsidiaries, (ii) proceeds from the issuance of subordinated convertible debt securities, other subordinated debt securities and borrowings (including debt issued by subsidiaries), (iii) the issuance of ordinary shares, and (iv) proceeds from the sale of non-core businesses and assets.
The Company and each of its major operating subsidiaries are responsible for financing their operations. The Company, as the holding company for the AXA Group, coordinates these activities and, in this role, participates in financing the operations of certain subsidiaries. The Company and certain of its subsidiaries, including AXA France Assurance, AXA Financial Inc., AXA Asia Pacific Holdings and AXA UK Plc. are holding companies and are dependent on dividends received from their respective subsidiaries as a principal source of funds to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular a minimum solvency ratio, and the level of internal dividends paid by operating entities to the Company (or other Group companies) must therefore take into account these constraints as well as potential future regulatory changes. In addition, the Company is required to have sufficient statutory (parent only) results to distribute a dividend on its ordinary shares. Cash position also fluctuates as a result of cash-settled margin calls from banks relating to collateral agreements on derivatives, and the Company’s statutory (parent only) results may be impacted by unrealized gains and losses on derivatives used to hedge currency or other risks. The Company anticipates that cash dividends received from operating subsidiaries and other liquidity sources management expects to be available to the Company will continue to be sufficient to meet its operating expenses and other obligations.
life & Savings Liquidity needs can be affected by fluctuations in the level of surrenders, withdrawals, maturities and guarantees to policyholders including guarantees in the form of minimum income benefits or death benefits, particularly on variable annuity business (see Part 2.2 – “Information on the Company” Segment Information – Life & Savings – Surrenders and lapses).
The investment strategy of AXA’s Life & Savings subsidiaries is designed to match the investment returns and estimated maturity of their investments with expected payments on insurance contracts. Entities regularly monitor the valuation and duration of their investments and the performance of their financial assets. Financial market performance may affect the level of surrenders and withdrawals on life insurance policies, as well as projected immediate and long-term cash needs. Thanks to a close monitoring of surrenders’ rate on a weekly basis, entities are able to adjust their investment portfolios to reflect such considerations and react in a targeted manner.
Asset Management and banking These subsidiaries’ principal sources of liquidity are operating cash flows, proceeds from the issuance of ordinary shares (where applicable), drawings on credit facilities, repository agreements, and other borrowings from credit institutions or others (including the Company).
lIqUIDITy POSITION AND RISK MANAGEMENT FRAMEwORK Despite the extreme financial conditions in 2008, insurers, and especially AXA, have proven their resilience in terms of liquidity position.
AXA has a solid liquidity risk management framework, including (i) a regular monitoring of our liquidity position in terms of resources (monthly monitoring of our liquidity resources including government bonds and a part of our equity and corporate bond portfolio) and requirements (weekly monitoring of surrenders’ rate for each local entity and consolidated view at Group level), (ii) confirmed undrawn credit lines for €6.1 billion, which are committed credit facilities without restrictive financial covenants or rating triggers, and (iii) a liquidity emergency plan in place, to deal with any liquidity crises that may arise, which can provide short term liquidity by around €18.6 billion of assets eligible for European Central Bank tenders (of which €14.9 billion immediately available), creating a very large alternative source of refinancing.
In addition, as part of its risk control system, AXA remains constantly vigilant regarding contractual provisions, such as ratings triggers or restrictive covenants, in financing and other documentation that may give lenders, security holders or other counterparties, rights to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse effect on its consolidated financial position. AXA currently has no ratings triggers in its bank facilities.
Subordinated debt At December 31, 2008, the Company had outstanding subordinated debt (excluding accrued interests) of €6,810 million (€6,778 million in 2007).
On a consolidated basis, subordinated debt (including derivative instruments) totaled €6,734 million at December 31, 2008 (compared to €6,146 million at December 31, 2007), after taking into account all intra-group eliminations and excluding perpetual debts (TSS / TSDI, which are included in shareholders’ equity, as described in Note 1.12.2 of Part V – Consolidated Financial Statements for a total amount of €7,361 million at December 31, 2008 and €7,781 million at December 31, 2007).
From January 2007, AXA’s only convertible debt outstanding is AXA’s 2017 convertible bonds, (6.6 million bonds at December 31, 2008). To neutralize the dilutive impact of the 2017 convertible bonds, AXA has purchased from a banking counterparty call options on the AXA ordinary share with an automatic exercise feature. This feature is such that one call option is automatically exercised upon each conversion of a convertible bond. Consequently, each issuance of a new ordinary share resulting from the conversion of a bond will be offset by the delivery to AXA of an ordinary share under the call option (ordinary share that AXA intends to cancel in order to avoid any increase of its outstanding shares or dilution). At December 31, 2008, the number of ordinary shares issuable upon conversion of outstanding bonds was 27.5 million.
The contractual maturities of financing debts are detailed in Note 16.4 of Part V – “Consolidated Financial Statements”.
Movements in this item are described in Note 17 of Part V – “Consolidated Financial Statements”.
Issuance and cancellation of ordinary shares For several years, the AXA Group has been offering to its employees, the opportunity to subscribe for shares issued by way of a capital increase reserved for employees. In 2008, employees invested a total of €460 million leading to a total of 24.7 million newly issued shares. Employee (including agents) shareholders represented 5.86% of the outstanding share capital at December 31, 2008.
Dividends received Dividends paid to the Company in 2008 in respect of the 2007 financial year totaled €2,674 million (2007: €2,178 million, 2006: €1,581 million), of which approximately €392 million were in currencies other than the Euro (2007: €213 million, 2006: €109 million). The €496 million increase in dividends in 2008 was mainly due to a €498 million increase in dividends received from European companies to €2,328 million, including a €943 million increase from AXA Holdings Belgium (as a result of capital gains on the sale of the Netherlands activities in 2007, which generated a dividend of €1,053 million), partly offset by a €678 million decrease of AXA France Assurance dividend to €737 million (due to the non-recurrence of large capital gains realized in 2006 and paid out in 2007).
The Company is not subject to restrictions on dividend payments, provided that its accumulated profits are sufficient to cover them and that the Group solvency ratio does not decrease below 100% after dividend payment in cash. However, many Group’s subsidiaries, particularly insurance companies, are subject to restrictions on the amount of dividends they can pay to shareholders. For more information on these restrictions, see Note 28.3 of Part V – “Consolidated Financial Statements”.
The Company anticipates that cash dividends received from operating subsidiaries and other liquidity sources management expects to be available to the Company will continue to be sufficient to meet its operating expenses and other obligations. AXA expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash flow remaining after payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses and future issues of debt and equity securities.
Dividends paid to AXA shareholders in 2008 in respect of the 2007 financial year totaled €2,473 million, or €1.20 per share, versus €1.06 per share paid in 2007 in respect of the 2006 financial year (€2,218 million in total). All of these dividends were paid in cash.
The solvency margin calculation is based on a formula that contains variables related to economic, financial and technical parameters.
