THE AXA GROUP 9 1.1 Key fi gures 11 1.3 Business overview 17
ACTIVITY REPORT AND CAPITAL MANAGEMENT 27 2.1 Market environment 28 2.2 Operating Highlights 33 2.3 Activity Report 38 2.4 Liquidity and capital resources 93 2.5 Events subsequent to December 31, 2016 100
CORPORATE GOVERNANCE 103 3.1 Corporate governance structure – A balanced and effi cient governance 104 3.2 Executive compensation and share ownership 136 3.3 Related-party transactions 171
CORPORATE RESPONSIBILITY 391 7.1 General information 392 7.2 Social information 393 7.3 Environmental information 403 7.4 Societal information 409 7.5 Responsible investment, “Article 173”/Climate-related fi nancial disclosures 413
APPENDICES 423 Appendix I Chairman of the Board of Directors’ report 424
referred to in paragraph I of Article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) as well as in Article 222-3 of the AMF General Regulation (Règlement Général de l’AMF) (please refer to the cross-reference table on page 466 of this Registration Document which indicates the relevant sections of this Registration Document corresponding to the items referred to in Article 222-3 of the AMF General Regulation), and (ii) all disclosure matters required to be included in the Board of Directors’ report to AXA’s Shareholders’ Meeting to be held on April 26, 2017, established pursuant to Articles L.225-100 and L.225-100-2 of the French Commercial Code (Code de commerce)
CERTAIN PRELIMINARY INFORMATION ABOUT THIS ANNUAL REPORT In this Annual Report, unless provided otherwise, (i) the “Company”, “AXA” and “AXA SA” refer to AXA, a société
anonyme (a public limited company) organized under the laws of France, which is the publicly traded parent company of the AXA Group, and (ii) the “AXA Group”, the “Group” and “we” refer to AXA SA together with its direct and indirect consolidated subsidiaries.
The Company’s ordinary shares are referred to in this Annual Report as “shares”, “ordinary shares”, “AXA shares” or
“€”). Unless otherwise stated, all amounts in this Annual Report are (i) expressed in Euro, with applicable foreign exchange rates presented on page 29 of this Annual Report, and (ii) presented in millions for convenience. Such amounts may have been rounded. Rounding differences may exist, including for percentages.
This Annual Report may include statements with respect to future events, trends, plans, expectations or objectives and other forward-looking statements relating to the Group’s future business, fi nancial condition, results of operations, performance, and strategy. Forward-looking statements are not statements of historical fact and may contain the terms “ may” , “ will” , “ should” ,
“ expects” , “ plans” , “ seeks” or “ anticipates” , or words of similar meaning. Such statements are based on Management’s current views and assumptions and, by nature, involve known and unknown risks and uncertainties; therefore, undue reliance should not be placed on them. Actual fi nancial condition, results of operations, performance or events may differ materially from those expressed or implied in such forward-looking statements, due to a number of factors including, without limitation, general economic and political conditions and competitive situation; future fi nancial market performance and conditions, including fl uctuations in exchange and interest rates; frequency and severity of insured loss events, and increases in loss expenses; mortality and morbidity levels and trends; persistency levels; changes in laws, regulations and standards; the impact of acquisitions and disposal, including related integration issues, and reorganization measures; and general competitive factors, in each case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of catastrophic events, including weather-related catastrophic events, or terrorist-related incidents. Please refer to Part 4 –
“Consolidated Financial Statements” of this Annual Report. The non-GAAP fi nancial measures used by the Group are defi ned in the Glossary set forth in Appendix VI to this Annual Report.
(3 ) Insurer fi nancial strength rating. Please refer to pages 13 and 14 of this Annual Report for further details.
(4 ) Dow Jones Sustainability Index. Please refer to pages 13 and 14 of this Annual Report for further details.
(11) Including G/A Savings, Unit-Linked, Fun ds and other and Banks.
Governance Committee, who were instrumental in preparing the management team’s succession plan and which led, after a successful transition period, to the appointment of Thomas Buberl as Chief Executive Offi cer of AXA and myself as Chairman of the
In my new position, I shall continue the corporate responsibility actions carried out for many years by the Group. I am also committed to ensuring that AXA preserves the elements which make it strong, such as its entrepreneurial spirit and its cultural and professional diversity. This diversity of profi les, which encourages exchange and sharing, will contribute to the Group’s success. I
am particularly pleased that Thomas Buberl has promoted the four values that make up AXA’s identity to Group employees: “Customer First, Courage, Integrity and One AXA”.
With the new management team around Thomas Buberl, we are convinced that AXA must empower people to live a “better life”.
“parametric” insurance solutions. In addition, as a responsible health insurer and investor, AXA decided last May to divest all its tobacco industry assets.
This means accelerating our work around innovation to meet our customers’ new expectations and to better protect them against the risks they are exposed to. This transformation process is at the heart of our strategy, presented last June by Thomas Buberl and refl ected in the Ambition 2020 strategic plan, which the Board of Directors fully supports and will follow in its implementation.
Finally, I would like to personally extend my warmest thanks to all
Offi cer of AXA on September 1, 2016. I would like to take this opportunity to congratulate Claude Bébéar and Henri de Castries for their exceptional achievements along with all those people that supported them in building the Group in only a few decades. What they have accomplished is unique.
To continue this development, we want to “empower each person to live a better life”. AXA must continue to better protect its clients, to help them manage new risks and to give them confi dence. I am convinced that the insurer’s role must signifi cantly evolve to give our clients a real partner who supports them day-to-day and not just a simple “payer”.
Practically speaking, this means that AXA must be present early on, to help prevent risks materializing or to mitigate their effects.
We are already a strong player in prevention, but we must step up our efforts notably by taking advantage of all the opportunities new technologies can offer.
We must help our customers gain time and make their day-to-day lives easier in every way possible, from the most simple to the most innovative. We must also be more present, assist them over the long term and contribute positively to their daily life, not only when a disaster occurs. The possibilities are endless!
In the current adverse macroeconomic context, with historically low interest rates, and the uncertain geopolitical environment, the Group’s revenues crossed the symbolic €100 billion mark for the fi rst time in 2016.
Property & Casualty, we grew in both Personal and Commercial lines, while improving our underwriting profitability. We also experienced signifi cant positive net infl ows in asset management.
remained well within our target range. The adjusted return on equity stood at 13.5%.
In 2016 we have made a strong start to the Ambition 2020 plan.
I would like to thank our 107 million clients for their continued trust and all of our employees, agents, and partners who are AXA’s heart and image across the world.
AXA SA is the holding company of the AXA Group, a worldwide leader in insurance and asset management. In 2016, AXA remained the 1st global insurance brand for the 8th consecutive year (1) and AXA Group was the world’s largest insurance group (2) with total assets of €893 billion and the world’s 9th largest asset manager (3) with total assets under management of €1,429 billion for the year ended December 31, 2016.
Chairman and Chief Executive Offi cer of AXA, would retire and step down from the Board of Directors on September 1, 2016.
Chairman of the Board of Directors and Chief Executive Offi cer, appointing Denis Duverne as n on-e xecutive Chairman of the
Board of Directors and Thomas Buberl as Chief Executive Offi cer of AXA and member of the Board of Directors.
On May 27, 2016, AXA announced a series of senior appointments to form a new management team to support
Throughout this Annual Report, “Restated” refers to the restatement of the United Kingdom Life & Savings contribution as discontinued operations following the disposal announcements and the reclassifi cation of the International Insurance segment into the Life & Savings and the Property & Casualty segments.
The IFRS indicators presented below are derived from the Consolidated Financial Statements for the year ended December 31, 2016.
(b) Shareholders’ equity per share is calculated based on the actual number of outstanding shares at each period-end presented. Shares held by AXA and its subsidiaries (i.e. treasury shares) are deducted for the calculation of outstanding shares. Undated debt is excluded from Shareholders’ equity for this calculation.
(c) An annual dividend is generally paid each year in respect of the prior year after the Annual Shareholders’ Meeting (customarily held in April or May) and before September of that year. Dividends are presented in this table in the year to which they relate and not in the year in which they are declared and paid. A dividend of €1.16 per share will be proposed at the Shareholders’ Meeting to be held on April 26, 2017. Subject to the Shareholders’ Meeting approval, the dividend will be paid out on May 9, 2017, with an ex-dividend date of May 5, 2017.
The table below sets forth the total assets managed by AXA’s subsidiaries, including assets managed on behalf of third parties: (in Euro million)
The Company pays dividends in Euro. Future dividends will depend on a variety of factors including AXA’s earnings, consolidated financial condition, applicable capital and solvency requirements, prevailing fi nancial market conditions and the general economic environment. Proposals for dividend payments are made at the discretion of the Board of Directors and are submitted for approval to the Shareholders’ Meeting.
(as noted above) which may have an impact on this target from one year to another. In assessing the dividend to be paid in any given year, Management tries to strike the appropriate balance between (i) prudent capital management, (ii) reinvestment of previous results to support business development and (iii) an attractive dividend for shareholders.
A dividend of €1.16 per share for the 2016 fi scal year will be proposed to the Shareholders’ Meeting to be held on April 26, 2017.
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 26, 2017.
(e) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.44 per share for fi scal year 2015.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 26, 2017. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.46 per share for fi scal year 2016.
Dividends not claimed within fi ve years after the payout date become the property of the French Public Treasury.
For further information on AXA’s dividend, see Note 29.4 “Other items: Restriction on dividend payments to shareholders” in Part 5
The fi nancial strength, debt or performance of the Company and certain of its insurance subsidiaries is rated by recognized rating agencies. The ratings set forth below are subject to revision or withdrawal at any time by the assigning rating agency in its sole discretion. Credit ratings are intended to refl ect the ability of AXA
S&P Global Ratings October 27, 2016 AA- Stable A Stable A-1
Moody’s Investors Service September 9, 2016 Aa3 Stable A2 Stable P-1
(a) Note: The Dow Jones Sustainability Index is a reference performance indicator for AXA, its methodology serves as the basis for the Group’s internal sustainability evaluation tool since 2010, and is one of the performance metrics used to calculate long term incentives (Performance Shares) since 2016.
AXA’s asset management subsidiary Alliance Capital, which subsequently changed its name to AllianceBernstein (now AB); (ii) the minority interest in AXA Financial; and (iii) Japanese life insurance company, Nippon Dantaï Life Insurance Company; and
Sale of Hong Kong’s mandatory retirement schemes business to The Principal Financial Group.
Sale of AXA’s (i) Portuguese operations to Ageas; (ii) UK offshore investment bonds business based in the Isle of Man to Life
Company Consolidation Group; (iii) UK (non-platform) investment and pensions businesses and its direct protection businesses to
Phoenix Group Holdings; (iv) UK wrap platform business Elevate to Standard Life plc; (v) Hungarian banking operations to OTP
For more information concerning Group subsidiaries (including the Group’s equity interest and voting rights percentages), please see Note 2 “Scope of consolidation” in Part 5 – “Consolidated
AXA has four operating business segments: Life & Savings, Property & Casualty, Asset Management and Banking.
Following the governance and reporting changes implemented in 2016, the following entities, which were previously part of the
Fees and charges relating to investment contracts with no participating feature 219 236
(c) Includes AXA Life Invest (excluding Germany & Japan), Family Protect, Other UK Life, Architas, AXA Corporate Solutions Life Reinsurance and AXA Global Life.
(d) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales).
offers Investment and Savings products as well as Protection and Health products in a number of other jurisdictions including
The principal competitive factors affecting the Life & Savings business include: ■ size, strength and quality of the distribution channels, in particular the quality of advisors; ■ range of product lines and product quality, feature functionality and innovation; ■ price; ■ quality of service; ■ investment management performance; ■ historical level of bonuses with respect to participating contracts; ■ crediting rates on General Account products; ■ reputation, visibility and recognition of brand; and
For additional information on markets, see Section 2.1 “Market e nvironment – Market conditions at segment level” of this Annual
To attract and retain clients, especially in the segments identifi ed as strategic, AXA has developed solutions designed to meet the needs of the targeted customer groups. In addition, new products are designed to support AXA’s multi-contract offer and thus improve client retention and enhance value for the clients.
The table below presents consolidated gross written premiums (after inter-segment elimination) and gross insurance liabilities by major product: GROSS WRITTEN PREMIUMS & INSURANCE LIABILITIES PER PRODUCT LINE
Gross written premiums by main product lines (a) Years ended December 31, Gross insurance liabilities at December 31, 20162016 2015 restated (c)
Fees and charges relating to investment contracts with no participating features 219 236 14,299
Contracts with fi nancial risk borne by policyholders (Unit-Linked) 15,789 27% 17,383 30% 175,733
■ Exclusive agents are individuals or fi rms commissioned by a single insurance company to sell its products exclusively (or principally) on its behalf. Tied agents are generally exclusive agents.
■ Independent Financial Advisors (IFAs) are individuals or fi rms that provide fi nancial advice to customers and negotiate related policies with insurance companies on behalf of customers.
■ Aligned distributors are independent individuals or firms who have chosen AXA to provide them with a full range of dealership services. They negotiate, on behalf of customers, policies of various insurance companies among a range of products selected by AXA.
believes that the diversifi cation of its distribution channels through the development of new channels improves opportunities for increased penetration and more frequent contacts with AXA’s target customer base.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2016 and 2015, is presented below: Based on gross revenues in 2016
AXA’s Property & Casualty segment offers a broad range of products including m otor, h ousehold, property and general liability insurance for both Personal and Commercial customers, targeting mainly small-to medium-sized companies. In certain countries, Health products are classifi ed as Property & Casualty products (1).
Property & Casualty segment: ■ AXA Corporate Solutions Assurance, which is the AXA
& Casualty, loss prevention, risk management, underwriting and claims handling and to specialty markets (Marine,
Aviation, Space) worldwide; ■ AXA Global P&C, which alongside its role as a global business line, is in charge of analysis, structuring and negotiation of reinsurance treaties on behalf of AXA Group insurance companies to a selection of third party reinsurers. AXA
In the Property & Casualty segment, AXA operates mainly in the largest Western European markets. AXA also offers Personal and
AXA’s Property & Casualty insurance operations offer a broad range of products including m otor, h ousehold, property and general liability insurance for both Personal and Commercial customers (targeting mainly small-to medium-sized companies)
Continental Europe, the same distribution channels may be used by both AXA’s Life & Savings and Property & Casualty operations. For a description of these distribution channels, please refer to this Section 1.3 “Business Overview” – “Life &
(a) Restated: Reclassifi cation of a part of the International Insurance segment into the Property & Casualty segment.
is listed on the New York Stock Exchange under the ticker symbol “AB”.
Asset Management segment consolidated gross revenues for the year ended December 31, 2016 (2015: €2,580 million or 68%).
AXA GAM is responsible for defi ning and implementing the overall strategy for the Asset Management businesses, setting and monitoring operational and financial performance and aligning the activities of the asset managers with the needs of the Group’s other global business lines.
The operations in the Banking segment are conducted primarily in Belgium, France and Germany. For the year ended
AXA Bank products and services in Belgium are mainly distributed by a network of 558 exclusive (1) bank agents. The bank’s products and offers are linked with insurance business and are primarily focused on retail products.
AXA Bank targets retail customers and supports the strategy of AXA Germany by facilitating new life insurance business and offering asset management solutions. The bank had approximately 43,000 clients (1) at the end of 2016. The main activities of AXA Bank are providing loans, deposits and investment funds. These products are mainly sold through the tied agent network of AXA Germany.
(1) Information established by AXA based on data available for the year 2016.
Market conditions at segment level 29 2.2 OPERATING HIGHLIGHTS 33 2.3 ACTIVITY REPORT 38
referendum on European Union (EU) membership in June led to a further decline in interest rates, equities as well as the
‘yield curve control’ measures which resulted into a steepening of the yield curve. In Europe, the European Central Bank (ECB)
decided to extend its asset purchase programme until the end of March 2017 with a reduction of its size from €80 billion to €60 billion per month from April 2017 onwards. In the UK, the Bank of England launched additional quantitative easing measures following the ‘Brexit’ vote, including a 25 basis point decrease in interest rates and an expansion of the asset purchase scheme of UK government bonds of £60 billion.
In the Eurozone, economic growth remained stable at around 1.6% in 2016 (from 1.9% in 2015), mainly driven by both consumption and investment, and supported by renewed confi dence and low interest rates. The labour market improved slightly with an unemployment rate of 9.7% (10.4% in 2015).
The uncertainty concerning the possible protectionist measures to be taken by Donald Trump weighted on some emerging markets currencies, in particular Mexico, where the central bank raised interest rates twice during the year. The Chinese economy continued its slowdown in 2016 (6.6% in 2016 from 6.9% in 2015). In Brazil, parliament voted the impeachment of President Rousseff following a contentious procedure with regards to illegal practices of accounting. The failed coup in
Turkey and the continuing government actions in its aftermath have increased the risk for political instability in the region.