The various components of what the Group considers as available capital are determined in accordance with these regulatory requirements under Solvency I, which are not yet harmonized throughout Europe while waiting for Solvency II. At December 31, 2008, available capital amounted to €28.1 billion (€31.0 billion at December 31, 2007 and €36.9 billion at December 31, 2006) of which: i. consolidated shareholders’ equity after dividend proposal: €34.7 billion (€33.8 billion at December 31, 2007 and €32.5 billion at December 31, 2006), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and deeply subordinated debts, ii. gross unrealized capital gains and other: €10.6 billion (€13.0 billion at December 31, 2007 and €17.3 billion at December 31, 2006), iii. admitted subordinated debt (with its loss absorbing capacity described below): €11.0 billion (€10.1 billion at December 31, 2007 and €9.9 billion at December 31, 2006), iv. locally admitted assets: €2.6 billion (€2.9 billion at December 31, 2007 and €3.1 billion at December 31, 2006), v. less intangible assets (excluding goodwill on AllianceBernstein as it is part of its net consolidated book value): €25.9 billion
Dated and undated (perpetual) subordinated notes issued by the Company qualify for favorable capital treatment from the French insurance regulator, which oversees the Company’s consolidated solvency position, and rating agencies.
In particular, the Company’s TSS include loss absorption mechanisms which provide that under certain circumstances relating to the consolidated solvency margin of the Group, the principal amount of each of the relevant TSS will be written down following which interest is payable on the reduced principal amount until such time as it is reinstated (following the Company’s return to financial health as defined in the TSS).
In the event of a failure by the Company and/or any of its insurance subsidiaries to meet minimum regulatory capital requirements, insurance regulators have broad authority to require or take various regulatory actions. A failure of any of the Company’s insurance subsidiaries to meet their regulatory capital requirements and/or a reduction in the level of their regulatory capital that may negatively impact their competitive position may also result in the Company having to inject significant amounts of new capital into its insurance subsidiaries, which could adversely affect the Company’s liquidity position. In 2008, the Company provided significant amounts to its subsidiaries through loans, capital contributions and other mechanisms including approximately €2.44 billion loaned to its US subsidiary AXA Financial that were used to enhance the capitalization of AXA Financial’s insurance subsidiaries. In the current financial market environment, management believes that its insurance subsidiaries may become increasingly dependent on the Company for capital resources and funding over the coming months.
Management closely monitors the Group’s ratings and currently expects that these ratings should remain at levels sufficient for the Company and its insurance subsidiaries to compete effectively. Given continuing adverse financial market and general economic conditions, however, management cannot predict with any degree of certainty the timing and/or magnitude of future ratings actions.
A downgrade or the potential for a downgrade of our ratings could have a variety of negative impacts on us including (i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies, (iv) increasing our cost of obtaining reinsurance, (v) negatively impacting our ability to obtain financing and/or increasing our cost of financing, (vi) triggering additional collateral requirements under certain agreements to which we are party, (vii) harming our relationships with creditors or trading counterparties and/or (viii) adversely affecting public confidence in us.
SUbSEqUENT EVENTS AFTER DECEMbER �1, 2008 IMPACTING AXA’S lIqUIDITy A dividend per share of €0.40 will be proposed at AXA’s Annual Shareholders’ Meeting that will be held on April 30, 2009. The dividend will be payable on May 12, 2009 with an ex-dividend date of May 7, 2009. For individuals whose fiscal residence is in France, this dividend gives rise to a 40% tax relief equal to €0.16 per share. These individuals may, barring certain exceptions, opt to have an 18% flat deduction at source, leading to the loss of the 40% tax relief mentioned earlier. The 12.1% welfare taxes (CSG, CRDS and welfare deduction) due by the persons who are deemed to be French residents for tax purposes are, in any case, paid at the date of the dividend payout.
Please refer to Note 31 of Part V – “Consolidated Financial Statements” for other subsequent events.
PART III CORPORATE GOVERNANCE, EXECUTIVE COMPENSATION, MAJOR SHAREHOLDERS AND RELATED MATTERS
Employees 140 3.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OwNERSHIP Executive compensation and Supervisory Board members fees 141
Transactions involving Company stock completed in 2008 by Management Board and Supervisory Board members 175
Employee shareholders 177 3.3 DESCRIPTION OF THE COMPANy’S SHARE REPURCHASE PROGRAM 179 3.4 MAJOR SHAREHOLDERS AND RELATED PARTy TRANSACTIONS Capital Ownership 181
Implementing sound corporate governance principles has been a priority at AXA for many years. AXA’s ordinary shares are publicly traded on Euronext Paris and its ADRs and ADSs are publicly traded on the New York Stock Exchange. Consequently, AXA is subject to prevailing corporate governance requirements and practices in both France and the United States including the Sarbanes-Oxley Act and the French Commercial Code.
In addition, AXA has decided in 2008 to adopt as its corporate governance code of reference the set of recommendations based on the consolidation of the AFEP’s and the MEDEF’s report of October 2003 and of the AFEP / MEDEF recommendations dated January 2007 and October 2008 on the compensation of executive directors of listed companies (hereafter the “AFEP / MEDEF Code”).
Article 12 of the Company’s Bylaws specifies that the following types of transactions or issues require the prior approval of the Supervisory Board: • issuance of securities that give a direct or indirect access to the Company’s registered share capital; • proposals for share repurchase programs to be submitted to shareholders at their ordinary General Meetings; • financial operations that may lead to a substantial change in the financial structure of the Company; • mergers and acquisitions, whatever their form; • strategic partnership agreements; • establishing stock option plans and/or granting performance shares to employees of the Company and its affiliates including to Members of the Management Board; • proposals for changing the Bylaws to be submitted to an Extraordinary Meeting of shareholders; • proposals for payment of dividends and allocation of the Company’s results to be submitted to shareholders at their Annual
The Supervisory Board meets as often as it deems necessary but not less frequently than once each quarter. Periodically Supervisory Board members meet among themselves without the attendance of Management Board members.
Prior to each meeting, Supervisory Board members receive documentation concerning matters to be reviewed, generally eight days in advance. In accordance with the Supervisory Board’s Rules of Procedure, they are also informed by the Management Board on a regular basis about the Company’s financial condition and results of operations as well as any significant events or transactions involving the Company or the Group.
Composition On December 31, 2008, the Supervisory Board was comprised of 14 members elected by the shareholders. Currently, 5 members of the Supervisory Board are nationals of countries other than France. In accordance with French law, one member of the Supervisory Board is an employee-representative who is elected by shareholders every four years from among a list of candidates selected by the Group’s employee shareholders. The Supervisory Board does not have any non voting members (censor).
Jacques de chateauvieux (57) (a) chairman of the supervisory Board chairman of the AXA supervisory Board chairman and cEO of BOURBON
Norbert Dentressangle (54) (a) Vice-chairman of the supervisory Board chairman of Financière Norbert Dentressangle (sAs)
Léo Apotheker (55) (a) Member of the supervisory Board co-cEO of sAP Ag sAP Ag Building capital 8 32, rue de Monceau 75008 Paris – France
Wendy cooper (58) Member of the supervisory Board, representing the employee shareholders senior Vice President & Associate general counsel of AXA Financial, inc. (United states)
AXA Financial, inc. 1290, Avenue of the Americas New york – Ny10104 United states
AXA UK PLc 5 Old Broad street London Ec2N 1AD United Kingdom
Henri Lachmann (70) (a) Member of the supervisory Board chairman of the supervisory Board of schneider Electric schneider Electric 35, rue Joseph Monier 92500 Rueil-Malmaison – France
Mrs. Dominique Reiniche (53) (a) Member of the supervisory Board chairman Europe of The coca-cola company
The coca-cola company groupe Europe 27, rue camille Desmoulins 92784 issy-les-Moulineaux cedex 9 – France
Mr. Claude Bébéar has been Honorary Chairman of the Supervisory Board since April 22, 2008.
At the Annual Meeting of Shareholders scheduled for April 30, 2009: • Mr. Ramon de Oliveira (54) is expected to be elected for a 4-year term, replacing Mr. Henri Lachmann as a member of the
Supervisory Board, whose term of office will expire at the close of this Meeting. Mr. Ramon de Oliveira is currently Managing Partner of the consulting firm Logan Pass Partners and spent 25 years of its career at JP Morgan.
• Mrs. Dominique Reiniche and Messrs. Jacques de Chateauvieux, Anthony Hamilton and Michel Pébereau, whose term of office will expire at the close of this Meeting, are expected to be re-elected for a 4-year term.
Supervisory Board activities in 2008 In 2008, the Supervisory Board met 8 times and the average attendance rate was 85.71%. Within the framework of its principal missions such as described above the Supervisory Board focused, in particular, on the following matters: • review of the Group strategy; • examination of the 2007 financial statements and the 2008 half year financial statements; • review of the reports of the Supervisory Board Committees; • authorization of the main projects with respect to acquisitions and disposals; • review of the AFEP / MEDEF recommendations and adoption of those recommendations as AXA’s corporate governance code of reference; • Board’s self-assessment; • review of the decisions in reaction to the financial crisis.
Directorships currently held BOURBON, Chairman and Chief Executive Officer JACCAR, Chairman and Chief Executive Officer SAPMER, Chairman of the Board of Directors CBo Territoria, Chairman of the Board of Directors Director or member of the Supervisory Board: • INNODIS • SINOPACIFIC Shipbuilding Group (China)
Previous directorships held during the last five years Vindemia S.A.S., Chairman Antenne Réunion Télévision, Chairman
Expertise and experience In 1979, Mr. Norbert Dentressangle founded the Norbert Dentressangle Group, a transportation and logistics specialist, and served as its Chairman until 1998. He is currently Chairman of the Supervisory Board of Groupe Norbert Dentressangle. Mr. Norbert Dentressangle has also been, since its creation in 1988, Chairman of Financière Norbert Dentressangle, the family-owned holding company which, in addition to a majority stake in Groupe Norbert Dentressangle, also holds equity interests in real estate, industrial and business service firms.
Directorships currently held Financière Norbert Dentressangle (SAS), Chairman Groupe Norbert Dentressangle, Chairman of the Supervisory Board Financière de Cuzieu (SAS), Chairman ND Investissements (SAS), Chairman SOFADE (SAS), Chief Executive Officer Director: • SEB • SOGEBAIL
Business address SAP AG – Building Capital 8 – 32, rue de Monceau – 75008 Paris, France
Jean-Martin FOLZ, Member of the AXA Supervisory Board 61, French nationality.
Expertise and experience Mr. Jean-Martin Folz is a graduate of the Ecole Polytechnique and ingénieur des Mines. Between 1975 and 1978 he has held various French government cabinet positions with his last position being head of cabinet of the Secretary of State for Industry. In 1978, he joined Rhône-Poulenc to run the Saint-Fons plant, and was then promoted to Senior Executive Vice-President of Rhône-Poulenc for the Specialty Chemicals business unit. In 1984, he became Senior Executive Vice-President and then Chief Executive Officer of Jeumont-Schneider (a Schneider subsidiary). In 1987, he was appointed Chief Executive Officer of Péchiney and Chairman of Carbone Lorraine (in 1988). In 1991, he became Group Chief Executive Officer of Eridania Béghin-Say and Chairman of Béghin-Say. Mr. Jean-Martin Folz joined PSA Peugeot Citroën in 1995 and became Chairman in 1997. He left PSA in February 2007.
Jean-René FOURTOU, Member of the AXA Supervisory Board 69, French nationality.
Expertise and experience Mr. Jean-René Fourtou is a graduate of the Ecole Polytechnique. In 1963, he joined Bossard & Michel as a consultant. In 1972, he became Chief Operating Officer of Bossard Consultants and Chairman and Chief Executive Officer of the Bossard Group in 1977. In 1986, he was appointed Chairman and Chief Executive Officer of the Rhône-Poulenc Group that later merged with and
Directorships currently held Vivendi, Chairman of the Supervisory Board Groupe Canal+, Chairman of the Supervisory Board Director, member of the Supervisory Board or member of the Management Committee: • CapGemini • Sanofi Aventis • AXA Millésimes1 (SAS) • NBC Universal (United States) • Maroc Telecom (Morocco) • Nestlé (Switzerland)
Previous directorships held during the last five years Vivendi Universal, Chairman and Chief Executive Officer Vivendi Environnement, Chairman of the Supervisory Board AXA Assurances IARD Mutuelle, Vice-Chairman of the Board of Directors AXA Assurances Vie Mutuelle, Vice-Chairman of the Board of Directors AXA Courtage Assurance Mutuelle, Vice-Chairman of the Board of Directors EADS (Netherlands), Director Aventis, Director
Anthony HAMILTON, Member of the AXA Supervisory Board 67, British nationality.
Expertise and experience Mr. Anthony Hamilton is a graduate of Oxford University. His early career was spent in London and New York working for the investment banks Schroders, Morgan Grenfell, and Wainright. In 1978 he joined Fox-Pitt, Kelton and was appointed Chief Executive Officer in 1994. In 1993, he became a non-executive Director of AXA Equity and Law PLC (Chairman, 1995) and in 1997 a non-executive Director of AXA UK PLC. Since September 2000, Mr. Anthony Hamilton has been non-executive Chairman of AXA UK PLC.
Directorships currently held AXA UK PLC11 (United Kingdom), Non-executive Chairman AXA Equity and Law PLC1 (United Kingdom), Non-executive Chairman Director or member of the Supervisory Board: • AXA Financial, Inc.1 (United States) • Binley Limited (United Kingdom) • Tawa plc (United Kingdom) • Golf Club of Valderrama (Spain) • AXA Equitable Life Insurance Company1 (United States) • MONY Life Insurance Company1 (United States) • MONY Life Insurance Company of America1 (United States)
Henri LACHMANN, Member of the AXA Supervisory Board 70, French nationality.
Business address Schneider Electric – 35, rue Joseph Monier – 92500 Rueil-Malmaison, France
Previous directorships held during the last five years Schneider Electric, Chairman and Chief Executive Officer Vice-Chairman of the Board of Directors and Director: • AXA Assurances IARD Mutuelle • AXA Assurances Vie Mutuelle • AXA Courtage Assurance Mutuelle FINAXA, Director Vivendi Universal, Director AXA Holding Maroc1 (Morocco), Director
François MARTINEAU, Member of the AXA Supervisory Board 57, French nationality.
Directorships currently held SCP Lussan & Associés, Managing Partner Vice-Chairman and director: • Bred Banque Populaire • Assurances Mutuelles Le Conservateur • Associations Mutuelles Le Conservateur Director: • Conservateur Finance • AXA Assurances IARD Mutuelle • AXA Assurances Vie Mutuelle
Gérard MESTRALLET, Member of the AXA Supervisory Board 59, French nationality.
Business address GDF SUEZ – 22, rue du Docteur Lancereaux – 75008 Paris, France
Directorships currently held GDF SUEZ, Chairman and Chief Executive Officer Chairman of the Board of Directors: • Suez Energie Services • Suez Environnement • Suez-Tractebel (Belgium) Vice-Chairman of the Board of Directors: • Hisusa (Spain) • Aguas de Barcelona (Spain) • Electrabel (Belgium) Director or member of the Supervisory Board: • Saint-Gobain • Pargesa Holding S.A (Switzerland)
Previous directorships held during the last five years Suez, Chairman and Chief Executive Officer Société Générale de Belgique (Belgium), Chairman Hisusa (Spain), Chairman Sociedad General de Aguas de Barcelona (Spain), Vice-Chairman Director or member of the Supervisory Board: • Crédit Agricole S.A.