Equity markets in the US, Japan and Europe posted gains in 2016. The MSCI World Index increased by 6.8%.
The Dow Jones Industrial Average index increased by 13.4% and the S&P 500 index increased by 9.5% in 2016. The FTSE 100 index in London increased by 14.4% in 2016. The EUROSTOXX
50 index in the Eurozone increased by 0.7% and the Nikkei index in Tokyo increased by 1.6%.
States, the CDX Main spread Index decreased by 21 bps to 67 bps.
Euro swaptions) increased from 33.8% as of December 31, 2015 to 76.3% as of December 31, 2016.
E nd of Pe riod Exchange ra te Avera g e Exchange rat e
(with the notable exception of Spain), however remaining resilient in Japan and the US. There was a modest increase in new business mainly driven by sales of p rotection products, while savings business was under further pressure due to the continued low interest rate environment and equity market volatility as well as regulatory headwinds. The sustained low interest rate environment and the impact of Solvency II on capital requirements for guarantees led to a further re-design of savings products, namely with a reduction of long term guarantees and more hybrid offers, whilst crediting rates on in-force polices continued to be gradually lowered. At the same time Unit-Linked markets were challenged by equity market volatility in Europe and the anticipation of the DOL review in the US.
France 3 9.2 3 8.9 FFA as of December 31, 2015 and December 31, 2016.
United States Life 17 1.7 17 1.7 LIMRA Life sales as of September 30, 2016 and September 30, 2015.
Germany Life 8 3.8 German association of Insurance companies (GDV) as of December 31, 2015. 2016 information not available.
Germany Health 4 7.6 German association of Insurance companies (GDV) as of December 31, 2015. 2016 information not available.
Belgium 3 8.6 2 12.6 Assuralia (Belgium Professional Union of Insurance companies) based on gross written premium as of September 31, 2016 and December 31, 2015.
Italy 6 5.9 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and m arket s hare as of September 30, 2015. 2016 information not available.
Mexico 6 3.4 AMIS (Asociacion Mexicana de instituciones de Seguros) as of December 31, 2015. 2016 information not available.
Hong Kong 5 6.5 5 8.1 Offi ce of Commissioner statistics as of September 30, 2016 and September 30, 2015 based on gross written premiums for the individual life in-force business.
Thailand 4 11.9 3 11.9 TLAA statistics report as of November 30, 2016 and November 30, 2015 (measured on APE).
Singapore 6 4.2 7 4.0 LIA statistics report as of September 30, 2016 and September 30, 2015 (measured on APE).
China 14 1.5 14 1.4 CIRC statistics as of November 30, 2016 and November 30, 2015 measured on total premium income.
Philippines 2 12.1 Insurance Commission as of December 31, 2015 measured on total premium income. 2016 information not available.
In 2016, the Property & Casualty market experienced tariff increases both in mature and emerging markets, notably driven by market hardening in Motor in Spain, Germany, the
Switzerland, markets achieved a moderate growth driven by softening prices in both Personal and Commercial lines, while
France 2 14.6 2 15.0 FFA as of December 31, 2016 and December 31, 2015.
United Kingdom 2 8.0 UK General Insurance: Competitor Analytics 2016, Verdict Financial. 2016 information not available.
Ireland (Nothern Ireland) – Motor 1 27.0 Driver & Vehicle Licensing Authority registered vehicle numbers. 2016 information not available.
Germany 5 5.7 GDV (German association of Insurance companies) as of December 31, 2015. 2016 information not available.
Switzerland 1 13.0 1 13.0 SIA (Swiss Insurance Association) as of December 31, 2016 and December 31, 2015. Market share based on statutory premiums and market estimations by the SIA.
Colombia 2 7.0 2 7.2 Colombian Superintendence of Finance – 290 Report as of September 30, 2016 and December 31, 2015
Thailand 19 1.5 17 1.6 TGIA as of October 31, 2016 (based on Direct Premium) and December 31, 2015.
In mature markets, premium income continued to grow steadily driven to a certain extent by medical infl ation increasing the need but also the cost of coverage. Specifi c situations can be noticed across AXA’s footprint. In France, a gradual shift from individual coverage to group coverage is happening as a consequence of the introduction of compulsory corporate cover. In the United
Kingdom, the increase in insurance tax has put further challenge on affordability leading to slower market growth and the search for non-insured solutions in the large corporate segment. In
(1) Ranking established by AXA based on information available as of September 30, 2016.
Buberl as Chief Executive Offi cer of the Group, and co-opted him to the Board as Director. These appointments were effective as of September 1, 2016.
On May 27, 2016, AXA announced a series of appointments to form a new management team. The composition of the new
Committee, please see Part 3 – “Corporate Governance” of this Annual Report.
After the successful delivery of “Ambition 2015”, AXA presented on June 21, 2016, its new strategic plan “Ambition 2020”. This 5-year plan is articulated around two strategic priorities: focus and transform.
Free Cash Flows of €28-32 billion, adjusted return on equity between 12% and 14% over the period and €2.1 billion pre-tax cost savings by 2020. AXA also confi rmed its Solvency II ratio target range between 170%-230%.
The above-mentioned range of 3% to 7% underlying earnings per share CAGR refl ects cautious assumptions for interest rates with an annual impact ranging between -5% (corresponding to interest rates remaining at June 21, 2016, levels over the next 5 years) and -1% (refl ecting a modest rise in interest rates over the next 5 years). A series of measures under management control
Co. (Charter Ping An), the #5 non-life insurer in the Philippines (2 )
for a total amount of €40 million (3 ).This acquisition allows AXA
to offer Property & Casualty insurance products alongside its current range of Life & Savings products. AXA also extended its successful bancassurance partnership with GT Capital and Metrobank, the #2 bank in the country (4 ), to include the distribution of Property & Casualty insurance products.
Liberty Ubezpieczenia from Liberty Mutual Insurance Group for a total consideration of PLN 101.3 million (1) (or €23.5 million (2)).
Poland, which is one of the most attractive insurance markets in Central and Eastern Europe.
Seguros de Vida SA (Life & Savings business) as well as AXA
On August 4, 2016, AXA announced that it had entered into an agreement with Vienna Insurance Group to sell its Life & Savings insurance operations in Romania and exit the Romanian market.
Under the terms of the agreement, Vienna Insurance Group would acquire 100% of AXA Life Insurance SA (4) through its
BCR Life and Omniasig entities. Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals.
On October 21, 2016, AXA announced that it had completed the sale of its UK offshore investment bonds business based in the
AXA completed the sale of its UK Life & Savings businesses to Phoenix Group Holdings & Standard Life plc
The fi nal overall consideration for the sale of the UK Life & Savings businesses amounted to GBP 0.6 billion (or €0.7 billion (5)). AXA
(5) EUR 1 = GBP 0,83105 as of June 30, 2016.
AXA completed the sale of its Hungarian banking operations to OTP Bank plc
This transaction is the fi nal step in the repositioning of AXA Bank
AXA completed the sale of its UK P&C commercial broker Bluefi n to Marsh
invested €75 million and owns 6% of the capital of AIG.
The new venture, named “AXA Africa Specialty Risks”, will be dedicated to covering specialty insurance lines in Africa, covering business such as political risks, energy and infrastructures.
On June 28, 2016, Fitch reaffi rmed all AXA entities’ insurer fi nancial strength ratings at ‘AA-’, maintaining a stable outlook.
Group employee share offering (“Sharep lan 2016”), a capital increase reserved to its employees worldwide, which had been launched on August 26, 2016. Over 28,000 employees in 36 countries, representing over 24% of the eligible employees, subscribed to Sharep lan 2016.
Shareholders’ Meeting of April 27, 2016. Following Sharep lan 2016, AXA’s employees held 5.81% of the share capital and 7.28% of the voting rights.
AXA announced the successful placement of €500 million senior notes due 2028
On May 11, 2016, AXA announced the successful placement of €500 million of Reg S senior notes due 2028 to institutional investors to refi nance, in advance, part of its outstanding debt.
The spread over swap is 55 basis points, corresponding to a fi xed coupon of 1.125% per annum. Settlement of the notes took take place on May 13, 2016.
On September 9, 2016, AXA announced the successful placement, notably to Asian investors, of $850 million of Reg S
Order and Memorandum are due by April 17, 2017. While the outcome of the foregoing cannot be anticipated at this time, it is likely to result in implementation of the fi duciary rule being delayed.
Emerging customers – AXA launched a global initiative to scale up its protection of tomorrow’s emerging middle class
MicroEnsure (a UK-based leader in the mobile micro-insurance space serving over 20 million emerging customers through partnerships with mobile network operators, banks and microfi nance institutions in 17 countries across Asia and Africa).
MicroEnsure will become the platform of choice for AXA to develop its emerging customer insurance offer.
Diversity & Inclusion – EDGE Certifi cation and Global Parental Leave Policy
On September 29, 2016, AXA announced that it was awarded the Economic Dividends for Gender Equality (EDGE) certifi cation, for its global headquarters (GIE AXA Paris), its principal business in France (AXA France) and AXA Technology Services with operations in 16 countries. This certifi cation recognizes AXA’s global commitments and actions in achieving and sustaining gender diversity and equality in the workplace.
o/w. gross written premiums 58,686 57,216 o /w. fees and revenues from investment contracts with no participating feature 219 236 -
The comparable basis mainly consisted in the adjustment of: (i) the foreign exchange rate movements (€+0.4 billion or
+0.4 point) mainly due to the appreciation of average Euro exchange rates against GBP and MXN, (ii) the sale of the
In addition, within the Life & Savings segment, both 2015 and 2016 reported figures include the reclassification of some
Protection products with Unit-Linked features which were previously classifi ed under the Unit-Linked Line of Business under the Protection & Health Line of Business. This reclassifi cation amounted to €1,932 million in 2015 and €1,801 million in 2016 gross revenues and to €380 million in 2015 and €378 million in 2016 APE.
Kingdom Life & Savings operations retroactively accounted for as discontinued operations. As a consequence, both 2016 and 2015 profi t & loss contribution from the United Kingdom Life &
Savings operations are fl owing through net income, but do not impact gross revenues, APE, underlying earnings and adjusted earnings.
Life & Savings New Business APE amounted to €6,600 million, up 2% on both reported and comparable basis. The increase in
Asia, India & China, as well as Hong Kong and Japan mainly resulting from the launch of new G/A capital light products, partly offset by Continental Europe. The growth in Protection
& Health products was primarily driven by Switzerland, mainly resulting from the sale of a large contract, as well as Hong
Kong and Spain. Funds & Other increased mainly following the underwriting of a large and profi table contract in France. This was partly offset by the decrease in Unit-Linked sales primarily driven by AXA MPS in a context of higher regulatory constraints and adverse market conditions.
In emerging markets, APE grew by 14% mainly driven by South-
Kong (+12% or €+56 million). In mature markets, APE decreased by 1% mainly driven by AXA MPS (-30% or €-91 million) and
(+3% or €+53 million), France (+2% or €+29 million) and Japan
■ G/A Savings APE (€1,438 million, 22% of total) up 15%
■ Protection & Health APE (€2,949 million, 45% of total) up 2% (or €+62 million) notably from (i) Switzerland (€+26 million)
driven by the sale of a large contract, (ii) Hong Kong
(b) Restated: Reclassifi cation of a part of the International Insurance segment into the Property & Casualty segment.
Motor revenues increased by 4% (€+371 million) as a result of tariff increases in the EMEA-LATAM Region, Direct, the United
Non-Motor revenues increased by 4% (or €+274 million) mainly driven by tariff increases across the board, as well as higher volumes and a positive product mix impact: ■ France (+4%) mainly driven by higher revenues from assumed business and tariff increases in Household and Property; ■ the United Kingdom & Ireland (+5%) mainly following strong growth in Health in Great Britain and internationally combined with higher volumes in Property in Great Britain; ■ the EMEA-LATAM Region (+7%) mainly driven by tariff increases in Health in Mexico and Turkey; ■ Asia (+7%) mainly from Hong Kong as a result of higher new business volumes in Health.
Health gross revenues were stable on a reported basis and up 4% on a comparable basis to €11,959 million with (i) France up 6% (or €+184 million) to €3,399 million driven by the Group business (+8% or €+201 million) mainly from higher volumes in the context of a change in regulation following the Accord
(ii) the United Kingdom & Ireland up 6% (or €+100 million)
to €1,824 million driven by both the Group and Individual businesses in Great Britain and internationally, (iii) Germany up 3% (or €+89 million) to €2,876 million mainly due to tariff increases and higher new business in full benefi t insurance, and
Asset Management Average AUM decreased by 1% (or €-11 billion) on a comparable basis to €1,059 billion driven by AXA Investment Managers (-3% or €-16 billion) due to the withdrawal of “Friends Life” assets, partly offset by AB (+1%
AXA Investment Managers AUM increased by 7% (or €+48 billion) from year-end 2015 to €717 billion as a result of €+56 billion net infl ows, €+9 billion combined market and foreign exchange rate impacts, partly offset by €-18 billion negative scope impact mainly related to the withdrawal of Friends Life assets.
Net banking revenues were down 4% (or €-25 million) mainly from Belgium mainly due to lower interest income on mortgage loans in a context of low interest rates environment.
Amortization of value of purchased life business in force (169) (153)
Net realized capital gains or losses attributable to shareholders 415 433
Profi t or loss on fi nancial assets (under fair value option) & derivatives (118) (231)
(b) For the periods ended December 31, 2016 and December 31, 2015 restated, “the change in fair value of assets backing contracts with fi nancial risk borne by policyholders” impacted the net investment result for respectively €+9,124 million and €+784 million, and benefi ts and claims by the offsetting amounts respectively.
Adjusted earnings represent the net income (Group share) as disclosed in Part 5 – “Consolidated Financial Statements” of this
Annual Report, before the impact of the following items net of policyholder participation, deferred acquisition costs, VBI, taxes and minority interests: ■ integration and restructuring costs related to material newlyacquired companies as well as restructuring and associated costs related to productivity improvement plans; ■ goodwill and other related intangibles; ■ exceptional operations (primarily changes in scope and discontinued operations); ■ profi t or loss on fi nancial assets accounted for under fair value option (excluding assets backing liabilities for which the fi nancial risk is borne by the policyholder), foreign exchange impacts on assets and liabilities, and derivatives related to invested assets.
(a) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of the International Insurance segment into the Life & Savings and the Property & Casualty segments.
Group underlying earnings amounted to €5,688 million, up 3% versus 2015 on a reported basis. On a constant exchange rate basis, underlying earnings increased by 3% driven by the
On a reported basis, Life & Savings underlying earnings were up €132 million (or +4%). Excluding the contribution of
Genworth and the activities in Portugal and on a constant exchange rate basis, Life & Savings underlying earnings increased by €70 million (or +2%) mainly attributable to the United States (€+60 million), Germany (€+59 million),
(€-66 million) and Switzerland (€-38 million) resulting from: ■ lower investment margin (€-109 million or -4%) mainly in (i) France (€-47 million), (ii) Japan (€-35 million) mainly resulting from the non-repeat of exceptional dividends from a Japanese equity fund in 2015, (iii) the United States
(€-34 million) and (iv) Germany (€-31 million) primarily driven by lower reinvestment yields on fi xed income assets;
Acquisition Costs) and (iii) France (€-76 million) mainly due to a lower opening adjustment (€92 million) in Unearned
• other revenues were down €20 million; ■ h igher net technical margin (€+869 million) mainly attributable to (i) the United States (€+886 million) primarily driven by favorable Variable Annuity GMxB results refl ecting the non-repeat of the reserve strengthening for policyholder behavior in 2015, (ii) Japan (€+168 million) mainly due to the above-mentioned reclassifi cation (€147 million) as well as the improved mortality experience, and (iii) Germany (€+87 million)
United States (€-894 million) mainly driven by reactivity to higher Variable Annuity GMxB results and the impact of model and assumption changes in 2015 and 2016, partly offset by (ii) France (€+237 million) refl ecting lower Deferred
and (ii) Thailand (€+18 million); ■ lower tax expenses and minority interests (€+177 million or -17%) mainly driven by lower pre-tax underlying earnings and higher positive tax one-offs in the United States (€164 million in 2016 vs. €104 million in 2015) and in Germany (€29 million).