Giuseppe MUSSARI, Member of the AXA Supervisory Board 46, Italian nationality.
Business address Banca Monte dei Paschi di Siena S.p.A. – Piazza Salimbeni, 3 – 53100 Siena – Italy
Expertise and experience Mr. Giuseppe Mussari is a graduate in Law of the University of Siena (Barrister registered in the Rolls of the Court of Siena since 1993). In 1998, he became Deputy Chairman of the Criminal Section of the Court of Siena and then in 2000 Chairman of the Criminal Section of the Court of Siena. In July 2001, he was appointed Chairman of the Monte dei Paschi di Siena Foundation. Since April 2006, Mr. Giuseppe Mussari has been Chairman of Banca Monte dei Paschi di Siena (BMPS).
Previous directorships held during the last five years Cassa dei Depositi e Prestiti (Bank for Deposits and Loans), Chairman of the Guidance Committee Monte dei Paschi di Siena Foundation, Chairman Chigiana Music Academy Foundation, Chairman Mecenate 90 Association, Chairman Siena Biotech, Chairman of the Ethical Monitoring Committee ACRI, Vice-Chairman Ravello Foundation, Director Clear Pacts Consortium, member of the General Council
Expertise and experience Mr. Michel Pébereau is a graduate of the Ecole Polytechnique and the Ecole Nationale d’Administration (ENA). In 1967, he started his career as auditor at the Treasury (inspecteur des finances). He then held various management positions at the direction du Trésor and at the “Cabinets” of two Ministers (Valéry Giscard d’Estaing and René Monory). In 1982, he joined Crédit Commercial de France. In 1987, he was in charge of its privatization before becoming Chairman and Chief Executive Officer from 1987 to 1993. In 1993, he became Chairman and Chief Executive Officer of BNP and after the merger with Paribas in 2000, Chairman and Chief Executive Officer of BNP Paribas. Since 2004, Mr. Michel Pébereau has been Chairman of the Board of Directors of BNP Paribas.
Dominique REINICHE, Member of the AXA Supervisory Board 53, French nationality.
Expertise and experience Mrs. Dominique Reiniche is a graduate of the Essec. In 1978, she joined Procter & Gamble and in 1983 became Associate Advertising Manager. In 1986, she joined Kraft Jacobs Suchard and was appointed Marketing & Strategy Manager. In 1992, she joined Coca-Cola Entreprise as a Marketing & Responsible “Compte-clé” Manager. In 1998, she was appointed Chairman and Chief Executive Officer of Coca-Cola Entreprise and Vice-Chairman of Coca Cola Enterprises – Europe Group in 2002. From January 2003 to May 2005, she was Chairman of Coca-Cola Enterprises – Groupe Europe. Since May 2005, Mrs. Dominique Reiniche has been Chairman Europe of The Coca-Cola Company.
Expertise and experience Mr. Ezra Suleiman is a graduate of Harvard University and of Columbia University. In 1973, he started his career as a Professor at the University of California, Los Angeles. Since September 1979, Mr. Suleiman has been a Professor of Political Sciences at Princeton University.
Directorships currently held Political Sciences at the University of Princeton (United States), Professor European Studies Center at the University of Princeton (United States), Manager Director: • Suez Environnement • AXA Financial, Inc1. (United States) • AXA Equitable Life Insurance Company1 (United States) • MONY Life Insurance Company1 (United States) • MONY Life Insurance Company of America1 (United States) Institut Montaigne, Chairman of the Orientation Board Member of the Editorial Committee: • Comparative Politics • La Revue des Deux Mondes • Politique Internationale • Politique Américaine Council on Foreign Relations (New York), member HEC International, member of Advisory Board
Family Relationship To the knowledge of the Company, there are no family relationships among the members of the Supervisory Board or with members of the Management Board.
Assessment of the Supervisory Board activity The Supervisory Board conducts an annual self-assessment with a view to reviewing its composition, organization and functioning. The conclusions of this self-assessment are discussed annually during a meeting of the Supervisory Board.
SUPERVISORy BOARD COMMITTEES The Supervisory Board has four Committees: (1) the Audit Committee, (2) the Finance Committee, (3) the Selection, Ethics, Governance and Human Resources Committee, and (4) the Compensation Committee.
The role, organization and operating procedures of each Committee are set forth in the Supervisory Board’s Rules of Procedure and in a dedicated charter for the Audit Committee. Each Committee issues opinions, proposals or recommendations to the Supervisory Board on matters within the scope of its responsibilities and is empowered to undertake or commission specific studies or reviews within the scope of its responsibilities. Each Committee may invite outside participants to attend its meetings and Committee Chairmen report to the Supervisory Board on a regular basis following Committee meetings.
Audit Committee Composition On December 31, 2008, the Audit Committee had four members having either finance or accounting expertise, all of whom were determined by the Supervisory Board to be independent in accordance with the criteria contained in the AFEP / MEDEF Code and the Sarbanes-Oxley Act. The Committee members at December 31, 2008 were Messrs. Anthony Hamilton (Chairman), Jean-Martin Folz, Henri Lachmann and Ezra Suleiman.
Missions and activities The scope of the Audit Committee’s responsibilities is set forth in an Audit Committee Charter which defines the Committee’s principal missions, including the following: • Overseeing the activities and systems of internal control over events that expose the Group to significant risk; • Monitoring the financial reporting process, the systems of internal control over financial reporting and the accuracy and integrity of the Group’s financial reporting; • Overseeing the qualifications and independence of the external auditors; and • Overseeing the performance of the Group’s internal audit function.
The Audit Committee met six times in 2008. The average attendance rate was 95.83%. Within the framework of its principal missions such as described above, the Committee focused, in particular, on the following issues: • 2007 annual and 2008 half-year financial statements; • 2008 Group Audit Plan; • internal fraud report; • local internal audit plans summary; • external Auditors fees and actions plan; • significant litigation and regulatory matters; • risk management issues; • the Group’s annual reports (Document de Référence and Form 20-F); • Sarbanes Sections 404 and 302 issues; • self-assessment of the Committee.
Finance Committee Composition As of December 31, 2008, the Finance Committee had four members, three of whom were determined by the Supervisory Board to be independent in accordance with the criteria set forth in the AFEP / MEDEF Code. At December 31, 2008, those members were: Messrs. Jacques de Chateauvieux (Chairman), Léo Apotheker, Henri Lachmann and Michel Pébereau.
The Finance Committee met five times in 2008. The average attendance rate was 85.71% and focused, in particular, on the following issues: • examination of AXA’s financial structure; • examination of the financial resolutions proposed to the AXA shareholders’ General Meeting; • reviewing proposed payments of dividends; • acquisitions, restructurings and disposals; • review of the decisions in reaction to the financial crisis; • Solvency II.
Early in 2008, the Committee reviewed the qualifications of the Supervisory Board candidates who were proposed to and approved by AXA’s shareholders at their meeting on April 22, 2008.
Compensation Committee Composition As of December 31, 2008, the Compensation Committee had three members all of whom were determined to be independent by the Supervisory Board in accordance with the criteria set forth in the AFEP / MEDEF Code. At December 31, 2008 the Committee members were: Messrs. Norbert Dentressangle (Chairman), Anthony Hamilton and Gérard Mestrallet.
Missions and activities The Compensation Committee has the following principal missions: • to make proposals to the Supervisory Board on (i) the compensation of the Chairman of the Supervisory Board, (ii) the compensation of each Management Board member, (iii) the aggregate amount of directors’ fees for the Supervisory Board to be proposed to the General Meeting of shareholders, and (iv) the allocation of Company stock options and performance shares to the members of the Management Board; • to formulate an opinion on the proposals of the Management Board concerning executive compensation for key Group management personnel including allocation of Company stock options and performance shares; • to be informed by the Management Board of compensation levels set by the boards of AXA Group subsidiaries for their principal executive officers.
MANAGEMENT BOARD The AXA Management Board is currently comprised of six members, each of whom serves for a 3-year term expiring on October 11, 2009.
The Management Board generally holds weekly meetings to discuss Group strategy and operations. It operates in accordance with the Company’s Bylaws and the Management Board’s Rules of Procedure.
Henri de castries (54) chairman of the Management Board AXA 25, avenue Matignon 75008 Paris – France
AXA Belgium Boulevard du souverain, 25 1170 Brussels – Belgium claude Brunet (51) Member of the Management Board, in charge of Transversal Operations, communication, Marketing and Human Resources
AXA 25, avenue Matignon 75008 Paris – France christopher condron (61) Member of the Management Board, President and cEO of AXA Financial, inc. (United states)
AXA Financial, inc. 1290 Avenue of the Americas New york – Ny 10104 United states
Denis Duverne (55) Member of the Management Board, group chief Financial Officer
François Pierson (61) Member of the Management Board, chairman and cEO of AXA France, responsible for Large Risks, Assistance and AXA canada
AXA France Terrasse 1 313 Terrasses de l’Arche 92727 Nanterre cedex – France
Members of the Management Board devote substantially all of their professional time to management of the Group and do not hold outside directorships or engage in professional activities outside the AXA Group that would interfere with or impede in any material way their availability to focus on the Group and its business.
Henri de CASTRIES, Chairman of the AXA Management Board 54, French nationality.
Director: • AXA France IARD • AXA France Vie • AXA Belgium SA (Belgium) • AXA Holdings Belgium (Belgium) • AXA UK PLC (United Kingdom) • AllianceBernstein Corporation (United States) • AXA Equitable Life Insurance Company (United States) • AXA America Holdings, Inc. (United States) • MONY Life Insurance Company (United States) • MONY Life Insurance Company of America (United States)
Previous directorships held during the last five years Chairman of the Board of Directors: • AXA Courtage Assurance Mutuelle Vice-Chairman of the Board of Directors: • FINAXA Director or member of the Supervisory Board: • AXA Konzern AG (Germany)
In 1968, Mr. Alfred Bouckaert started working as a stockbroker with JM Finn & Co in London. In 1972, he joined the Chase Manhattan Bank where he held various commercial and credit posts before becoming Chase’s Manager of Commercial Banking for Belgium. In 1984, he was appointed General Manager of Chase in Copenhagen (Denmark) and General Manager and Country Manager of Chase in Belgium in 1986. In 1989, when Chase Manhattan Bank’s Belgian operations were sold to Crédit Lyonnais France, Mr. Bouckaert was in charge of merging Chase’s and Crédit Lyonnais’s Belgian Operations. In 1994, he was asked by Crédit Lyonnais to head the bank’s European Operations. In 1999, he became Managing Director of AXA Royale Belge and AXA also appointed him Country Manager for the Benelux (Belgium, The Netherlands, Luxembourg). In 2005, Mr. Bouckaert became General Manager of the Group’s Northern European Region (Belgium, The Netherlands, Luxembourg, Germany, Switzerland). Since October 2006, Mr. Bouckaert has been a member of the AXA Management Board, in charge of operations in the Northern, Central & Eastern Europe Region (Belgium, The Netherlands, Luxembourg, Germany, Switzerland, Poland (Life insurance), Czech Republic, Solvak Republic, Hungary, Ukraine and Russia). Since April 2007, he has been Chairman of the Board of Directors of AXA Belgium SA (Belgium) and since December 2007, he has been permanent representative of AXA to the Supervisory Board of AXA Ukraine and AXA Insurance (Ukraine). Since September 2008, he has been a director of RESO (Russia).
Mr. christopher condron has a bachelor’s degree in Business Management from the University of scranton. in 1989, he became head of the Private client group of The Boston company, now Mellon Private Asset Management. in 1993, he was appointed Executive Vice-President of Mellon and, in 1994, became Vice-chairman of Mellon. in 1999, Mr. condron became President & chief Operating Officer of Mellon Financial corporation. since May 2001, Mr. christopher condron has been President and cEO of AXA Financial, inc. and chairman of the Board, President (since May 2002) and chief Executive Officer of AXA Equitable Life insurance company. Mr. condron has been a member of the AXA Management Board since July 2001.
Positions currently held outside the AXA Group • Central Supply Corp (United States), Director • KBW, Inc. (United States), Director • The American Ireland Fund (United States), Director and Treasurer • University of Scranton, Trustee
Mr. Denis Duverne is a graduate of the Ecole des Hautes Etudes Commerciales (HEC). After graduating from the Ecole Nationale d’Administration (ENA), he started his career in 1984 as commercial counselor for the French Consulate General in New York before becoming Director of the Corporate Taxes Department for the French Ministry of Finance in 1986. In 1988, he became Deputy Assistant Secretary for Tax Policy for the French Ministry of Finance and, in 1991, he was appointed Corporate Secretary of Compagnie Financière IBI. In 1992, he became a member of the Executive Committee of Banque Colbert, in charge of operations. In 1995, Mr. Denis Duverne joined the AXA Group and assumed responsibility for supervision of AXA’s operations in the US and the UK and managed the reorganization of AXA companies in Belgium and the United Kingdom. Since February 2003, Mr. Denis Duverne has been a member of the AXA Management Board, in charge of Finance, Control and Strategy.
Positions currently held in the AXA Group Member of the Management Board: AXA Chairman and Chief Executive Officer: • AXA America Holdings, Inc. (United States) Director: • AXA France IARD • AXA France Vie • AXA Belgium SA (Belgium) • AXA Holdings Belgium (Belgium) • AXA Assicurazioni S.p.A. (Italy) • AXA Italia S.p.A. (Italy) • AXA MPS Assicurazioni Vita S.p.A. (Italy) • AXA MPS Assicurazioni Danni S.p.A. (Italy) • AXA UK PLC (United Kingdom) • AXA Financial, Inc. (United States) • AXA Equitable Life Insurance Company (United States) • AllianceBernstein Corporation (United States) • MONY Life Insurance Company (United States) • MONY Life Insurance Company of America (United States)
François PIERSON, Member of the AXA Management Board 61, French nationality.
Positions currently held outside the AXA Group Chairman of the Board of Directors: Euromed Permanent representative of AXA France IARD to the board of UCAR
AXA has an Executive Committee which is an internal management committee composed of members of AXA’s Management Board and other key senior executives from across the Group selected on the basis of their role in the organization (central or local). The seven principal business units of the Group represented on the Executive Committee are: Mediterranean and Latin American region; Northern, Central and Eastern Europe region; United States; Asia-Pacific region and Japan; United Kingdom and Ireland; AXA Investment Managers; France / Canada / AXA Corporate Solutions Assurance / AXA Assistance.