Property & Casualty underlying earnings amounted to €2,514 million. On a reported basis, Property & Casualty underlying earnings were up €31 million (or +1%). Excluding the contribution of Genworth and the activities in Portugal and on a constant exchange rate basis, Property & Casualty underlying earnings increased by €51 million (or +2%) mainly attributable to the EMEA-LATAM Region (€+220 million), France
Ireland (€-48 million) and Italy (€-36 million), resulting from: ■ lower net technical result (€-129 million or -10%) driven by: • current year loss ratio improved by 0.5 point as a result of (i) an improved claims experience (-0.3 point) mainly driven by AXA Assistance following the cancellation of a loss-making large contract as well as a favorable change in business mix, Switzerland due to an improvement in
Workers’ Compensation and Germany due to lower natural events combined with (ii) lower Nat Cat charges (-0.2 point)
mainly in the United Kingdom & Ireland due to the absence of Nat Cat events in 2016, partly offset by France, mainly due to the June foods (€68 million), and Germany, mainly due to the Marine and Elvira storms (€66 million),
• lower positive prior year reserve developments by 0.3 point to -1.2 points (compared to -1.4 points in 2015) mainly driven by Germany (€-139 million), the
• As a result, the combined ratio increased by 0.5 point to 96.5% while current year combined ratio deteriorated by 0.2 point to 97.7%; ■ stable net investment result primarily driven by (i) the
(€-35 million) refl ecting lower revenues and an unfavorable tax one-off (€-50 million Group share) and (ii) AXA Investment
Banking underlying earnings amounted to €78 million. On a constant exchange rate basis, underlying earnings decreased by €19 million (or -19%) mainly attributable to Belgium (€-16 million)
Holdings and other companies underlying earnings amounted to €-827 million. On a constant exchange rate basis, underlying earnings increased by €79 million (or +9%)
■ a less unfavorable change in the fair value of financial assets and derivatives net of foreign exchange impacts; up €112 million to €-117 million which can be analyzed as follows: • €-197 million from the change in the fair value of hedging derivatives not eligible for hedge accounting under IAS 39,
• €+40 million from the change in the fair value of assets accounted for under fair value option driven by equity and private equity funds; partly offset by: ■ higher negative impact from integration and restructuring costs (€-284 million) to €-454 million mainly reflecting a redundancy plan in Belgium as well as restructuring costs in
(a) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements.
(a) Including an adjustment to refl ect net fi nancial charges related to undated debt (recorded through shareholders’ equity).
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 34 (123)
(b) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of a part of the International Insurance segment into the Life & Savings segment.
(a) EMEA-LATAM Region includes Portugal, Greece, Turkey, Morocco, Mexico, Colombia, Nigeria, Poland, Czech Republic, Slovak Republic and Luxembourg.
(d) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of a part of the International Insurance segment into the Life & Savings segment.
Net income from investments in affi liates and associates 48 30
Net capital gains or losses attributable to shareholders net of income tax 175 159
(a) Before intercompany eliminations. Gross Revenues amounted to €35,604 million net of intercompany eliminations as of December 31, 2016.
(b) Direct business in France, Belgium, Spain, Portugal, Italy, Poland, United Kingdom, South Korea and Japan.
(d) Other corresponds to AXA Liabilities Managers and AXA Global P&C.
(b) Direct business in France, Belgium, Spain, Portugal, Italy, Poland, the United Kingdom, South Korea and Japan.
(c) Asia includes India, Hong Kong, China, Malaysia, Singapore and Thailand.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share for the Asset Management segment for the periods indicated: CONSOLIDATED GROSS REVENUES
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 31 10
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 19 33
France Assurance, AXA Financial, AXA United Kingdom Holdings, AXA Germany Holdings, AXA Belgian Holding and EMEA-LATAM
Net realized capital gains or losses attributable to shareholders (9) 9
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (268) (115)
Net capital gains or losses attributable to shareholders net of income tax 105 114
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 16 68
(b) Restated: Reclassifi cation of AXA Life Europe operations into AXA Life Invest (included in Life & Savings – Other).
increased by €345 million (+5%) to €7,302 million refl ecting a €318 million increase in Group Protection & Health mainly driven by higher volumes in the context of a change in regulation following the Accord National Interprofessionnel
Individual Health due to negative portfolio developments in the context of the ANI; ■ G/A Savings revenues (33% of gross revenues) decreased by €146 million (-3%) to €5,599 million in line with the strategy to focus on products with a signifi cant Unit-Linked component; ■ Unit-Linked revenues (18% of gross revenues) increased by €32 million (+1%) to €3,108 million stemming from a €108 million increase in Group Retirement reflecting a signifi cant growth in additional and recurring premiums on existing contracts, partly offset by a decrease in Individual
Savings (€-76 million) refl ecting unfavorable market conditions at the beginning of the year; ■ Funds & Other revenues (6% of gross revenues) increased by €689 million (+221%) to €1,001 million due to the sale of a large and profi table contract in 2016.
(+0%) to €873 million mainly driven by an increase in Group
Investment margin decreased by €40 million (-3%) to €1,151 million. On a comparable basis, investment margin decreased by €47 million (-4%) mainly due to lower reinvestment yields, partly offset by the decrease in interests credited to policyholders.
Fees & revenues decreased by €39 mill ion (-2%) to €1,771 million. On a comparable basis, fees & revenues decreased by €40 million (-2%) mainly due to a lower opening adjustment (€-92 million) in Unearned Revenues Reserves
(more than offset in Deferred Acquisition Costs), partly offset by a €24 million increase in loadings on premiums mainly driven by higher volumes in Protection & Health as well as a €34 million increase in Unit-Linked management fees due to higher account value.
Revenues Reserves) and lower commissions as well as lower general expenses.
Underlying earnings decreased by €52 million (-6%) to €774 million. On a comparable basis, underlying earnings decreased by €66 million (-8%).
Net capital gains or losses attributable to shareholders net of income tax 8 (5)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (37) (29)
APE increased by €75 million (+5%) to €1,732 million. On a comparable basis, APE increased by €53 million (+3%): ■ Variable Annuity sales (60% of APE) increased by €81 million
(-1%) to €517 million due to lower advisory account sales refl ecting unfavorable market conditions; ■ Life sales (10% of APE) decreased by €22 million (-11%) to €183 million driven by lower sales in Protection.
Fees & revenues increased by €78 mill ion (+3%) to €2,650 million. On a constant exchange rate basis, fees & revenues increased by €44 million (+2%) mainly due to the non-repeat of the acceleration of the amortization of deferred premiums loadings in 2015, partly offset by lower Unit-Linked management fees reflecting lower average legacy GMxB
On a constant exchange rate basis, net technical margin increased by €886 million due to favorable Variable Annuity
GMxB results reflecting the non-repeat of the reserves strengthening for policyholder behavior in 2015.
Amortization of VBI increased by €9 million to €-10 million. On a constant exchange rate basis, amortization of VBI increased by €8 million.
As a result, the underlying cost income ratio increased by 8.8 points to 71.7% mainly driven by higher expenses.
On a constant exchange rate basis, net income increased by €54 million (+7%) due to higher adjusted earnings partly offset by mark-to-market effects.
Net income decreased by €507 million to €-439 million. On a constant exchange rate basis, net income decreased by €560 million mainly refl ecting the loss related to the disposal of the UK Life and Savings operations (€-457 million).
increased by €51 million (+1%) to €3,864 million mainly refl ecting higher new business in Protection with Savings
(€+82 million) and higher in-force revenues from Health products (€+10 million), partly offset by a decrease in the in-force revenues from the portfolios of Increasing Term,
Increasing Term Rider, Whole Life, Endowment (run-off portfolios) and Group Life products (€-41 million); ■ G/A Savings revenues (25% of gross revenues) increased by €514 million (+81%) to €1,285 million mainly due to the continued success of the G/A capital light Single Premium
Whole Life product; ■ Unit-Linked revenues (0% of gross revenues) decreased by €136 million (-93%) to €12 million due to lower sales of Variable Annuity products (€-135 million) in line with the strategic decision to stop sales.
(+192%) to €81 million due to the continued success of the G/A capital light Single Premium Whole Life product
(€+48 million); ■ Unit-Linked sales (0% of APE) decreased by €14 million
(-100%) to €0 million due to Variable Annuity products (€14 million) following the above-mentioned strategic decision to stop sales.
Fees & revenues increased by €8 million (+1%) to €1,327 million.
On a constant exchange rate basis, net technical margin increased by €168 million mainly due to the above-mentioned reclassifi cation (€+147 million) as well as the improved mortality experience and various assumption updates, partly offset by lower surrender margin and deteriorated hedging results on
Expenses increased by €88 million (+11%) to €-870 million. On a constant exchange rate basis, expenses decreased by €3 million
As a result, the underlying cost income ratio decreased by 0.9 point to 56.5%.
Net capital gains or losses attributable to shareholders net of income tax 44 30
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 25 (10)
(a) Before intercompany eliminations. Gross Revenues amounted to €6,662 million net of intercompany eliminations as of December 31, 2016.
(+0%): ■ Life revenues (57% of gross revenues) decreased by €77 million (-2%) to €3,786 million driven by lower single premiums mainly from hybrid products after re-pricing measures and lower revenues from run-off portfolios mainly in Protection with Savings, partly offset by higher regular premiums from hybrid and Pure Protection products; ■ Health revenues (43% of gross revenues) increased by €89 million (+3%) to €2,876 million mainly due to tariff increases and higher new business in full benefi t insurance, notably in the civil servant segment.
Investment margin decreased by €31 million (-17%) to €147 million mainly due to lower re-investment yields.
Fees & revenues increased by €41 million (+15%) to €310 million from Health due to higher volumes and a decrease in policyholder participation.
Net technical margin increased by €87 million (+234%) to €124 million mainly due to an improved margin for Variable
Amortization of VBI decreased by €16 million (-31%) to €-35 million due to the non-repeat of the unfavorable one-off impact of updated lower interest rate assumptions in 2015.
As a result, the underlying cost income ratio increased by 1.8 points to 50.3%.
Income tax expenses decreased by €19 million (-23%) to €-65 million mainly due to positive tax one-offs (€+29 million).
Adjusted earnings increased by €73 million (+37%) to €267 million mainly due to higher underlying earnings as well as higher net realized capital gains from fi xed income assets
(-20%) to €89 million mainly driven by lower sales of the single premium Protect Star product.
On a constant exchange rate basis, expenses increased by €11 million (+3%) mainly due to lower Deferred Acquisition
Costs capitalization and higher pension costs as a result of lower interest rate assumptions.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 5 (39)
Gross revenues decreased by €505 million (-29%) to €1,210 million. On a comparable basis, gross revenues decreased by €505 million (-29%): ■ Protection & Health revenues (67% of gross revenues)
(-40%) to €18 million mainly due to lower new business in the Oxylife Secure hybrid product, in line with the strategy to focus on Protection products and to exit the Individual
(-81%) to €9 million refl ecting lower sales of the Oxylife Invest hybrid product, in line with the strategy to focus on Protection products and to exit the Individual Savings business line.
Net technical margin decreased by €10 million (-30%) to €22 million mainly driven by a less favorable mortality experience.
As a result, the underlying cost income ratio decreased by 4.0 points to 46.7%.
Income tax expenses increased by €5 million (+7%) to €-84 million driven by higher pre-tax underlying earnings.
Net income increased by €23 million (+13%) to €197 million mainly driven by higher adjusted earnings and a favorable change in the fair value of m utual funds and of foreign exchange derivatives not eligible for hedge accounting, partly offset by higher restructuring costs (€-29 million) following the plan announced in September 2016.
Net capital gains or losses attributable to shareholders net of income tax 12 2
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (14) (3)
Gross revenues decreased by €675 million (-17%) to €3,412 million. On a comparable basis, gross revenues decreased by €675 million (-17%): ■ Unit-Linked revenues (16% of gross revenues) decreased by €1,278 million (-70%) to €541 million mainly due to the discontinuation of Protected Unit product sales in a context of higher regulatory constraints as well as adverse market conditions; ■ G/A Savings revenues (78% of gross revenues) increased by €571 million (+27%) to €2,672 million mainly driven by the shift towards G/A capital light products due to the abovementioned context; ■ Protection & Health revenues (6% of gross revenues) increased by €32 million (+20%) to €199 million mainly due to higher sales of Protection products.
APE decreased by €105 million (-26%) to €300 million. On a comparable basis, APE decreased by €106 million (-26%): ■ Unit-Linked sales (33% of APE) decreased by €133 million
Protected Unit product sales in a context of higher regulatory constraints as well as adverse market conditions combined with a stronger competition; ■ G/A Savings sales (54% of APE) increased by €21 million
(+15%) to €163 million mainly driven by the shift towards G/A
(+21%) to €38 million mainly due to higher sales of Protection products.
Investment margin decreased by €3 million (-2%) to €144 million mainly due to lower reinvestment yields on fi xed income assets, partly offset by a higher asset base as well as a lower average minimum guaranteed rate.
Net technical margin decreased by €3 million (-6%) to €49 million.
(more than offset in Unearned Revenues Reserves) in line with lower surrenders.
As a result, the underlying cost income ratio increased by 3.4 points to 60.7%.
Adjusted earnings decreased by €12 million (-12%) to €88 million due to lower underlying earnings, partly offset by higher net realized capital gains.
increased by €129 million (+63%) to €334 million driven by the new distribution agreements with RGA and Caixa Colonya banks; ■ G/A Savings revenues (38% of gross revenues) decreased by €48 million (-14%) to €303 million mainly due to adverse market conditions; ■ Unit-Linked revenues (19% of gross revenues) decreased by €44 million (-23%) to €148 million mainly due to adverse market conditions.
APE increased by €2 million (+2%) to €86 million. On a comparable basis, APE increased by €2 million (+2%): ■ Protection & Health sales (40% of APE) increased by €13 million (+62%) to €34 million mainly driven by the new distribution agreements with RGA and Caixa Colonya banks; LIFE & SAVINGS OPERATIONS – SPAIN
Net capital gains or losses attributable to shareholders net of income tax 8 0
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 11 (3)
■ G/A Savings sales (28% of APE) decreased by €3 million
Fees & revenues increased by €1 million (+1%) to €79 million.
Net technical margin decreased by €1 million (-4%) to €29 million mainly driven by lower surrender margin, partly offset by an improved mortality margin.
Expenses increased by €1 million (+1%) to €-86 million mainly driven by commissions, in line with higher sales on Protection
Amortization of VBI decreased by €1 million (-16%) to €-3 million.
As a result, the underlying cost income ratio increased by 2.7 points to 60.6%.
Income tax expenses decreased by €2 million (-13%) to €-14 million mainly driven by lower pre-tax underlying earnings.
Adjusted earnings increased by €4 million (+7%) to €52 million as lower underlying earnings were more than offset by higher net realized capital gains.
Morocco, Greece, Slovak Republic, Luxembourg and Turkey are fully consolidated; (ii) Portugal was disposed on April 1, 2016; (iii) Nigeria is consolidated under the equity method and contributes only to the underlying earnings, adjusted earnings and net income.
In the comments below, the comparable basis excludes the contribution of Portugal.
APE decreased by €30 million (-20%) to €118 million. On a comparable basis, APE decreased by €8 million (-6%) mainly in
Fees & revenues decreased by €54 million (-17%) to €256 million. On a comparable basis, fees & revenues decreased by €27 million (-9%) mainly driven by lower sales of Protection &
Expenses decreased by €50 million (-13%) to €-332 million. On a comparable basis, expenses decreased by €13 million (-4%)
Income tax expenses increased by €1 million (+7%) to €-13 million. On a comparable basis, income tax expenses increased by €5 million (+62%) as lower pre-tax underlying earnings were more than offset by the non-repeat of positive tax one-offs.
Underlying earnings decreased by €18 million (-27%) to €49 million. On a comparable basis, underlying earnings decreased by €6 million (-10%).
Net income decreased by €18 million (-25%) to €53 million. On a comparable basis, net income decreased by €4 million (-7%)
(a) Before intercompany eliminations. Gross Revenues amounted to €2,737 million net of intercompany eliminations as of December 31, 2016.
increased by €125 million (+6%) to €2,198 million from both new business sales and in-force growth; ■ G/A Savings revenues (10% of gross revenues) increased by €105 million (+63%) to €276 million mainly driven by the successful launch of a G/A capital light product; ■ Unit-Linked revenues (11% of gross revenues) increased by €77 million (+36%) to €290 million mainly due to higher single premiums from insurance contracts.
APE increased by €11 million (+2%) to €536 million. On a comparable basis, APE increased by €56 million (+12%): ■ Protection & Health sales (72% of APE) increased by €22 million (+6%) to €387 million mainly driven by the launch of a new product and the sale of a large Group Health contract; ■ G/A Savings sales (23% of APE) increased by €54 million
Fees & revenues decreased by €40 million (-6%) to €638 million.