As of February 18, 2009, the Executive Committee was comprised of the following eighteen members, including nine non-French nationals: Jean-Raymond Abat chief Executive Officer of the Mediterranean and Latin America region business unit
Alfred Bouckaert Member of the Management Board, chief Executive Officer for the Northern, central and Eastern Europe business unit claude Brunet Member of the Management Board, in charge of Transversal Operations, communication, Marketing and Human Resources
Denis Duverne Member of the Management Board, group chief Financial Officer
Philippe Egger chief Executive Officer of insurance activities in switzerland gérald Harlin Deputy chief Financial Officer, Executive Vice-President Finance and control
Mark Pearson chief Executive Officer of AXA Life Japan and AXA Japan Holdings (Japan)
François Pierson Member of the Management Board, chairman and chief Executive Officer of AXA France, responsible for Large Risks, Assistance and AXA canada
Eugène Teysen chief Executive Officer of insurance and Bank activities in Belgium
Over the past 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
PART III – cORPORATE gOVERNANcE, EXEcUTiVE cOMPENsATiON, MAJOR sHAREHOLDERs AND RELATED MATTERs governance matters including board composition and size, directors’ independence criteria, Board Committees’ and their roles, and directors’ fees.
The Group Governance Standards require the Boards of AXA’s principal subsidiaries to establish an Audit Committee and a Compensation Committee in addition to any other Board committees that they consider necessary or appropriate for their specific businesses. The role, duties, and composition of these Committees (including the requirements for participation of independent directors) are specified in a detailed Audit Committee Standard and Compensation Committee Standard. The Audit Committee Standard requires the Company’s Audit Committee to be composed entirely of independent directors and the Audit Committee’s of Group subsidiaries to have a significant component of independent directors in order to ensure that this Committee is strongly independent towards the management given its critical role in reviewing financial results and other financial information prepared by management, financial reporting and control processes, critical accounting policies, particular accounting issues, key risks and systems of internal control, fraud and similar issues. In addition, the Group’s Compensation Committee Standard requires that the Compensation Committee have a minimum of one independent director to ensure a level of independent review and judgment on all senior executive compensation matters.
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: SALARIED EMPLOYEES
• Acquisition of sBJ group in the United Kingdom (+823 salaried employees). • Acquisition of genesys in Australia (+189 salaried employees). • in the Mediterranean and Latin American Region: acquisition of seguros iNg (+4,927 salaried employees), consolidation of the gulf Region (+628 salaried employees) and a new distribution network, Direct italy (+58 salaried employees). • in switzerland: change to an independent sales organization for exclusive agents (–1,326 salaried employees), and change of methodology for apprentices
(+136 salaried employees). (b) A portion of the employees of AXA’ s French affiliates are included in giEs. in addition, the employees included in insurance and financial services activities in France are included in the “cadre de convention” of 4 not consolidated “mutuelles”. (c) Employees of AXA Belgium provide services in common for both the insurance activities and the bank activities. consequently, split is not available. (d) including ireland.
It follows 3 guiding principles: • compensation competitiveness on international markets, • internal equity, based on individual and collective performance, • financial ability to pay.
Executive compensation is therefore structured so as to foster and reward performance: • both at individual level and collective level (local business entity and AXA Group), • both with a short-term, medium-term and long-term focus.
The fixed annual compensation of the Chairman of the Management Board (€500,000), which had not changed since he was appointed in May 2000, was adjusted to €600,000 effective January 1, 2008.
The variable component of his pay is determined on the basis of a predefined target amount (€2,700,000 in 2008) and includes two components: • Group performance, as measured by underlying earnings per share, P&C revenues, new business value in Life & Savings and customer scope index, • Individual performance, which is evaluated by the Compensation Committee on the basis of specific strategic objectives set at the beginning of the year.
Variable remuneration for the year 2004 paid in 2005 €2,304,277 €2,000,000 115%
Variable remuneration for the year 2006 paid in 2007 €3,045,987 €2,500,000 122%
Variable remuneration for the year 2008 paid in 2009 €1,846,304 €2,700,000 68%
The individual performance is assessed both on the achievement of results for each predetermined strategic objective (the “what”), and on the demonstrated leadership behaviors (the “how”).
The assessment of the leadership behaviors is based on the dimensions of the AXA leadership model: • catalyze high performance – Change and Team leadership, • build to grow – Strategic vision and Building capability, • focus on customers, • share to succeed, • lead through actions – Results orientation and Living through AXA values.
The variable remuneration paid to other Management Board members has been: Variable remuneration Variable remuneration for the year 2007 for the year 2008
Denis Duverne group chief France e1,400,415 e1,250,000 112% e1,052,337 e1,350,000 78% Financial Officer
François Pierson chairman & cEO France e1,180,000 e1,150,000 103% e988,174 e1,200,000 82% AXA France
In considering variable compensation for 2008 the Compensation Committee and Supervisory Board took into account, in particular, the following three measures that were included among the 2008 objectives of all Management Board members (i) the Group’s 2008 underlying earnings (€4,044 million down 17% from 2007) which were resilient in a very challenging environment, (ii) growth in the Group’s P&C revenues (+3%), and (iii) the decline in new business value (NBV) of life & savings business written during 2008 (–43% from 2007). In addition, they considered the decline in the Group’s 2008 net income and the lower proposed dividend payout for 2008. The 2008 variable compensation for (i) Alfred Bouckaert and François Pierson reflects, in particular, the operational results of the Group companies in their respective zones of responsibility, (ii) Christopher Condron, whose variable compensation was reduced to zero, reflects the significant losses incurred by the Group’s United States life insurance subsidiaries on secondary guarantees offered on Accumulator variable annuity contracts, (iii) Claude Brunet takes into account, notably, the successful launch of the AXA trademark repositioning, (iv) Denis Duverne takes into account, notably, the decline in the Group’s 2008 adjusted earnings and net income compensated, in part, by strong risk management and effective hedging strategies, and (v) Henri de Castries reflects all of the foregoing elements as well as the manner in which he managed the Group through the severe market turbulence and financial crisis of 2008.
For Executive Committee members who have an operational responsibility, the proportion of their variable remuneration linked to the Group results accounts for 20%, the proportion linked to their operational entity’s results for 40% and the proportion linked to their individual performance for 40%.
For Executive Committee members who have a functional responsibility, the proportion of their variable remuneration linked to the Group results accounts for 30%, the proportion linked to the results of their area of responsibility for 30% and the proportion linked to their individual performance for 40%.
All the tables included in this section comply with the recommendations from AMF, MEDEF and AFEP on executive directors’ compensation and on stock options and performance shares.
All the amounts presented in this Section 3.2 are gross amounts.
For the sake of transparency and to continue with the practice developed for several years, the compensation data for each member of the AXA Executive Committee are also reported under the same format.
Summary of remuneration, options and performance shares/units granted to Management Board members year 2007 year 2008
Alfred Bouckaert cEO North, central & Eastern Europe Business Unit claude Brunet chief Operating Officer christopher condron
Summary of remuneration, options and performance shares/units granted to Executive Committee members year 2007 year 2008
Eugène Teysen cEO Belgium Belgium 963,071 430,875 – 246,600 1,640,546 758,173 159,555 – 275,076 1,192,804
Philippe Egger cEO switzerland switzerland 668,398 239,375 – 137,000 1,044,773 713,564 124,098 – 213,948 1,051,610 gérald Harlin (3)
At each date of grant, the fair value of stock options and performance shares/units is determined based on iFRs norms. This is an historical value at the date of grant, calculated for accounting purposes as described in the Note 25.3.1 of the 2008 consolidated Financial statements included in Part V of the Annual Report. This value not represent a current market value or other current valuation of these options and performance shares or the actual proceeds of and when if and when the options are exercised or ther performance shares are acquired.
Board fees paid for board membership in AXA Group companies or in external companies when representing AXA, are deducted by 70% from the variable remuneration of the same year.
The only “Benefits in kind” for H. de Castries, A. Bouckaert, C. Brunet and D. Duverne are a company car.