Net technical margin increased by €47 million (+47%) to €146 million. On a constant exchange rate basis, net technical margin increased by €45 million (+45%) mainly due to higher surrender margin and better claims experience in Protection &
Amortization of VBI decreased by €6 million (-36%) to €-11 million. On a constant exchange rate basis, amortization of VBI decreased by €6 million (-36%) mainly due to temporary reactivity to market experience.
Income tax expenses increased by €14 million (+83%) to €-30 million. On a constant exchange rate basis, income tax expenses increased by €13 million (+81%) mainly due to higher pre-tax underlying earnings.
On a constant exchange rate basis, adjusted earnings increased by €4 million (+1%) due to higher underlying earnings partly offset by lower net realized capital gains.
Net capital gains or losses attributable to shareholders net of income tax 3 14
(+16%) driven by: ■ Singapore up €75 million driven by Protection & Health
(€+43 million) due to higher sales mainly through the agency channel and Unit-Linked (€+27 million) due to higher renewals combined with higher sales; ■ Indonesia up €6 million driven by Protection & Health
On a constant exchange rate basis, net income decreased by €17 million (-12%) as the increase in adjusted earnings was more than offset by an unfavorable change in the fair value of fi nancial assets in Thailand (€-19 million) and China (€-17 million).
The following tables present the operating results for the other Life & Savings operations of AXA: Consolidated Gross revenues
(b) Other corresponds to AXA Corporate Solutions Life Reinsurance Company and Architas.
Net realized capital gains or losses attributable to shareholders 0 7
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 5 (5)
Adjusted earnings decreased by €10 million to €-18 million. On a constant exchange rate basis, adjusted earnings decreased by €11 million mainly driven by lower underlying earnings.
Underlying earnings and adjusted earnings increased by €19 million to €-1 million following the strategic decision to redeploy insurance portfolios and resources within the Group and to close the entity.
Net income increased by €20 million to €-8 million mainly driven by higher adjusted earnings, partly offset by restructuring costs in line with the above-mentioned strategic decision.
Net income increased by €2 million to €-16 million driven by higher adjusted earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 9 (19)
(a) Before intercompany eliminations. Gross Revenues amounted to €6,742 million net of intercompany eliminations as of December 31, 2016.
In the comments below, the comparable basis excludes the contribution of the Genworth entities, consolidated starting from
Gross revenues increased by €709 million (+12%) to €6,786 million. On a comparable basis, gross revenues decreased by €22 million (0%): ■ Personal lines (52% of gross revenues) were up 2% to €3,520 million, as higher revenues from assumed business as well as tariff increases in most segments were partly offset by lower volumes driven by a strong competition in the context of the Hamon law; ■ Commercial lines (48% of gross revenues) were down 3% to €3,222 million, as tariff increases were offset by lower volumes notably in Construction in a context of selective underwriting and lower average premiums in Property and Liability.
Net technical result increased by €509 million (+30%) to €2,208 million. On a comparable basis, net technical result increased by €77 million (+5%): ■ the current accident year loss ratio increased by 0.8 point to 69.5% mainly driven by a higher Nat Cat charge, related to the June fl oods (€68 million in 2016); ■ the all accident year loss ratio decreased by 1.2 points to 67.2% due to a favorable prior year reserve developments mainly in Construction.
On a comparable basis, enlarged expense ratio decreased by 0.5 point to 29.0% due to lower claims handling expenses.
Net investment result increased by €14 million (+3%) to €517 million. On a comparable basis, net investment result increased by €9 million (+2%) as lower reinvestment yields on the fi xed income portfolio were more than offset by higher dividend distribution from mutual funds .
Underlying earnings increased by €91 million (+18%) to €598 million. On a comparable basis, underlying earnings increased by €70 million (+14%).
(a) Before intercompany eliminations. Gross Revenues amounted to €4,658 million net of intercompany eliminations as of December 31, 2016.
Gross revenues decreased by €162 mill ion (-3%) to €4,716 million. On a comparable basis, gross revenues increased by €356 million (+8%): ■ Commercial lines (54% of gross revenues) were up 7% to €2,555 million: • Non-Motor was up 3% to €1,958 million: (i) Health was up 4% to €1,023 million due to growth in Great Britain and internationally, (ii) Property was up 4% to €574 million due to increased new business and improved retention, (iii) Liability was up 10% to €225 million mainly driven by improved retention rates, partly offset by (iv) Other was down 51%
Britain and internationally, and (ii) Property was up 3% to €463 million refl ecting increased volumes in Great Britain,
• Motor was up 12% to €705 million mainly due to tariff increases in both Great Britain and Ireland.
due to negative prior year reserve developments (+1.6 points), partly offset by the improvement of the current year accident loss ratio.
Expense ratio increased by 0.3 point to 28.6%. On a constant exchange rate basis, expense ratio increased by 0.4 point driven by an increase in the acquisition expense ratio (+0.8 point)
mainly due to increased volumes and the effects of cost savings programs in Great Britain.
Enlarged expense ratio increased by 0.7 point to 31.4%. On a constant exchange rate basis, enlarged expense ratio increased by 0.8 point.
Adjusted earnings decreased by €69 million (-24%) to €214 million. On a constant exchange rate basis, adjusted earnings decreased by €47 million (-17%) mainly refl ecting lower underlying earnings.
(€+38 million), an exceptional income received following the sale of two real estate properties in New York (€+17 million), lower restructuring costs, favorable foreign exchange movements partly offset by lower adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax 7 (13)
As a result, the combined ratio increased by 3.8 points to 97.3%.
Net capital gains or losses attributable to shareholders net of income tax 42 45
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (18) (19)
(a) Before intercompany eliminations. Gross Revenues amounted to €3,088 million net of intercompany eliminations as of December 31, 2016.
Compensation were offset by the loss of a large unprofi table contract in Workers’ Compensation.
Expense ratio improved by 0.4 point to 24.6% mainly driven by a lower administrative expense ratio refl ecting the positive impact of cost savings programs.
As a result, the combined ratio increased by 0.2 point to
Underlying earnings decreased by €30 million (-6%) to €474 million. On a constant exchange rate basis, underlying earnings decreased by €25 million (-5%).
Adjusted earnings decreased by €32 million (-6%) to €516 million. On a constant exchange rate basis, adjusted earnings decreased by €27 million (-5%) mainly driven by lower underlying earnings.
On a constant exchange rate basis, net income decreased by €26 million (-5%) mainly driven by lower adjusted earnings and an unfavorable change in the fair value of interest rate and foreign exchange derivatives not eligible for hedge accounting
(+4%): ■ Personal lines (49% of gross revenues) were up 1% to €1,022 million driven by a new distribution agreement with a wholesale broker and tariff increases, partly offset by negative net new contracts in the traditional broker channel; ■ Commercial lines (48% of gross revenues) were up 1% to €995 million as growth in the SME business was partly offset by lower sales in the Mid Market business; ■ Other lines (3% of gross revenues) were up 117% to €87 million due to the one-off booking in prior year of a reinsurance contract.
Net technical result decreased by €64 million (-8%) to €741 million: ■ the current accident year loss ratio increased by 1.1 points to 68.9% impacted by the May and June fl oods (€27 million)
Net investment result decreased by €24 million (-13%) to €154 million due to lower dividend distribution on mutual funds and lower reinvestment yields on fi xed income assets.
Income tax expenses decreased by €45 million (-37%) to €-76 million mainly driven by lower pre-tax underlying earnings.
Adjusted earnings decreased by €42 million (-15%) to €235 million mainly due to lower underlying earnings, partly offset by higher net realized capital gains on equities.
Net capital gains or losses attributable to shareholders net of income tax (8) 3
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (1) 4
(0%): ■ Personal lines (80% of gross revenues) were down 1% to €1,238 million mainly driven by tariff decreases in Motor in the context of strong competition, partly offset higher volumes from the acquisition of new agencies; ■ Commercial lines (20% of gross revenues) were up 2% to €317 million from higher volumes through bancassurance and brokers channels; ■ Other lines (0% of gross revenues) were down 23% to €14 million.
Net technical result decreased by €63 million (-11%) to €525 million: ■ the current accident year loss ratio increased by 1.0 point to 68.2% mainly refl ecting lower average premiums in Motor as well as higher natural events mainly impacting Commercial lines; ■ the all accident year loss ratio increased by 3.8 points to 65.8% mainly driven by a lower positive prior year reserve developments as well as the increase in current accident year loss ratio.
As a result, the combined ratio increased by 4.1 points to 94.7%.
Net investment result decreased by €17 million (-14%) to €103 million mainly due to the non-repeat of an exceptional distribution from mutual funds .
Adjusted earnings decreased by €47 million (-31%) to €103 million driven by lower pre-tax underlying earnings as well as lower net realized capital gains.
Net income decreased by €64 million (-40%) to €96 million mainly driven by lower adjusted earnings as well as higher restructuring costs.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 3 4
(a) Before intercompany eliminations. Gross Revenues amounted to €1,567 million net of intercompany eliminations as of December 31, 2016.
(+2%): ■ Personal lines (75% of gross revenues) were up 1% to €1,189 million mainly due to higher sales in Motor and Health, partly offset by lower sales in Property from lower renewals following 2015 pruning actions; ■ Commercial lines (24% of gross revenues) were up 6% to €384 million driven by higher volumes mainly in SME Motor business; ■ Other lines (1% of gross revenues) were down 23% to €15 million due to lower assumed business from Group pool.
Net technical result increased by €18 million (+4%) to €456 million: ■ the current accident year loss ratio decreased by 2.6 points to 70.1% driven by lower attritional claims refl ecting improved frequency and severity as well as lower Nat Cat charges, partly offset by higher large losses; ■ the all accident year loss ratio decreased by 2.4 points to 71.1% as a consequence of an improved current accident year loss ratio, partly offset by lower positive prior year reserve developments.
Net investment result decreased by €4 million (-4%) to €90 million mainly driven by lower income from fi xed income assets.
Adjusted earnings increased by €15 million (+20%) to €89 million driven by higher underlying earnings, partly offset by lower net realized capital gains.
Net income from investments in affi liates and associates 56 37
Net capital gains or losses attributable to shareholders net of income tax (14) (3)
(a) Before intercompany eliminations. Gross Revenues amounted to €4,232 million net of intercompany eliminations as of December 31, 2016.
Gross revenues decreased by €279 mill ion (-6%) to €4,239 million. On a comparable basis, gross revenues increased by €339 million (+8%). Personal lines (36% of gross revenues) were up 10% to €1,526 million, Commercial lines
■ T he Gulf Region down €31 million (-4%) mainly due to the loss of large accounts in Commercial Health.
Net technical result increased by €151 million (+19%) to €959 million. On a comparable basis, net technical result increased by €299 million (+40%): ■ the current accident year loss ratio decreased by 0.5 point to 76.2% mainly driven by (i) an improvement in Motor in Turkey following tariff increases and a decrease in frequency, partly offset by (ii) higher large losses in Property in Turkey mainly due to terror events and in Mexico; ■ the all accident year loss ratio decreased by 5.8 points to 77.0% driven by less unfavorable prior year reserves development in Motor in Turkey.
Expense ratio increased by 0.4 point to 25.9%. On a comparable basis, expense ratio increased by 0.7 point driven by (i) a higher acquisition expense ratio (+0.4 point) mainly in Brazil to support growth and in Colombia driven by a new bancassurance agreement with higher commission schemes, and (ii) a higher administrative expense ratio (+0.3 point) mostly driven by higher staff costs in Mexico.
Net investment result increased by €8 million (+3%) to €261 million. On a comparable basis, net investment result increased by €39 million (+16%) mainly driven by (i) Turkey as a result of both higher interest rates and average asset base, and
Adjusted earnings increased by €209 million to €131 million. On a comparable basis, adjusted earnings increased by €220 million mainly driven by higher underlying earnings partly offset by lower net realized capital gains.
Net income increased by €192 million to €131 million. On a comparable basis, net income increased by €199 million mainly driven by higher adjusted earnings.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 7 (5)
Gross revenues increased by €131 mill ion (+5%) to €2,866 million. On a comparable basis, gross revenues increased by €183 million (+7%): ■ Personal Motor (86% of gross revenues) was up €186 million
+62%) refl ecting strong volumes on new business from direct sales and growth through the bancassurance partnership with mBank, (ii) the United Kingdom (€+46 million or +8%) due to tariff increases and improved retention, (iii) France (€+40 million or +10%) due to higher average premiums as well as the positive impact of the Hamon law on new business, (iv) Japan
■ Personal Non-Motor (14% of gross revenues) was up €13 million (+3%) to €395 million driven by (i) France
(€+5 million or +3%) refl ecting an increase in renewals in
Household, (ii) Poland (€+4 million or +11%) due to higher volumes in Household, Liability and Health and (iii) Japan
(€+3 million or +23%) due to the strong performance in pet insurance, partly offset by (iv) the United Kingdom (€-3 million or -3%) due to lower new business volumes in Household.
Spain and Japan, partly offset by the decrease in market average premiums in Italy; ■ the all accident year loss ratio improved by 2.1 points to 75.0% mainly as a result of favorable prior year reserve developments in the United Kingdom.
On a comparable basis, enlarged expense ratio increased by 0.3 point due to a higher expense ratio, partly offset by lower claims handling costs in the United Kingdom.
Income tax expenses decreased by €7 million (-14%) to €-43 million. On a comparable basis, income tax expenses decreased by €4 million (-8%) as higher pre-tax underlying earnings were more than offset by a lower corporate tax rate in France.
Adjusted earnings increased by €34 million (+26%) to €166 million. On a comparable basis, adjusted earnings increased by €48 million (+35%) driven by higher underlying earnings.
Net income from investments in affi liates and associates (18) (16)
(a) Before intercompany eliminations. Gross Revenues amounted to €1,103 million net of intercompany eliminations as of December 31, 2016.
India, Hong Kong, Malaysia, Singapore and Thailand, on a group share basis. Indonesia operations are not consolidated. China and India are consolidated through the equity method.
(€+20 million) mainly as a result of new business growth in
Health, partly offset by (ii) Personal lines (€+13 million) mainly from higher new business in Health.
Net technical result increased by €12 million (+3%) to €389 million. On a constant exchange rate basis, net technical result increased by €17 million (+4%): ■ the current accident year loss ratio increased by 1.3 points to 68.3% due to worsening claims experience in Singapore from Commercial Motor and Commercial Property, in Thailand from Personal Motor and Commercial Health, as well as in
Malaysia from Commercial Property; ■ the all accident year loss ratio improved by 0.5 point to 64.1%
Enlarged expense ratio increased by 1.9 points to 34.0%. On a constant exchange rate basis, enlarged expense ratio increased by 1.9 points.
Bharti from 26% to 49% in December 2015, underlying earnings increased by €8 million (+19%).
On a constant exchange rate basis, net income decreased by €5 million (-11%) driven by lower adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax 25 21
(a) Before intercompany eliminations. Gross Revenues amounted to €2,318 million net of intercompany eliminations as of December 31, 2016.
(0%), notably in Property (+5%) and Liability (+6%), partly offset by Aviation/Space (-17%), Construction (-12%) and Motor
(-10%) due to the actions undertaken to protect the profi tability.
Expense ratio increased by 1.9 points to 17.8%. On a comparable basis, expense ratio increased by 1.2 points mainly driven by higher project investment costs.
As a result, the combined ratio increased by 2.6 points to 101.2%. On a comparable basis, the combined ratio increased by 2.1 points.
On a comparable basis, adjusted earnings decreased by €8 million (-5%) driven by lower underlying earnings, partly offset by higher net realized capital gains.
(b) Restated: Reclassifi cation from the International Insurance segment into the Property & Casualty segment.
Gross revenues increased by €77 mil l ion (+6%) to €1,449 million. On a comparable basis, gross revenues increased by €56 million (+5%) mainly driven by the refi nement in accounting methodology of a large contract combined with new business in Motor and Health.
Adjusted earnings decreased by €12 million (-48%) to €14 million due to lower underlying earnings.
Net income decreased by €23 million (-125%) to €-5 million driven by lower adjusted earnings combined with higher restructuring costs mainly in Germany.
Net realized capital gains or losses attributable to shareholders 4 7
Net income decreased by €4 million (-7%) to €58 million. On a constant exchange rate basis, net income decreased by €2 million (-4%) mainly driven by lower adjusted earnings, partly offset by a favorable change in the fair value of foreign exchange hedging derivatives not eligible for hedge accounting.
Net income decreased by €17 million (-37%) to €28 million due to lower adjusted earnings as well as an unfavorable change in the fair value of mutual funds and foreign exchange impact.
(a) Before intercompany eliminations. Gross Revenues amounted to €2,530 million net of intercompany eliminations as of December 31, 2016.
due to lower market levels and volumes in Europe and Asia and
Net investment result increased by €8 million to €-5 million. On a constant exchange rate basis, net investment result increased by €8 million.
General expenses decreased by €84 million (-4%) to €-2,021 million. On a constant exchange rate basis, general expenses decreased by €110 million (-5%) mainly due to lower compensation expenses resulting from lower revenues and lower promotion and servicing expenses.
Underlying earnings and adjusted earnings decreased by €33 million (-15%) to €191 million. On a constant exchange rate basis, underlying and adjusted earnings decreased by
AXA ownership of AB at December 31, 2016 was 63.7%, compared to 62.8% at December 31, 2015.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 8 11
(a) Before intercompany eliminations. Gross Revenues amounted to €1,180 million net of intercompany eliminations as of December 31, 2016.
December 31, 2016, driven by net infl ows of €56 billion, mostly from third party clients (€+57 billion) mainly from Asian joint ventures (€+39 billion) and other third party clients (€+18 billion), and €9 billion combined market and foreign exchange rate impact, partly offset by €-18 billion negative scope impacts mainly related to the partial withdrawal of Friends Life assets.
Gross revenues decreased by €60 mil l ion (-4%) to €1,545 million. On a comparable basis, net revenues were stable at €1,233 million (€+3 million), mainly driven by higher transaction fees (€+12 million or +37%), partly offset by lower management fees (€-6 million or -1%) as a result of lower average assets (-3%)
On a comparable basis, net investment result decreased by €17 million mainly due to the non-repeat of an exceptional realized capital gain of €16 million in 2015.
The underlying cost income ratio increased by 3.1 points to 72.4%. On a comparable basis, the underlying cost income ratio remained stable.
Underlying earnings and adjusted earnings decreased by €9 million (-4%) to €225 million. On a comparable basis, underlying earnings and adjusted earnings decreased by
(-6%) mainly driven by (i) lower interest income on mortgage loans and lower commercial margins on current and savings accounts in the context of low interest rates environment and
to €139 million mainly driven by higher interest income on retail loans, primarily on mortgages, despite the low interest rates environment, as a consequence of in-force growth following the strong level of new credit production during the last years.
(-96%) to €0 million, as the increase in operating expenses to support business growth was partly offset by an increase in operating net banking revenues combined with an improved cost of risk.
Underlying earnings in creased by €60 million to €-773 million mainly driven by lower fi nancial charges mainly refl ecting the interest rate management program implemented in the context of low interest rates, partly offset by the impact of the external debt issuance program.
Adjusted earnings increased by €53 million to €-780 million mainly driven by higher underlying earnings, partly offset by higher impairment on equities.
(i) higher adjusted earnings and (ii) a realized capital gain related to the disposal of AXA Portugal, were more than offset by (iii) an unfavorable change in the fair value of interest rate and foreign
Underlying earnings increased by €15 million to €14 million mainly due to higher investment result.
Adjusted earnings increased by €14 million to €13 million driven by higher underlying earnings.
Net income decreased by €3 million to €-6 million as higher adjusted earnings were more than offset by costs linked to the restructuring of the participation in Bharti AXA General Insurance.
Underlying earnings and adjusted earnings decreased by €59 million to €-77 million. On a constant exchange rate basis, underlying earnings and adjusted earnings decreased by €58 million mainly driven by lower rental income due to the sale of two real estate properties in New York, partly offset by lower share-based compensation expenses.
Adjusted earnings remained stable at €-2 million on both reported and constant exchange rate basis.
Bluefi n Insurance Group (€-82 million), an unfavorable change in the fair value of foreign exchange hedging derivatives not eligible for hedge accounting and restructuring costs.
Adjusted earnings increased by €57 million to €63 million driven by higher underlying earnings, partly offset by lower net realized capital gains.
Underlying earnings increased by €3 million (+43%) to €-3 million as a result of higher net investment income and lower fi nancing debt expenses.
Adjusted earnings increased by €2 million (+40%) to €-4 million mainly due to higher underlying earnings.
Net income increased by €5 million (+89%) to €-1 million driven by higher adjusted earnings and a favorable change in the fair value of foreign exchange derivatives not eligible for hedge accounting.
Underlying earnings increased by €6 million (+23%) to €-19 million. On a constant exchange rate basis, underlying earnings increased by €6 million.
On a constant exchange rate basis, net income decreased by €2 million driven by lower adjusted earnings.
Liquidity management is a core part of the Group’s fi nancial planning and includes debt profile scheduling and, more generally, the Group’s capital allocation process. Liquidity resources result mainly from Life & Savings, Property & Casualty and Asset Management operations, as well as from capital raising activities and committed bank credit lines.
(mainly subordinated debt) and borrowings (including debt issued by subsidiaries), (iii) the issuance of ordinary shares and
Each of the major operating subsidiaries of the Group is responsible for managing its own liquidity position, in coordination with the Company. The Company, as the holding company of the AXA Group, coordinates funding and liquidity management and, in this role, participates in financing the operations of certain of its subsidiaries. Certain of AXA’s subsidiaries, including AXA France Assurance, AXA Financial,
SA, are also holding companies and consequently, depend on dividends received from their own subsidiaries to meet their obligations. The Group’s operating insurance companies are required to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating subsidiaries must therefore take into account these constraints. Cash positions also fl uctuate as a result of cashsettled margin calls from counterparties related to collateral agreements on derivatives. The Company’s statutory results may be signifi cantly impacted by unrealized gains and losses on derivatives used to hedge, in particular, currency and interest rate risks.
The Company anticipates that cash dividends received from its operating subsidiaries and other fi nancing sources available to the Company will continue to cover its operating expenses
(including interest payments on its outstanding debt and borrowings) and dividend payments during each of the next four years. AXA expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash fl ow remaining after payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses as well as future issues of debt and/or equity instruments.
As a holding company, AXA is not subject to legal restrictions on dividend payments, provided that its accumulated profi ts are suffi cient to cover distributions and that the Group solvency ratio does not decrease below 100% after dividend payment.
Liquidity needs of Life & Savings subsidiaries can be affected by a number of factors including 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 our Variable
The investment strategy of AXA’s Life & Savings subsidiaries is designed to match the investment returns and estimated maturities of their investments with expected cash fl ows on their insurance contracts. Entities regularly monitor the valuation and duration of their investments and the performance of their fi nancial assets. Financial market performance may affect the level of surrenders and withdrawals on life insurance policies, as well as immediate and projected long-term cash needs. Group operating entities seek to adjust their investment portfolios to refl ect such considerations and react in a targeted manner.
The fi nancing needs of asset management subsidiaries arise principally from their activities, which require working capital, in particular to fi nance prepaid commissions on some mutual fund-type products at AB or to constitute seed money for new funds at both AB and AXA Investment Managers.
In 2016, AXA continued to follow a prudent approach to manage its liquidity risk. At year-end 2016, AXA had: ■ a large cash position across all business lines (information on cash fl ows from operations is provided in Note 12 “Cash and cash equivalents” in Part 5 – “Consolidated Financial
Euro Medium Term Note (“EMTN”) program (of which €13.8bn issued) and €1.5bn of French titres négociables à moyen terme (formerly bons à moyen terme négociables);
■ a debt profile characterized by (i) debt that is mostly subordinated, with a long maturity profi le. Over the next two years, €2.8 billion of debt repayments (1) are expected out of total fi nancing debt in an amount of €18.3 billion at year-end 2016; and (ii) improvement in the debt ratios (debt gearing (2): 26.4% at year-end 2016, versus 25.9% at year-end 2015; interest coverage (3): 15.7x at year-end 2016, versus 10.7x at year-end 2015).
AXA has put in place a robust liquidity risk management framework that it reviews on a regular basis through a quarterly monitoring of liquidity and solvency requirements in stressed environments both at local and Group level. For additional information, please refer to Section 4.2 “Internal control and risk management” (4) and Section 4.5 “Liquidity risk” (5) of this
At year-end 2016, Group entities held, in the aggregate, more than €236 billion government and related bonds of which €144 billion issued by eurozone countries, which enables them to address local liquidity needs through highly liquid assets. AXA
In addition, as part of its risk control framework, AXA remains vigilant regarding contractual provisions, such as rating triggers or restrictive covenants in fi nancing and other documentation that may give lenders, security holders or other counterparties, the right to accelerate repayment, demand collateral or seek other similar remedies under circumstances that could have a material adverse effect on the Group’s consolidated fi nancial position. At year-end 2016, AXA had no rating triggers and no fi nancial covenants in its credit facilities.
On a consolidated basis, dated and undated subordinated debt that qualifi es as fi nancing debt (excluding derivative instruments)
(€7,818 million including derivatives) after taking into account all intra-group eliminations and excluding undated subordinated debt (TSS/TSDI, which are included in shareholders’ equity, as described in Note 1.13.2 “Undated subordinated debt” in
As of December 31, 2016, AXA’s only convertible debt outstanding was AXA’s 2017 convertible bonds (6,612,510 convertible bonds were outstanding as of December 31, 2016, representing a carrying value of €1,783 million for its debt component, as described in Note 17 “Financing debt” in Part 5
To neutralize the dilutive impact of the 2017 convertible bonds in 2016, AXA had maintained arrangements with a banking counterparty for call options on the AXA ordinary share with an automatic exercise feature. Under such arrangements, one call option was automatically exercised upon each conversion of a convertible bond. Consequently, each issuance of a new ordinary share resulting from the conversion of a bond was offset by the delivery to AXA of an existing ordinary share under the call option (which ordinary share AXA cancelled in order to avoid any increase in the number of its outstanding shares and/or dilution).
December 31, 2016 (€1,109 million including derivatives), an increase of €476 million from €663 million at the end of 2015
At December 31, 2016, the Group did not owe any fi nancing debt to credit institutions.
Debt instruments (other than fi nancing debt) issued by Group entities are described in Note 18 “Payables” in Part 5 –
Debt (other than fi nancing debt) owed to credit institutions is described in Note 18 “ Payables” in Part 5 – “Consolidated
Dividends received by the Company from its subsidiaries amounted to €3,521 million in 2016 (€2,552 million in 2015), of which €1,302 million were denominated in currencies other than the Euro (€733 million in 2015).
Dividends paid to AXA SA’s shareholders in 2016 in respect of the 2015 fi nancial year were equal to €2,656 million, or €1.10 per share, versus €0.95 per share paid in 2015 in respect of the 2014 fi nancial year (€2,317 million in total). Those dividends were paid in cash.
GSIIs include a number of requirements on GSIIs amongst which the requirement to submit a Systemic Risk Management Plan, a Liquidity Risk Management Plan and a Recovery Plan to their
In the event that the Group or any of its insurance subsidiaries failed to meet minimum regulatory capital requirements, insurance regulators would have broad authority to require or take various regulatory actions. A failure by any of the Group’s insurance subsidiaries to meet its minimum regulatory capital requirements or a deterioration of their solvency position that may negatively impact its competitive position may also cause the Company having to provide signifi cant amounts of new capital to such subsidiary, which could adversely affect the
The AXA Group has defined and implemented capital management standards aimed at ensuring that the Company and its subsidiaries are well positioned from a competitive point of view and maintain an adequate solvency ratio in accordance with local regulation requirements. The Management has developed various contingency plans. These plans may involve use of reinsurance, sales of investment portfolios and/or other assets, measures to reduce capital strain of new business or other measures. There can be no assurance, however, that these plans will be effective to achieve their objectives.
Available fi nancial resources are split into three different tiers, based on the quality of each component as defined under
Solvency II regulations. The classifi cation depends upon the extent to which the own fund item is immediately available to absorb losses including in case of a winding-up (permanent availability) and subordinated to all other obligations including towards policyholders and benefi ciaries. Capital elements of the highest quality are classifi ed in Tier 1. Eligibility limits apply to these components to cover the Solvency Capital Requirement
For compliance with the SCR, the following quantitative limits apply: (a) the eligible amount of Tier 1 items must be at least one half of the SCR; (b) the eligible amount of Tier 3 items must be less than 15% of the SCR; (c) the sum of the eligible amounts of Tier 2 and Tier 3 items must not exceed 50% of the SCR.
(1) This information is not required under IFRS and as such is not part of the C onsolidated F inancial S tatements. T herefore, it is not covered by the report of the S tatutory A uditors on the C onsolidated F inancial S tatements.
The Company has issued dated subordinated notes (“TSR”), undated subordinated notes (“TSDI”) and undated deeply subordinated notes (“TSS”), which include provisions designed to allow the Company to ensure the continuity of its activities in the event its fi nancial position deteriorates.
Certain TSR include clauses which permit or force the Company to defer interest payments. In addition, redemption at maturity is subject to (i) the prior approval by the ACPR, (ii) the absence of any event (a) making the own funds of the Company and/or the Group insuffi cient to cover its regulatory capital requirements or (b) pursuant to which the Company would have to take specifi ed action in relation to payments under the notes due to its fi nancial condition or (c) having an adverse effect on its insurance subsidiaries claim payments ability.
Meeting or receipt by the Company or by certain of its principal insurance subsidiaries of a regulatory demand to restore their solvency position). Payment of deferred interest may become due in certain specifi ed cases (e.g. payment of a dividend, notifi cation of the end of a regulatory demand to restore solvency, liquidation of the Company or redemption of the TSDI, etc.).
will be written down. In such event, interest will become payable on the reduced principal amount only. The principal may be reinstated when the Company returns to fi nancial health, as defi ned under the terms and conditions of the TSS.
The ACPR currently considers that AXA SA is not subject to requirements relating to fi nancial conglomerates.
– Regulation and Supervision – Regulatory capital and solvency requirements” (1) of this Annual Report.
A dividend per share of €1.16 will be proposed to the
ACTIVITY REPORT AND CAPITAL MANAGEMENT 2 2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2016 2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2016
The initial coupon has been set at 5.125% per annum. It will be fi xed until the fi rst call date in January 2027 and fl oating thereafter with a margin including a 100 basis points step-up.
CHANGE IN THE BODILY INJURY DISCOUNT RATE IN THE UNITED KINGDOM
State for Justice in the United Kingdom announced her decision to decrease the discount rate used when calculating future fi nancial losses in the form of a lump sum in bodily injury cases
AXA’s Solvency II position and free cash fl ow generation should remain strong and resilient to external shocks. Under its new strategic plan, the Company will focus actively on four clearly identifi ed growth drivers (effi ciency, business growth, technical margin improvement and M&A), continue to allocate capital effectively and pursue the transformation of its business model.
CORPORATE GOVERNANCE 3 3.1 CORPORATE GOVERNANCE STRUCTURE – A BALANCED AND EFFICIENT
GOVERNANCE 104 3.1.1 Board of Directors 105 3.1.2 The Board Committees 129 3.1.3 Executive Management 133 3.1.4 Other information 134 3.2 EXECUTIVE COMPENSATION AND SHARE OWNERSHIP 136
3.1 CORPORATE GOVERNANCE STRUCTURE – A BALANCED AND EFFICIENT G OVERNANCE
Comité de Gouvernement d’Entreprise), proxy advisors, rating agencies and other stakeholders overtime.
The Board’s Terms of Reference include corporate governance requirements which, in certain instances, go beyond French regulatory requirements notably in relation to the role of the independent directors on the Board Committees.
The Board’s Terms of Reference were updated in 2016, notably to comply with Solvency II regulations, as well as the changes in AXA’s governance described below.
Directors and Chief Executive Officer have been combined with Mr. Henri de Castries acting as both Chairman and Chief
Following Mr. Henri de Castries’s decision to step down from his positions of Chairman and Chief Executive Offi cer announced on March 21, 2016, AXA’s Board of Directors decided to separate the positions of Chairman and Chief Executive
Chairman and Mr. Thomas Buberl as Chief Executive Offi cer (1)
AXA’s new corporate governance framework is summarized in the following table .
(1) With effect from March 21, 2016, Mr. Thomas Buberl was appointed Vice-Deputy Chief Executive Offi cer (Directeur Général Adjoint).
Assists the Chief Executive Officer in the operational management of the Group
Given the international profi le of the Group, the Board and its
On December 31, 2016, the Board of Directors comprised sixteen members: seven women and nine men. Seven directors were citizens of countries other than France.