Frank Keuper cEO germany germany 500,000 550,000 – 115,317 14,390 1,179,707 500,000 720,000 – 115,317 14,390 1,349,707 gerald Lieberman cOO AllianceBernstein
Supervisory Board members fees Directors’ fees paid to Supervisory Board members The members of the Supervisory Board, except for its Chairman, do not receive compensation from the Company, with the exception of a fee for attending meetings. The amount of directors’ fees paid to AXA’s Supervisory Board members is indicated in the table below.
Directors’ fees earned in 2009 Directors’ fees earned in 2008 (Gross amounts, in Euro) for 2008 for 2007
(a) On February 27, 2008, J.-R. Fourtou resigned as Vice-chairman of the supervisory Board and was replaced by J. de chateauvieux with immediate effect.
(b) On April 22, 2008, J. de chateauvieux was appointed chairman of the supervisory Board replacing c. Bébéar whose term of office had expired. (c) Appointed by the Annual Meeting of shareholders on April 22, 2008 replacing J. Tabourot whose term of office had expired. (d) On April 22, 2008, N. Dentressangle was appointed Vice-chairman of the supervisory Board replacing J. de chateauvieux. (e) Appointed by the Annual Meeting of shareholders on April 22, 2008 replacing c. Bébéar whose term of office had expired.
To date, AXA has opted to grant subscription options, with the exception of options granted until 2005 to certain employees of AXA Financial, which consisted of purchase options on ADRs.
Each year, the Management Board proposes for the Supervisory Board’s approval a global option pool to grant. The pool of options allocated to each business unit is essentially determined on the basis of their contribution to the Group financial results during the previous year.
Beneficiaries are identified among the Group and business units executive population, technical experts and employees holding key positions within the organization. Selection criteria and individual option grants take into account: • importance of the job Ì role • importance of the individual within the job Ì retention • importance of the individual in the future Ì potential • quality of the individual contribution Ì performance
Individual option grants recommendations are made by the CEOs of the business units and by the Group functional department heads. Recommendations are reviewed by the Management Board to ensure coherence and fairness. Individual options grants are then decided by the Management Board, although grants to members of the Management Board are approved by the Supervisory Board, acting on the recommendation of its Compensation Committee.
Since 2006, options granted to Management Board and Executive Committee members, and since 2007 with respect to any beneficiary receiving a minimum of 5,000 options, are associated with a performance condition: the last tranche, i.e. 1/3 of the options granted, will be exercisable only if at any of the fourth to tenth anniversary date of the grant, the AXA share performed at least as well as the DowJones Europe Stoxx Insurance index.
In 2008, AXA stock options were granted as follows: • 9,176,347 subscription options at a weighted average price of €21.50 granted to 5,428 employees, representing 0.43% of the share capital as of December 31, 2008; • 10,650 purchase options on ADRs granted by AXA Financial at a price of $36.11 to 10 beneficiaries in the United States.
The portion of options granted in 2008 to the six members of the Management Board represents 21% of the total number of options granted.
Date of the Management Board 26/05/1999 (b) 26/05/1999 (b) 09/06/1999 09/06/1999 18/11/1999 05/07/2000 05/07/2000 (b) 12/07/2000 13/11/2000
Number of options exercised at 31/12/08 – – 491,814 315,570 4,996 – – – –
Date of the Shareholders’ meeting 09/05/2001 26/05/1999 (b) 09/05/2001 09/05/2001 03/05/2002 30/05/2001 (b) 03/05/2002 21/05/2002 (b) 03/05/2002
Start date of exercise 09/05/2003 30/05/2003 27/02/2004 14/03/2005 14/03/2005 02/04/2005 26/03/2006 14/04/2006 29/03/2007
On the basis of the AXA share price on December 31, 2008, i.e. €15.85, only 5,974,052 subscription options are in the money, i.e. 7% of the outstanding subscription options.
Date of the Shareholders’ meeting 28/05/1997 (b) 26/05/1999 (b) 12/05/1997 05/05/1999 05/05/1999 05/05/1999 26/05/1999 (b) 05/05/1999 05/05/1999
Date of the Management Board 25/09/06 13/11/06 10/05/07 10/05/2007 10/05/2007 24/09/2007 24/09/2007 19/11/2007 19/11/2007
Exercise schedule of options 100% after 4 y 100% after 4 y 33% after 2 y
Date of the Shareholders’ meeting 03/05/2002 03/05/2002 03/05/2002 03/05/2002 20/04/2005 20/04/2005 20/04/2005 20/04/2005 20/04/2005
Total number (a) of shares to be subscribed, from which to be subscribed by : Directors: Henri de Castries Alfred Bouckaert Claude Brunet Christopher Condron Denis Duverne François Pierson wendy Cooper The first 10 employees beneficiaries
Start date of exercise 25/09/2010 13/11/2010 10/05/2009 10/05/2009 10/05/2011 24/09/2009 24/09/2011 19/11/2009 19/11/2011
Expiry date of options 01/04/2018 01/04/2018 19/05/2018 19/05/2018 22/09/2018 22/09/2018 24/11/2018
Henri de castries chairman of the Management Board 01/04/2018 1/3 of options: Eurostoxx insurance index
Alfred Bouckaert cEO North, central & Eastern Europe Business Unit 01/04/2018 1/3 of options: Eurostoxx insurance index claude Brunet chief Operating Officer 01/04/2018 1/3 of options: Eurostoxx insurance index christopher condron
Denis Duverne group chief Financial Officer 14/03/2003 14/03/2003 14/03/2003 04/09/2008 22/09/2008 15/12/2008
Underlined numbers indicate exercises of options where the AXA shares have been retained by the beneficiaries or donated upon exercise.
Stock options granted and/or exercised by the top 10 beneficiaries (outside the Management Board) during 2008
Stock options granted or exercised by the top 10 beneficiaries (outside management bodies’ members) during the year
Stock options held by corporate bodies’ members (options granted but not exercised as of December 31, 2008)
Veronique Weill group Executive VP iT & Operational Excellence 59,500 –
(a) Also owns 80,000 stock options on AllianceBernstein. (b) Also owns 838,967 stock options on AXA Asia Pacific Holdings. (c) Also owns 1,691,501 stock options on AXA Asia Pacific Holdings.
From 2005 onwards, as a result of the new French law related to the grant of free shares, Performance Units have been replaced in France by Performance Shares. Performance Shares are free shares whose final acquisition is subject to performance conditions.
The principle of Performance Units/Shares is as follows: • Each beneficiary receives an initial grant of Performance Units/Shares. This number will be used to calculate the actual number of units or shares that will definitely be acquired at the end of a 2-year acquisition period, under the condition that the beneficiary is still employed by the AXA Group at that date.
• Each year during the acquisition period, half of the Performance Units/Shares initially granted is subject to collective performance conditions measuring both the performance of the AXA Group and the beneficiary’s operational business unit performance, based on pre-determined targets.
• For beneficiaries in operating business units, their operational business unit performance carries a weighting of 2/3 while the AXA Group performance carries a weighting of 1/3. For beneficiaries in Group support functions, the performance is measured at AXA Group level only.
As far as Performance Units are concerned: • Units acquired at the end of the 2-year acquisition period are valued based on the average closing price of the AXA share during the last 20 trading days of the acquisition period.
• If the number of units acquired is less than 1,000, the amount corresponding to the value of these units is paid in cash to the beneficiary. If the number of units acquired is equal to or higher than 1,000, the beneficiary only receives 70% of the value in cash to allow him/her to pay social contributions and income taxes calculated on 100% of that value, and 30% of these units are reinvested into AXA shares which are restricted from sale during a 2-year period, in order to develop employees’ share ownership and align employees and shareholders’ interests.