Thomas Buberl (43) Director and Chief Executive Offi cer 25, avenue Matignon – 75008 Paris – France German nationality
Jean-Pierre Clamadieu (58) Chairman of the Executive Committee and director of Solvay (Belgium) Rue de Ransbeek 310 – 1120 Brussels – Belgium French nationality
Mrs. Irene Dorner (62) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France British nationality
Jean-Martin Folz (69) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France French nationality
Paul Hermelin (64) Chairman & Chief Executive Offi cer of Capgemini 11, rue de Tilsitt – 75017 Paris – France French nationality
Mrs. Angelien Kemna (59) Chief Finance & Risk Offi cer of the APG Group N.V. (The Netherlands) Gustav Mahlerplein 3 – 1082 MS Amsterdam – The Netherlands Dutch nationality
Mrs. Isabelle Kocher (50) Chief Executive Offi cer of ENGIE 1, place Samuel de Champlain – 92930 Paris la Défense cedex – France French nationality
Mrs. Deanna Oppenheimer (58) Founder of CameoWorks (United States) 2200 Alaskan Way #210 – Seattle – WA 98121 – United States American and British nationalities
Mrs. Dominique Reiniche (61) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France French nationality
Meeting). Mrs. Dominique Reiniche and Mr. Paul Hermelin whose terms of offi ce end at the 2017 Shareholders’ Meeting, both informed the Board that they did not wish to run for a new term and have decided to retire from the Board.
Subject to the approval of the Shareholders’ Meeting of April 26, 2017, the Board of Directors will consequently comprise fourteen members including six women (43%) and ten members considered independent (71%) by the Board of Directors in accordance with the criteria of the Afep-Medef Code.
Chairman of the AXA Board of Directors Directorship and number of AXA shares
Mr. Denis Duverne is a graduate of the École des H autes É tudes
December 2009, Mr. Duverne was the Management Board member in charge of Finance, Control and Strategy. From January 2010 until April 2010, Mr. Duverne assumed broader responsibilities as
Company (United States), MONY Life Insurance Company of America (United States) (2)
Chief Executive Offi cer of AXA Directorship and number of AXA shares
Elected on September 1, 2016 – Term expires at the 2018 Shareholders’ Meeting
Mr. Thomas Buberl holds a Master of Economics degree from WHU
From 2000 to 2005, Mr. Thomas Buberl worked at the Boston Consulting
Mr. Thomas Buberl was also appointed Chief Executive Offi cer of the global business line Life & Savings. From March 21, 2016 to August 31, 2016, Mr. Thomas Buberl was Deputy Chief Executive Offi cer (Directeur
Général Adjoint) of AXA. Since September 1, 2016, Mr. Thomas Buberl has been Chief Executive Offi cer and director of AXA.
Director or member of the Management Committee: AXA ASIA (SAS), AXA America Holdings (United States),
Chairman of the Executive Committee and member of the Board of
Number of AXA shares held on December 31, 2016: Born on August 15, 1958
S upérieure des M ines of Paris and ingénieur du Corps des Mines. He began his carrier in various positions within the French Civil Service, in particular for the Ministry of Industry and as technical adviser in the
Offi cer of the Rhodia Group and in 2008, Chairman & Chief Executive
Offi cer. In September 2011, further to the combination between the groups Rhodia and Solvay, Mr. Clamadieu became Vice-Chairman of the
Executive Committee of Solvay and Chairman of the Board of Directors of Rhodia. Since May 2012, Mr. Clamadieu has been Chairman of the
Number of AXA shares held on December 31, 2016: Born on December 5, 1954
Mrs. Irene Dorner graduated with a Master of Arts in Jurisprudence from St. Anne’s College, Oxford (United Kingdom) and qualifi ed as a
Bank in 1992, became Head of Strategic Planning at Midland Bank. She then held various senior front line and support function roles in Midland
Whilst in this role, American Banker elected her the fi rst most powerful woman in the banking sector. She was also Group Managing Director of HSBC Holdings (United Kingdom) and member of the HSBC Group
Poulenc to run the Saint-Fons plant, and was then promoted to Senior
Folz joined PSA Peugeot Citroën in 1995 and became Chairman of the
Management Board in 1997. He left PSA in February 2007. From June 2007 to March 2010, Mr. Jean-Martin Folz was Chairman of the Afep.
Director or member of the Supervisory Board: Alstom, ONF-Participations, Société Générale, Solvay
Elected on December 14, 2016 – Term expires at the 2018 Shareholders’ Meeting
Mr. André François-Poncet graduated from École des H autes É tudes
After a sixteen year career at Morgan Stanley, he joined, in 2000, BC
Number of AXA shares held on December 31, 2016: Born on April 30, 1952
École N ationale d’A dministration (ENA). Mr. Paul Hermelin spent the fi rst fi fteen years of his career in the French government, primarily in the Ministry of Finance. He held a number of positions in the Budget
Gemini and Ernst & Young Consulting (which he initiated), he became
Dr. Angelien Kemna graduated with a Master of Arts in Econometrics and a Ph.D in Finance from Erasmus University Rotterdam (the Netherlands).
She has a visiting scholar at the Sloan School, MIT (United States).
Dr. Angelien Kemna began her career as Associate Professor in Finance at Erasmus University from 1988 to 1991. In 1992, she joined Robeco
Management Director from 1998 to 2001. During this period, she was also part-time Professor of Financial Markets at the University of
Maastricht (the Netherlands) (1993-1999). From 2001 to July 2007, she worked for ING Investment Management BV (the Netherlands), where she initially held the position of Global Chief Investment Offi cer and subsequently Chief Executive Offi cer for the European Region. In the period 2007-2011, Dr. Angelien Kemna was part-time Professor of
Non-Executive and advisory positions, most notably Vice-Chairman of the Supervisory Board of the Dutch regulatory institution (AFM).
September 1, 2014, Mrs. Angelien Kemna has been Chief Finance & Risk
Director or member of the Supervisory Board: Stichting Child and Youth Finance International (The
CORPORATE GOVERNANCE 3 3.1 CORPORATE GOVERNANCE STRUCTURE – A BALANCED AND EFFICIENT GOVERNANCE
Number of AXA shares held on December 31, 2016: Born on December 9, 1966
Ulm), ingénieur du Corps des Mines and holds an aggregation in Physics.
Europe. From October 2011 to November 2014, Mrs. Isabelle Kocher was Executive Vice-President, Chief Financial Offi cer of GDF SUEZ. From
November 2014 to April 2016, Mrs. Isabelle Kocher was director, Deputy
Chief Executive Offi cer and Chief Operating Offi cer of GDF SUEZ, which became ENGIE on April 2015. Since May 3, 2016, Mrs. Isabelle Kocher has been Chief Executive Offi cer of ENGIE.
Number of AXA shares held on December 31, 2016: Born on May 16, 1958
Law Corporation, a major law fi rm in Singapore. She is a member of the Executive Committee of the Singapore Academy of Law, where she also chairs the group on Legal Education and Studies, a member of the Advisory Board to the Law School at Singapore Management
Director or member of the Management Committee: AXA*, AXA ASIA (SAS)
Mr. Stefan Lippe is a graduate in mathematics and business administration from the University of Mannheim (Germany). He obtained his doctorate in 1982 being awarded the Kurt Hamann foundation prize for his thesis.
In October 1983, he joined Bavarian Re (a former Swiss Re subsidiary).
From 1985, he was involved in the casualty department’s operations in the German-speaking area. In 1986, he became Head of the nonproportional Underwriting Department. He was appointed member of the Management Board in 1988 when he assumed responsibility for the company’s casualty line of business in the German-speaking area.
Reinsurance CEO of the year 2011 by the leading industry publication,
Mr. Stefan Lippe co-founded Acqupart Holding AG of which he serves as
Vice-Chairman of the Board of Directors, and Acqufi n AG. In May 2013, he co-founded Paperless Inc. renamed as Yes Europe AG in 2016 and serves currently as Chairman of the Board of Directors of this company. In
Directors of CelsiusPro AG. Since May 2014, Mr. Stefan Lippe has been a member of the Supervisory Board of Commerzbank AG.
Degree), University Paris I (Law Master), and of the Institut d’études politiques of Paris. Mr. François Martineau has been an attorney since 1976. In 1981, he was Secrétaire de la Conférence. In 1985, he was a lecturer at the University Paris I (Civil Procedure). In 1995, he was a Professor at the Paris Bar School (EFB) and since 1998, he is
(Peru). In 1996, he became an Expert at the Council of Europe and fulfi lled various missions in Eastern Europe countries regarding the reform of the Code of the Judicial Organization, the reform of the magistrates’
Elected on April 30, 2013 – Term expires at the 2017
Mr. Ramon de Oliveira is a graduate of the University of Paris and of the Institut d’É tudes P olitiques (Paris). Starting in 1977, Mr. de Oliveira spent 24 years at JP Morgan & Co. From 1996 to 2001, Mr. de Oliveira was Chairman & Chief Executive Officer of JP Morgan Investment
JP Morgan & Co. asked to join the Executive Committee of the new fi rm with operating responsibilities. Between 2002 and 2006, Mr. de Oliveira was an Adjunct Professor of Finance at both Columbia University and
New York University. Mr. Ramon de Oliveira is the Managing Director of the consulting fi rm Investment Audit Practice, LLC, based in New York.
Director or member of the Supervisory Board: American Century Companies Inc. (United States),
(United States) with degrees in political science and urban affairs. She completed the Advanced Executive Programme at the J.L. Kellogg School of Management at Northwestern University. Mrs. Deanna Oppenheimer started her career in Banking at Washington Mutual (United States)
in 1985, retiring in March 2005 as President, Consumer Banking. In
Banking Chief Operating Offi cer. In December 2005 she became Chief
Mrs. Oppenheimer added the role of Chief Executive of Europe Retail and Business Banking. At the end of 2011, she left Barclays. In 2012,
Mrs. Doina Palici-Chehab is a graduate of the University of Bucarest
(Versicherungsbetriebswirt (DVA)). From 1980 to 1983, she was a teacher for foreign languages in Romania. From 1983 to 1990, she was subject
Germany. In 2000, she became head of Group Reinsurance of AXA Global
P&C in Paris (France). From 2010 to March 2013, she was Chief Executive
Executive Offi cer of AXA Life Insurance Singapore. Further to the merger of the two entities in Singapore in January 1, 2017, Mrs. Doina Palici-
Chehab became Chief Executive Offi cer of the new entity AXA Insurance
Representative of the General Insurance Association of Singapore to the Board of Governors: Singapore
Mrs. Dominique Reiniche is a graduate of the ESSEC Business School.
Advertising Manager. In 1986, she joined Kraft Jacobs Suchard and was appointed Marketing & Strategy Manager. In 1992, she joined Coca-
Each year, the Board of Directors assesses the independence of each of its members on the basis of the independence criteria set out in the Afep-Medef Code.
The following table summarizes the position of each director of the Company with regard to the criteria of the Afep-Medef Code as of December 31, 2016.
Criterion (the criterion is considered to be met when it is identifi ed by ✓)
Poncet 1 Not have been an employee or executive offi cer of the Company, or an employee, executive offi cer or director of a consolidated subsidiary during the last fi ve years 2 Not have cross-directorships ✓ ✓ ✓ ✓ ✓ ✓
5 Not have been an auditor of the Company within the previous fi ve years
✓ ** ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
On February 22, 2017, the Board of Directors determined that, on December 31, 2016, twelve of the sixteen Board members were independent after assessing the criteria of the Afep-Medef
Senior Independent Director, the Chief Executive Officer, any Deputy Chief Executive Offi cer, any “dirigeants effectifs”
Meeting and/or co-opts directors to the Board; ■ reviews and sets (arrête) the Company’s and the Group’s halfyear and annual fi nancial statements; ■ approves the report of the Board of Directors’ Chairman on the composition of the Board and the implementation of the principle of fair representation of women and men within the
Board of Directors’ work as well as the internal control and r isk m anagement procedures set up by the Company as required under French law; ■ fulfills all the Board obligations set out in the Solvency II
regulation ; ■ adopts and oversees the general principles of the Group’s compensation policy; ■ reviews the strategies and the policies on the taking, management and monitoring of risks as well as the conclusions of the internal assessment of risks and solvency
In accordance with French law, the Chairman’s role is to organize and oversee the work of the Board of Directors. In this context, he sets the agenda of the Board meetings, holds regular discussions with the Chief Executive Offi cer and the directors, requests any document or information necessary to help the
Board of Directors for the preparation of its meetings, verifi es the quality of the information provided and more generally, ensures that Board members are in a position to fulfi ll their role.
Prior to each meeting, Board members receive documentation concerning matters to be reviewed, generally eight days in advance of Board meetings.
■ upon invitation of the Chief Executive Offi cer, take part in internal meetings with Group executives and teams to provide his opinion on strategic issues or projects; ■ assist and advise the Chief Executive Offi cer.
Executive Offi cer, his role is contributory in nature and does not confer any executive power. Under French law, it is the Chief
Executive Offi cer who is solely responsible for the Company’s operational leadership and management.
Board of Directors in the event of temporary incapacity or death, chairs meetings of the Board in the absence of the Chairman, acts as spokesperson for the independent directors and informs the Chairman of any potential confl ict of interest identifi ed. The
Director, attended all eleven meetings of the Board of Directors as well as all Compensation & Governance Committee meetings, with whom he worked closely. The time spent by the Senior
Independent Director on his activities for the AXA Group in 2016 represented 51 full days work.
In 2016, the Board focused, in particular, on the following matters: succession planning for the Chairman & Chief Executive
Board Committees’ reports, review of proposed significant acquisitions and disposals, approval of non-audit services, review of the ORSA report, AXA’s Internal Model, and other written policies required under Solvency II, the Group’s Recovery
(1) The role of the Chairman is set out in the Board’s Terms of Reference which are available on AXA’s website.
The Board of Directors held its annual two-day off-site strategy session with presentations by members of the Group’s management on a variety of key strategic topics in March 2016 prior to the announcement of the Group’s 2020 Strategic Plan on June 21, 2016.
Chairman of the Board of Directors and provided to new and existing members of the Board of Directors to familiarize them with the Group’s principal activities and challenges. These sessions mainly focused on the Group’s fi nancial structure, strategy, governance, main activities, r isk m anagement, corporate responsibility and responsible investment as well as the evolution of the insurance sector, including regulatory developments.
In 2013, the Board of Directors decided that the annual assessment should be carried out by an external consultant on a regular basis. Consequently, in 2016, the Board selfassessment was carried out by a consultant who collected each of the individual director’s input, views and suggestions on the Board work, and its performance. Each director’s view on other members’ participation in, and contribution to, the Board work was also collected. The reports on each director’s personal contribution to the Board (except for the Chairman) were shared with the Chairman who gave individual feedback to each Board member during a dedicated one-on-one meeting. The report on the Chairman’s own personal contribution was shared with the
The Compensation & Governance Committee reviewed in detail the conclusions of the Board evaluation, the principal areas identifi ed for improvement and made recommendations to the
At this meeting, the members of the Board also acknowledged that recommendations from prior reviews had been implemented or were in the process of being implemented. They further noted that the succession planning for Mr. Henri de Castries, the change in the governance structure and the transition process had all been conducted smoothly, effi ciently and professionally and acknowledged the quality of the analysis and discussions which took place, as well as the transparency vis-à-vis the
(2) organizing a Board trip to a strategic business location and
Committees: the Audit Committee, the Finance Committee and the Compensation & Governance Committee.
Each Committee issues opinions, proposals or recommendations to the Board of Directors on matters within the scope of its responsibilities with each Committee Chairman reporting to the
Each Committee is composed of members with expertise in the relevant areas which is reviewed regularly by the Board of
The role and responsibilities of each Committee are set out more fully in the Board’s Terms of Reference and in the Audit
In accordance with the Afep-Medef recommendations, the Audit Committee members are competent in the areas of fi nance and/or accounting.
The Group Chief Financial Offi cer and the Group Chief Risk Offi cer attend each Finance Committee meeting.
The Committee focused, in particular, on the following issues: ■ fi nancial r isk m anagement; ■ liquidity and fi nancing; ■ capital and solvency; ■ risk appetite and asset allocation; ■ interest rates exposure; ■ Systemic Risk Management Plan; ■ Liquidity Risk Management Plan; ■ Recovery Plan; ■ Review of the fi nancial authorizations (guarantees); and
Composition on December 31, 2016: Jean-Martin Folz, Chairman Jean-Pierre Clamadieu Deanna Oppenheimer Dominique Reiniche
The principal missions of the Committee are: ■ to issue proposals to the Board of Directors on: – the recommendations to the Shareholders’ Meeting for the appointment and the reappointment of the members of the Board of Directors,
– the composition of the Board Committees, – the appointment of the Chairman, the Senior
Independent Director, the members of the Executive Management and the persons who effectively run the Company (dirigeants effectifs) as defi ned under the Solvency II regulation ; T he Committee also prepares, with the Chairman of the Board of Directors and the Chief Executive Offi cer, the succession of the Executive Management, the members of the Committee are also kept informed of the appointments of the main executives of the Group, and in particular of the members of the Management Committee; ■ to issue proposals to the Board of Directors on: – the compensation of the Chairman of the Board of Directors, the Chief Executive Offi cer and the Deputy Chief Executive Offi cers and the preparation of their annual assessment,
The Compensation & Governance Committee met six times in 2016. The average attendance rate was 91.7%.