Performance Shares, even if shares ultimately delivered to beneficiaries are newly issued shares (until now, AXA has always delivered existing shares), represent less shareholder dilution than stock options, due to the smaller grant volume.
Individual Performance Shares grants recommendations are made by the business units CEOs and by the Group functional department heads. Recommendations are reviewed by the Management Board to ensure coherence and fairness. Individual Performance Shares grants are then decided by the Management Board, provided that grants to members of the Management Board shall receive the prior approval of the Supervisory Board (acting on the recommendation of its Compensation Committee).
A new Performance Unit plan was launched on April 1, 2008 and 2,382,972 Performance Units were initially granted to 2,752 beneficiaries outside France. These shares are definitively acquired after a 2-year acquisition period which ends on April 1, 2010.
The acquisition period of the Performance Shares plan launched on May 10, 2007 with a total of 782,432 Performance Shares granted to 1,433 beneficiaries in France will end on May 10, 2009. The shares acquired will be subject to a 2-year restriction period until May 10, 2011.
(b) The 1,276 Performance Units of the 2008 Plan, acquired by anticipation, related to one deceased beneficiary. (c) The 645,604 units acquired by 1,537 beneficiaries of the March 26, 2004 plan have been settled as €7.8 million and $12.7 million in cash and 91,997 shares restricted until March 26, 2009. (d) The 960,520 units acquired by 1,532 beneficiaries of the March 29, 2005 plan have been settled as €25.3 million and 152,379 shares restricted until
(e) The 1,365,787 units acquired by 1,838 beneficiaries of the March 31, 2006 have been settled as €24.3 million and 238,019 shares restricted until March
(a) Performance shares granted as a replacement for 250,306 Performance Units 2004 cancelled. (b) Restricted shares granted as a replacement for 143,630 Performance Units 2004 cancelled. (c) The 260 Performance shares of the 2007 Plan and the 182 Performance shares of the 2008 Plan, acquired by anticipation, concern one deceased beneficiary.
Performance Units/Shares granted to the top 10 beneficiaries (outside management bodies’ members)
claude Brunet chief Operating Officer 01/04/2008 50,400 0.002% 855,792 01/04/2010 01/04/2012 – underlying earnings per share
Performance Shares becoming unrestricted during 2008 for each corporate bodies’ members
Representative of employees shareholders at the supervisory Board earnings per share
SHARE OwNERSHIP OF MANAGEMENT BOARD AND SUPERVISORy BOARD MEMBERS Members of the Management Board To the best knowledge of the Company, each of the Management Board members held, as of December 31, 2008, the number of AXA shares or ADR, and units of mutual funds invested in AXA shares indicated in the table below.
Number of shares and number of units of mutual funds owned as of December 31, 2008
Alfred Bouckaert (Belgium) 13,619 – 90,453 claude Brunet 254,815 – –
AXA ordinary shares or ADRs or shares of listed Group subsidiaries, held directly or indirectly through mutual funds or similar investment vehicles, are taken into account for purposes of this Minimum Shareholding Requirement.
Pursuant to Articles L.225-197-1 and L.225-185 of the French Commercial Code, the Supervisory Board has decided that, as long as a Management Board member has not met his Minimum Shareholding Requirement, all stock options and performance shares granted to him after January 1, 2007 will be subject to the following restrictions: • upon each exercise of these stock options granted after January 1, 2007, the Management Board member must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France this equals approximately 50% of the post-tax capital gain). These shares will have to be held during the whole duration of the Management Board mandate; • for performance shares granted after January 1, 2007, the Management Board member must, at every share acquisition date, hold in registered form at least 25% of the performance shares acquired during the whole duration of the Management Board mandate.
These restrictions do not apply if a Management Board member is in compliance with his Minimum Shareholding Requirement.
Members of the Supervisory Board To the best knowledge of the Company based on information reported to it, each of the Supervisory Board member held, as of December 31, 2008, the number of AXA shares or ADR indicated in the table below.
TRANSACTIONS INVOLVING COMPANy STOCK COMPLETED IN 2008 By MANAGEMENT BOARD AND SUPERVISORy BOARD MEMBERS
Transactions involving Company stock completed in 2008 by members of the Management Board To the best of the Company’s knowledge based on information reported to it, the members of the Management Board made the following disclosures in the course of 2008 concerning their transactions involving Company stock in compliance with Article L.621-18-2 of the French Monetary and Financial Code. Detailed information about all of these transactions, as well as individual disclosures filed in accordance with Articles 223-22 and 223-25 of the AMF’s (Autorité des marchés financiers) General Regulations, are published on the Company’s website (www.axa.com) and on the AMF website (www.amf-france.org).
Transactions involving Company stock completed in 2008 by members of the Supervisory Board To the best of the Company’s knowledge based on information reported to it, several members of the Supervisory Board made the following disclosures in the course of 2008 concerning their transactions involving Company stock. Detailed information about all of these transactions, as well as individual disclosures filed in accordance with Articles 223-22 and 223-25 of the AMF (Autorité des marchés financiers) General Regulations, are published on the Company’s website (www.axa.com) and on the AMF website (www.amf-france.org).
COMMITMENTS MADE TO MANAGEMENT BOARD AND SUPERVISORy BOARD MEMBERS Pension The French members of the AXA Management Board (Henri de Castries, Claude Brunet, Denis Duverne and François Pierson) participate, as all other executive employees (directeurs) of AXA Group entities in France, in a supplemental pension scheme pursuant to article 39 of the French Tax Code (Code Général des Impôts).
The new scheme was approved by the Supervisory Board on December 22, 2004, after having been presented for advice to all work councils and central work councils in France during the last quarter of 2004.
Under this scheme, a supplementary pension is paid to executives who retire immediately upon leaving the AXA Group, at age 60 or later, and who have a minimum length of service of 10 years, of which at least 5 years as an executive.
The amount of the supplementary pension aims, for a minimum executive seniority of 20 years, at achieving a global pension equivalent to: • 40% of the average gross remuneration of the past 5 years preceding the retirement date, if this average is superior to 12 annual
Social Security ceilings; • 50% of the average gross remuneration of the past 5 years preceding the retirement date, if this average is inferior to 8 annual
The total obligation of the Company and its subsidiaries to provide pension or retirement to the aforementioned executives was €31.6 million as of December 31, 2008.
Termination provisions The French members of the AXA Management Board (Henri de Castries, Claude Brunet, Denis Duverne and François Pierson) benefit, as employees and as all other executives of AXA Group companies in France, from the regulations provided for under the Collective Agreement of March 3, 1993 signed by the Fédération Française des Sociétés d’Assurances (F.F.S.A), the Syndicat National des Cadres de Direction de l’Assurance (CFE-CGC) and the Syndicat du Personnel de Direction des Sociétés d’Assurances et de Capitalisation (S.D.A.C).
Alfred Bouckaert, a member of the AXA Management Board, benefits from a contractual clause with AXA Holdings Belgium stating that in case of termination of his position within AXA Holdings Belgium by this company for any other reason than gross misconduct, he would be given a 24 month notice period. If the notice period is not served, he would receive from AXA Holdings Belgium an indemnity equivalent to 24 months of compensation, calculated on the basis of his fixed salary and variable compensation received during the past 12 months preceding the termination of his contract.
Henri de castries chairman of the Management Board First appointment : October 11, 2006 Term of office : October 11, 2009