Governance issues: ■ the review of the governance structure of the Company and of the succession plan of the Executive Management; ■ the selection process of the future directors; ■ the composition of the Board and its Committees; ■ the independence of the members of the Board; ■ the self-assessment of the Board of Directors; ■ the share ownership requirements for the Chairman, the members of the Board of Directors, the Chief Executive Offi cer as well as for the members of the Management Committee and Partners group; ■ the review of the Board’s Terms of Reference; ■ the Company’s Corporate Responsibility; and
Under French law, the Chief Executive Offi cer is vested with the broadest powers to act in all circumstances on behalf of the
Company and to represent the Company in its relationships with third parties. He exercises these powers within the scope of the Company’s corporate purpose and subject to the powers expressly assigned by law to the Shareholders’ Meetings and to the Board of Directors. In addition, the Board’s Terms of
Management Committee plus approximately thirty other senior executives from across the Group. Its principal role is to assist the Chief Executive Offi cer and the Management Committee to develop and implement key strategic initiatives in the context of Ambition 2020 and to contribute to a permanent strategic dialogue throughout the Group. It has no formal decision making authority and is advisory in nature.
SERVICE CONTRACTS BETWEEN THE AXA GROUP AND MEMBERS OF THE BOARD OF DIRECTORS
Board of Directors and/or the Senior Independent Director of any situation concerning her/him which may create a confl ict of interest with the Company or the companies of the AXA Group, and to abstain from voting on any related resolution.
Certain members of the Board of Directors, however, are corporate offi cers and/or executives of companies that may have agreements or enter into transactions from time to time with the
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 r egion: Salaried employees (full time equivalent) At December 31, 2014 r estated (m) At December 31, 2016
(c) In 2016, the decrease by 138 in Germany refl ected effi ciency programs and early retirements.
(e) In 2016, the increase by 621 in Direct was mainly driven by the acquisition of operations in Poland and business growth across countries, partly offset by the sale of the Portuguese operations.
(h) In 2016, the increase by 232 in Asia was mainly driven by business growth across Singapore, Hong Kong, Thailand and Malaysia.
(j) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the banking activities. Consequently, the split is not available.
(k) In 2016, the decrease by 282 refl ects the sale of the Hungarian banking operations completed in 2016.
(m) Restated: Restatement of the UK Life & Savings contribution as discontinued operations following the disposal announcements and reclassifi cation of the International Insurance segment into the Life & Savings and the Property & Casualty segments.
AXA’s global executive compensation policy is designed to align the interests of the Company’s executives with those of its shareholders while establishing a clear and straightforward link between performance and compensation. In this context, its main objective is to encourage the achievement of ambitious objectives and the creation of long-term value by setting challenging performance criteria.
This is designed to align executive compensation more directly with the operational strategy of the Group and the interests of the shareholders while encouraging performance: ■ both on an individual and collective level; and
(1) The information in this section is presented in accordance with recommendation No. 2009-16 of the AMF, as modifi ed on April 13, 2015, and with the recommendations of the Afep-Medef Code.
COMPENSATION OF THE CORPORATE OFFICERS AND MANAGEMENT COMMITTEE MEMBERS ON DECEMBER 31, 2016
Company’s compensation policy and principles, (2) the determination of the corporate officers’ compensation and performance assessment, and (3) the allotment of AXA stock options or performance shares to the Chief Executive Offi cer and the other members of the Management Committee of the Group.
The Committee meets frequently with the Group executives and the internal departments of the Company including Group Human
Resources and Group Legal. The Committee is empowered to undertake or commission specifi c reviews and to use external consulting expertise to the extent deemed appropriate. Thus, during the last few years, the Committee worked several times with a compensation consulting fi rm in order to benefi t from an external expertise and an independent overview in order to compare AXA’s variable compensation practices with general market practices.
Solvency II regulations came into force on January 1, 2016 and include a number of specifi c remuneration and governance requirements applicable to European insurers and reinsurers.
establishing a clear link between performance and remuneration over the short, medium and long term, (ii) ensuring that the
The AXA Group compensation policy is designed to: ■ attract, develop and motivate critical skills and best talents; ■ drive superior performance; ■ align compensation levels with business performance; ■ ensure that employees are not incentivized to take inappropriate and/or excessive risks and that they operate within AXA’s overall risk framework; and
In this context, the overall compensation structure is based on the following components, which are designed to provide balance and avoid excessive risk taking for short term fi nancial gain: ■ a fi xed component which comprises guaranteed elements, such as base salary and any other fi xed allowances. It takes into account the position, responsibilities, experience, market practices, technical skills and leadership skills, and also sustained individual performance and criticality or scarcity of skills; ■ a variable component which comprises an upfront cash element (Short Term Incentive) and a deferred element which is awarded through equity based instruments or equivalent such as stock options and/or performance shares (Long
Group (insurance and banks) which are principally based in the main European markets (Belgium, France, Germany, Italy, the Netherlands, the United Kingdom, Spain and Switzerland); ■ a third and fourth market composed exclusively of international fi nancial companies comparable in size and scope to the AXA
This total target compensation is composed of a fi xed annual compensation and a target annual variable compensation.
The fi xed annual compensation of the Chief Executive Offi cer amounts to €1,450,000 and the variable component of his compensation is set at €1,450,000 i.e. 100% of his fi xed annual compensation.
The total amount of compensation of the Chief Executive Offi cer and the balance between its different components (fi xed and variable) are mainly based on a study by an external advisory firm (Willis Towers Watson) on compensation practices for similar positions within a sample of CAC 40 fi nancial services companies as well as the principal European insurance companies, and follows the recommendations of the G20, the
Buberl with respect to 2016 were calculated prorata temporis as he was appointed Chief Executive Offi cer as of September 1, 2016.
Total target compensation of the Chairman & Chief Executive Offi cer until August 31, 2016
Compensation & Governance Committee, maintained unchanged in 2016 the total cash compensation target of the
Executive Offi cer was €950,000 and the variable component of his compensation was €2,350,000 in 2016 i.e. 247% of his fi xed annual compensation.
Mr. Henri de Castries with respect to 2016 were calculated prorata temporis as he retired from offi ce as of August 31, 2016.
Mr. Denis Duverne as Deputy Chief Executive Officer with respect to 2016 were calculated prorata temporis as he resigned from offi ce as of August 31, 2016.
Governance Committee appointed Mr. Denis Duverne as non-executive Chairman of the Board of Directors as of
Compensation & Governance Committee and pursuant to the recommendations of the Afep-Medef Code considered that the compensation structure best suited for the Chairman of the
Board of Directors was to limit his compensation to a sole fi xed annual compensation.
In order to determine Mr. Denis Duverne’s fi xed compensation, the Board of Directions consulted an external advisory fi rm (Willis
Towers Watson) regarding compensation practices for similar positions within a sample of CAC 40 fi nancial services companies as well as the principal European insurance companies.
Furthermore, Mr. Denis Duverne, who claimed his rights to pension as of September 1, 2016, has decided to waive payment, for his entire term of offi ce as Chairman of the Board of Directors, of the annuities which he would have received as from September 1, 2016 under the complementary pension scheme for Group executive offi cers in France, amounting to circa €750,000 per year. Mr. Denis Duverne has decided not to receive payment of these annuities until termination of his term of offi ce as Chairman of the Board without any retroactive payment.
No variable compensation shall be paid to him, nor will he receive directors’ fees, be granted any stock options or performance shares or any other long-term incentive during his term of offi ce .
The compensation due to Mr. Denis Duverne as Chairman of the Board of Directors with respect to 2016 was calculated prorata temporis as he was appointed Chairman of the Board of Directors as of September 1, 2016.
Return on Equity – ROE) and customer scope index. The relative weight of these three indicators is, respectively, 65%,
The individual performance of the executive officers is assessed based on various indicators and qualitative and quantitative objectives set by the Board of Directors through a written target letter drawn up at the beginning of each calendar year, before the performance measurement period.
It includes detailed objectives about the Group’s progress in the elaboration of its strategic plan as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives and/
Each of these two metrics is evaluated separately so that overall variable payout refl ects performance against two distinct components assessed independently .
– R eturn on equity (15%) (101%) – C ustomer scope index (20%) (100%)
In order to assess Mr. Thomas Buberl’s individual performance in 2016, the Board of Directors assessed the achievement of the following objectives set in his target letter : (i) the implementation of the Group’s new governance model (30%), (ii) the preparation and presentation of the Group’s new strategic plan “Ambition 2020”, articulated around the two strategic priorities: focus and transform (30%), (iii) the further development of the Group’s mid-term strategic orientations (20%), and (iv) the further strengthening of the Group’s internal controls and second line of defence (e.g. the implementation of the Group Audit Risk and
MR. HENRI DE CASTRIES AS CHAIRMAN & CHIEF EXECUTIVE OFFICER UNTIL AUGUST 31, 2016
of his variable target compensation, i.e. 371% of his fi xed annual compensation.
MR. DENIS DUVERNE AS DEPUTY CHIEF EXECUTIVE OFFICER UNTIL AUGUST 31, 2016
For the other members of the Management Committee, their variable compensation is also determined on the basis of an individual predefi ned target which was based as follows.
Regions/Global Business Lines performance are defi ned at the beginning of the year with: ■ a predefi ned target, aligned with the strategic plan (budget), the attainment of which will result in 100% achievement; ■ a fl oor (which may vary between 50% and 90% of achievement against the target depending on the indicator), which defi nes the threshold below which no variable compensation for that component will be paid; ■ a cap (which may vary between 110% and 130% of achievement against the target depending on the indicator), which defines the threshold above which the variable compensation for that component is capped.
“what”) and (ii) qualitative factors, including leadership skills demonstrated by the members of the Management Committee measured against AXA’s Leadership Framework (the “how”).
(a) This amount includes the part of the variable compensation with respect to 2014, 2015 and 2016 which has been deferred in accordance with the mechanism described on page 142 . The total amount paid will depend on performance conditions and may then vary.
(c) Please note that Mr. Thomas Buberl received a variable compensation of €592,850 in respect of his employee position within the AXA Group for the period from January 1 to August 31, 2016.
Messrs. Buberl, de Castries and Duverne, was computed according to the following elements : (i) an underlying earnings per share which is below the target and (ii) a return on equity
Since 2013, the Board of Directors has implemented for the executive offi cers a deferral mechanism with respect to 30% of their variable compensation over two years.
Under this mechanism, the executive offi cers’ deferred amount of variable compensation for the 2016 fi scal year will be paid out in two tranches, in 2018 and 2019. The amount of the payout will vary depending on the AXA share price evolution over the deferral period and will be subject to a fl oor at 80% of the deferred amount and a cap at 120% of the deferred amount; provided, however that no variable compensation would be paid in the event (i ) that the Group’s underlying earnings are negative for the year ending immediately prior to the year of scheduled payout, or (ii ) of resignation or dismissal, for gross or willful misconduct prior to the payout date (clawback provision).
At the end of February 2017, (i) the second tranche of Messrs.
Henri de Castries’ and Denis Duverne’s deferred variable compensation for the 2014 fi scal year i.e. an amount of €445,419 for Mr. Henri de Castries and €276,869 for Mr. Denis Duverne and (ii) the fi rst tranche of their deferred variable compensation for the 2015 fi scal year i.e. an amount of €363,251 for Mr. Henri de Castries and €214,346 for Mr. Denis Duverne, were paid.
These amounts refl ect the evolution of the AXA share price and were set at 117% of half of the deferred variable compensation granted in respect of the 2014 fi scal year and at 90% in respect of the 2015 fi scal year.
Each year, LTIs (stock options and performance shares) are granted to Group executives.
These LTIs represent an important part of their global variable compensation in order to associate the Group executives to the creation of long term value. In this context, the number of LTIs granted is set so that the executives are between the median and the 3rd quartile of market references considering the total amount of the variable part (comprised of one part in cash and one part in LTIs). The Compensation & Governance
Directors since September 1, 2016 shall not receive any stock options, performance shares or other long-term incentive during his term of offi ce.
Mr. Thomas Buberl in 2016 were granted prior to his appointment as Chief Executive Offi cer and in respect of his previous employee duties within the AXA Group.
Chairman of the Board of Directors as of September 1, 2016
(a) This amount includes the part of the variable compensation with respect to 2015 or 2016 as the case may be, which has been deferred in accordance with the mechanism described on page 142 . The total amount paid will depend on performance conditions and may then vary.
On each date of grant, the fair value of stock options and performance shares/units is determined in accordance with
Report . This value does not represent a current market value, a current valuation of these options and performance shares, nor the actual amounts that may be paid to benefi ciaries if and when the options are exercised or the performance shares are acquired.
On June 6, 2016, the fair value of one option was €1.67 for options with performance conditions, and the fair value of one performance share was €14.02.
(a) This amount does not include the part of variable compensation with respect to 2015 which has been deferred in accordance with the mechanism described on page 142 .
Directors’ fees indicated in the above table were paid for Board memberships held in AXA Group companies and are deducted up to 70% from the variable compensation of the same year in accordance with the Group policy applicable to all employees who benefi t from directors’ fees. This principle of deduction of up to 70% of the paid directors’ fees is meant to compensate the absence of contribution (e.g. life insurance disability insurance, retirement) on behalf of the benefi ciary, as a consequence of the decrease of the gross compensation.
During the 2016 fi scal year , the members of the Board of Directors, except for the corporate offi cers, only received directors’ fees
(jetons de présence) as compensation from the Company. The amount of directors’ fees paid to each AXA Board member is indicated in the table below.
Denis Duverne – Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as from September 1, 2016 0 0
Henri de Castries – Chairman & Chief Executive Offi cer until August 31, 2016 0 0
The total annual amount of directors’ fees to be allocated to the members of the Board of Directors was set by the Shareholders’
Shareholders’ Meeting, in accordance with applicable laws, and apportioned by the Board of Directors to its members in accordance with its Terms of Reference (in accordance with the recommendations of Afep-Medef Code, a minority part of the fees is distributed evenly among the members of the Board of
Directors as a fi xed fee): ■ a fi xed amount determined by the Board of Directors shall be paid annually to the Senior Independent Director (set to €80,000 as of January 1, 2017); ■ 65% of the remaining amount shall be allocated to the
Board as follows: 40% shall be divided equally among Board members and paid as a fi xed fee and 60% shall be paid according to Board attendance;
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2016 an annual gross cash compensation of
Offi cer of AXA Insurance Pte Ltd. This compensation consists of SGD 440,755 of fi xed compensation and SGD 220,600 of variable compensation.
Mrs. Suet Fern Lee and Mr. Ramon de Oliveira received in 2016, as non-e xecutive d irector of several companies of the Group, directors’ fees for a gross amount of EUR 11,231 for Mrs. Suet
Since 1989, AXA has granted stock options to its corporate offi cers and its employees in France and abroad. The purpose of these grants is to associate them with AXA’s share price performance and encourage their performance over the long term.
Senior Executives with shareholders though the performance of the AXA share price.
Benefi ciaries and individual grants are determined taking into account the (i) criticality of the position within the organization,
(ii) criticality of the individual in the current position and potential for future, (iii) sustainability of the individual contribution and
In 2016 the option grant took place on June 6, 2016. The strike price, equal to the average of the closing AXA share price during the 20 trading days before the grant date, was set at €21.52.
In 2016, 3,323,259 subscription or purchase options with a strike price of €21.52 were granted to 158 employees, representing 0.14% of the outstanding share capital as at December 31, 2016
No options were granted in 2016 to Messrs. Henri de Castries and Denis Duverne.
The Board of Directors decided that as from the options granted in 2017, a new performance condition will be added pursuant to which benefi ciaries would not be able to exercise their stock options in the event the Net Income of the Group is negative, and for as long as it remains.
On December 31, 2016, this index included 36 companies of the sector.
Total number of benefi ciaries 2,418 861 1,002 10 29 5 2,866 876 1,163 4
Start date of exercise 31/03/2008 31/03/2008 31/03/2010 25/09/2008 25/09/2010 13/11/2010 10/05/2009 10/05/2009 10/05/2009 24/09/2009
Expiry date of options 31/03/2016 31/03/2016 31/03/2016 25/09/2016 25/09/2016 13/11/2016 10/05/2017 10/05/2017 10/05/2017 24/09/2017
Subscription or purchase price of options (a) 27.75 27.93 27.93 28.03 28.03 29.59 32.95 33.78 33.78 29.72
Number of options exercised at 31/12/2016 2,877 0 0 0 0 0 0 0 0 0
Date of the Shareholders’ Meeting 20/04/2005 20/04/2005 20/04/2005 20/04/2005 20/04/2005 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008
Subscription or purchase price of options (a) 29.72 28.53 28.53 21.00 21.00 23.42 23.42 21.19 21.19 13.89
Subscription or purchase price of options (a) 9.76 9.76 9.76 13.03 15.47 15.88 16.60 16.60 15.43 15.43
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 22/04/2008 27/04/2011 27/04/2011
Grant date (Board of Directors or Management Board) 18/08/2010 18/08/2010 13/10/2010 13/10/2010 22/12/2010 18/03/2011 18/03/2011 04/04/2011 16/03/2012 13/06/2012
Total number of shares to be subscribed (a) or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 18/08/2012 18/08/2014 13/10/2012 13/10/2014 22/12/2014 18/03/2013 18/03/2015 04/04/2013 16/03/2014 13/06/2014
Subscription or purchase price of options (a) 13.89 13.89 13.01 13.01 12.22 14.73 14.73 14.73 12.22 9.36
Subscription or purchase price of options (a) 13.81 18.68 22.90 21.52
Chief Executive Offi cer as of September 1, 2016 06/06/2016 subscription or purchase 06/06/2026 100% of options: SXIP
Chairman & Chief Executive Offi cer until August 31, 2016 06/06/2016 subscription or purchase 06/06/2026 -
Representative of employee shareholders to the Board of Directors 06/06/2016 subscription or purchase 06/06/2026
STOCK OPTIONS HELD BY EXECUTIVE OFFICERS THAT BECAME EXERCISABLE DURING 2016
Chief Executive Offi cer as of September 1, 2016 22/03/2013 subscription or purchase 17,334 13.81 22/03/2023 100% of options: SXIP index 13/06/2012 subscription or purchase 25,363 9.36 13/06/2022 100% of options: SXIP index
Chairman & Chief Executive Offi cer until August 31, 2016 22/03/2013 subscription or purchase 56,334 13.81 22/03/2023 100% of options: SXIP index 16/03/2012 subscription or purchase 73,332 12.22 16/03/2022 100% of options: SXIP index
Representative of employee shareholders to the Board of Directors 22/03/2013 subscription or purchase 4,667 13.81 22/03/2023 Last third of options: SXIP Index 16/03/2012 subscription or purchase 2,500 12.22 16/03/2022 Last third of options: SXIP Index
(a) Options vested (according to the vesting calendar) for which the performance conditions have been met during the year, or no performance condition is applicable.
Chairman & Chief Executive Offi cer until August 31, 2016 (a)
Deputy Chief Executive Offi cer until August 31, 2016 and Chairman of the Board of Directors as of September 1, 2016
(a) No options were exercised by Mr. Henri de Castries from January 1, 2016 to August 31, 2016.
STOCK OPTIONS GRANTED AND/OR EXERCISED BY THE TOP 10 BENEFICIARIES (OUTSIDE THE EXECUTIVE OFFICERS) DURING 2016
Stock options of AXA or any eligible AXA Group subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group subsidiaries, who exercised the highest number of stock options (aggregate information)
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 90,068 -
Criteria for Performance Shares grants are similar to those used for stock options.
The Board of Directors also decided that the total number of
Performance Shares granted to the executive offi cers each year may not exceed 10% of the aggregate number of Performance
as changes in regulations. Thus, during the last few years, the performance criteria used for this purpose have been linked to (i) the underlying earnings and the net income or adjusted earnings to measure the operational entities’ performance, and
or business unit is weighted at 40% of the total performance while the AXA Group performance is weighted at 50%. For benefi ciaries in Group support functions (including AXA executive offi cers), the considered operational entity is the AXA Group.
Moreover as from 2016, two new relative performance criteria were introduced in the calculation of the global performance: ■ one criterion linked to Corporate Social Responsibility – CSR
(based on the Dow Jones Sustainability Index ”DJSI”) which is weighted at 10% of the global performance rate. Accordingly, the average of the scores achieved by AXA according to the
• 100% of the shares shall be granted if AXA’s score is equal to the eighty-fi fth percentile, and
• a maximum of 130% of the shares shall be granted if AXA’s score is equal or greater than the ninety-fi fth percentile.
Between these minimal and maximal performance levels, the number of shares defi nitely granted are calculated on a linear basis depending on the performance achieved.
■ one fi nancial criterion of relative performance is meant to compare the growth of the total return of the AXA share (Total
Should the performance be: ■ lower than 65% (for the Group) and 60% (for the benefi ciary’s performance perimeter) of the performance required to reach the target (the “fl oor”), no share would be delivered to the benefi ciary at the end of the acquisition period; consequently the benefi ciaries are not guaranteed a minimal grant/gain; ■ equal to 65% of the performance required to reach the target, the number of shares defi nitively granted would be equal to 65% of the number initially granted; ■ equal to 100% of the performance required to reach the target, the number of shares defi nitively granted would be equal to 100% of the number initially granted; ■ equal to or higher than 130% of the performance required to reach the target, the number of shares defi nitively granted would be equal to 130% of the number initially granted. Such a performance would correspond to a weighted-compound annual growth rate of the indicators equal to or higher than 15%.
Per Share) reach 80%, the Adjusted ROE would amount to 10.8%, i.e. a level above the cost of capital, which would justify
The performance conditions are summarised in the chart below: Executive Offi cers & Management Committee Other benefi ciaries
Floor 80% of the performance required to reach the target 50% Floor 65% of the performance required to reach the target
Executive Offi cers Management Committee (excluding the Executive Offi cers) & o ther benefi ciaries
Target CAGR of 5% over the period 100% Target CAGR of 5% for mature entities/
Performance rate divided by 2 should no dividend be paid during any of the fi scal years of the acquisition period In any event the total number of shares defi nitely acquired is capped at 130% of the initial grant
(a) AXA’s TSR vs TSR of SXIP: - 5 points if AXA’s score ≤ 75% of the index , +5 points if AXA’s score ≥ 150% of the index, calculation on a linear basis between these levels.
Grant date (Board of Directors) 16/03/2012 13/06/2012 22/03/2013 24/03/2014 19/06/2015 06/06/2016
Total number of benefi ciaries 5,039 1 5,162 5,101 5,093 4,968
Total number of International Performance Shares granted from which granted to: Executive Directors: Acquisition date of the International Performance Shares 16/03/2015 13/06/2013 22/03/2016 24/03/2017 (d) 19/06/2019 06/06/2020
(b) The 6,197,399 units of the March 16, 2012 plan have been settled at €136.37 million.
As from the 2017 grants, the target will no longer be determined according to the weighted-compound annual growth rate but will be directly aligned with the fi nancial targets of the strategic plan “Ambition 2020” and the level of performance to reach the fl oor will be increased for Management Committee members.
Representative of employee shareholders to the Board of Directors 06/06/2016 International Performance
(a) International Performance Shares granted to Mr. Thomas Buberl prior to his appointment as the AXA Chief Executive Offi cer.
Total number of Performance Shares granted from which granted to Executive Directors: Acquisition date of the shares 16/03/2014 22/03/2015 24/03/2016 (a) 43,270 (b) 06/06/2019
Chief Executive Offi cer as of September 1, 2016 22/03/2013 International Performance
(a) International Performance Shares acquired by Mr. Thomas Buberl prior to his appointment as AXA Chief Executive Offi cer.
The fair value of Performance Shares is determined in accordance with IFRS standards. It corresponds to a historical value at the date of grant, calculated for accounting purposes as described in Note 26.3.1 “Share based compensation instruments issued by the Group” in Part 5 – “Consolidated Fi nancial Statements”
PERFORMANCE SHARES/ INTERNATIONAL PERFORMANCE SHARES BECOMING UNRESTRICTED DURING 2016 FOR EACH EXECUTIVE OFFICER
Thomas Buberl Chief Executive Offi cer as of September 1, 2016 - - (a) -
Henri de Castries Chairman & Chief Executive Offi cer until August 31, 2016 16/03/2012 142,826 16/03/2016
(i.e. in France, this equals approximately 50% of the post-tax capital gain). These shares shall be held during his entire term of offi ce as Chief Executive Offi cer; ■ for Performance Shares granted, the Chief Executive Offi cer must, at every performance share acquisition date, hold in registered form at least 25% of the Performance Shares acquired during his entire term of offi ce as Chief Executive
Denis Duverne – Chairman of the Board of Directors 1,348,524 18,734
Shareholding Requirement such as described in the above section “Share ownership policy for executives of the Group”. Mr. Thomas
I Transactions involving Company securities completed in 2016 by the members of the Board of Directors
(Messrs. Henri de Castries and Denis Duverne) participated, as all other executive employees (directeurs) of AXA Group entities in France, in a mandatory and collective supplementary pension scheme with defi ned benefi ts on the condition that they terminate their career in the AXA Group in accordance with the provisions of Article L.137-11 of the French Social Security
Code. This scheme is outsourced to an insurer. The current pension scheme rules were approved by the Supervisory Board on October 7, 2009 (after having been presented for advice to all work councils and central work councils in France) and by the Shareholders’ Meeting of AXA on April 29, 2010.
Detailed information about all of these transactions, as well as individual disclosures fi led in accordance with Articles 223-22 and 223-25 of the AMF General Regulation , are published on the Company’s website (www.axa.com) and on the AMF website
(b) AXA shares locked in under the AXA employee-stock purchase plan (Plan d’Épargne d’Entreprise du Groupe).
Under this scheme, a supplementary pension is paid to senior executives who retire immediately upon leaving the AXA Group, and who have a minimum length of service of 10 years in the
(except in the case of gross or wilful misconduct) after the age of 55 may also benefi t from the scheme provided that they do not resume any professional activity before retiring. In case of voluntary departure from the AXA Group before retirement, no supplementary pension is paid.
The amount of the supplementary pension is calculated at the time of retirement and comes in addition to the total amount of retirement pensions paid under mandatory schemes (social security, ARRCO, AGIRC…) and under any other retirement scheme financed by the employer to which the beneficiary may have participated during his/her career, both within and/or outside the AXA Group (including the mandatory and collective supplementary pension scheme with defined contributions mentioned at the end of this Section 3.2).
The amount of the supplementary pension is designed, for a minimum executive seniority of 20 years within the AXA Group, to achieve a global pension (including the amounts paid with respect to compulsory schemes) equivalent to 40% of the average gross compensation of the past 5 years preceding the retirement date, if this average is superior to 12 annual social security ceiling (1).
Reduced rates apply for an executive seniority of less than 20 years. As an example, with 10 years of executive seniority, the supplementary pension allows to reach a global pension equivalent to 34% instead of 40%. No supplementary pension is paid for an executive seniority of less than 5 years.
During the phase of activity, the employer’s overall tax and social contributions amount to 24% of the premiums paid to the insurer under this regime.
Mr. Henri de Castries, who retired from his position as AXA’s
This collective defi ned benefi ts pension scheme has been closed to any new benefi ciary as of December 31, 2016. As a result, no executive employees (directeurs) or executive offi cer appointed after this date shall benefi t from it.
(collective insurance contract – contrat d’assurance de groupe as defi ned in Article L.141-1 of the French Insurance Code, which is outsourced to an insurer). This AXA Pension Fund was implemented in 2011 and benefi ts to the employees of AXA
Group entities in France falling within the scope of the Collective
As the defi nitive benefi ts pension scheme has been closed to any new benefi ciary as of December 31, 2016, a retirement performance shares plan meant to benefi t to all other executive employees (directeurs) of AXA Group entities in France including the Chief Executive Offi cer was implemented.
These performance shares are subject to (i) an acquisition period of three years; (ii) a holding period of at least two years following the acquisition period and (iii) an obligation to hold the shares until retirement, provided that the benefi ciaries may sell their shares for diversifi cation purposes (following the three-year acquisition period and two-year holding period), as long as the sale proceeds are invested in a long-term savings plan until the benefi ciary’s retirement.
(1) For information, the annual social security ceiling for 2017 is equal to €39,228.
All retirement performance shares granted are subject to the performance conditions described above and calculated over a three-year period beginning on January 1, 2016 and ending on December 31, 2018.
Denis Duverne Chairman of the Board of Directors Beginning of current mandate: September 1, 2016 Term of offi ce: 2018 – X X (b) – – X – X
(b) Mr. Denis Duverne decided to waive payment of the annuities he is entitled to under the collective defi ned benefi t pension scheme, until termination of his term of offi ce as Chairman of the Board without any retroactive payment. He does not benefi t from any supplementary pension scheme as Chairman of the Board of Directors.
In connection with this decision, the Board of Directors upon recommendation of its Compensation & Governance Committee undertook a review of the consequences of this renunciation including with respect to the continuity of the social benefi ts
As a result, on August 2, 2016, the Board of Directors took the following decisions: ■ the Board of Directors authorized that, following the termination of his employment contract, Mr. Thomas Buberl will continue to have social benefi ts (health insurance, life insurance, disability insurance, etc.) on terms equivalent to those of all other Group senior employees of the AXA Group in France; ■ the Board of Directors authorized a contractual severance benefit for Mr. Thomas Buberl designed to replicate the benefits to which he would have been entitled as AXA
The amount of severance benefi t to be paid to the benefi ciary would be adjusted in accordance with the level of achievement against these performance conditions: 100% of the severance benefi t will be paid if at least two of the three performance conditions are met; 40% of the severance benefi t will be paid if only one performance condition is met; and no severance benefi t shall be paid if none of the performance conditions are met. Notwithstanding the foregoing, if only two of the three performance conditions are met, the amount of severance benefi t will be reduced by 50% if performance condition (1) is not met or if AXA’s consolidated net income for the preceding fi scal year is negative.
I Report of the Board of Directors on the compensation policy of the Company’s C orporate O ffi cers
The Compensation & Governance Committee, whose role and composition are presented in detail in Section 3.1 of this Registration
Document , is responsible for, among others, formulating propositions to the Board of Directors regarding the Company’s principles and policy on corporate offi cers’ compensation.
The Compensation & Governance Committee is exclusively composed of independent members who exchange frequently with the Group’s management and the internal departments of the Company including Group Human Resources and Group Legal. The
Committee is also empowered to undertake or commission specifi c reviews by external experts when deemed appropriate. Such reviews allow the Committee to benefi t from a technical expertise and independent insights in comparing AXA’s compensation practices with general market practice.
The determination of the amount of the Chief Executive Offi cer’s fi xed compensation is based on an in-depth analysis of market practices as well as applicable national and international regulations. It also takes into consideration various other factors such as experience, technical skills, as well as criticality and scarcity of such skills, and the Group’s fairness principles or the individual’s compensation history.
The Board of Directors, relying in particular on a study carried out by an external advisory fi rm (Willis Towers Watson) regarding compensation practices for similar functions in a sample of CAC 40 fi nancial companies and in the main European insurance companies, and upon recommendation of its Compensation & Governance Committee, decided to maintain unchanged, for 2017, the amount of the Chief Executive Offi cer’s fi xed annual compensation, at €1.45 million.
In order to determine the Chief Executive Offi cer’s target annual variable compensation, the Board of Directors sought to establish a balanced structure between the fi xed part and the variable part of his cash compensation.
The Chief Executive Offi cer’s total effective variable compensation may not exceed 150% of his variable compensation target, i.e.
In order to ensure that AXA remains aligned with current market practice and regulations, both in France and abroad, within the fi nancial industry, the Board of Directors has decided to continue to use a deferral mechanism with respect to the Chief Executive
Pursuant to the provisions of Article L.225-37-2 of the French Commercial Code, payment of the Chief Executive Offi cer’s variable cash compensation for 2017 is subject to the approval by the Shareholders’ Meeting to be held in 2018 of the compensation elements paid or granted to the Chief Executive Offi cer for the 2017 fi scal year .
Each year, the Board of Directors, upon recommendation of its Compensation & Governance Committee, decides to grant Long Term
In order to give the Chief Executive Offi cer a stake in long-term value creation, these LTIs represent an important part of his compensation. Therefore, the value of the allocated LTIs is determined in order to position the Chief Executive Offi cer’s overall compensation (in cash and in shares) between the median and the 3rd quartile of market references.
Given the principles presented above and following an analysis of practices observed on the market for similar functions in CAC 40 fi nancial companies of similar size and scope, the Board of Directors, on the proposal from its Compensation & Governance Committee, has decided that the total value of the LTIs to be granted to the Chief Executive Offi cer during 2017, shall not exceed 150% of the amount of his annual variable compensation target.
The Board of Directors does not contemplate granting any exceptional compensation to the Chief Executive Offi cer.
As all other executives of AXA Group entities in France, he participates in the retirement performance share plan, under which grants are made on an annual basis.
The performance shares granted under such plan are subject to (i) a vesting period of three years, (ii) a holding period of two years following the end of the acquisition period, and (iii) an undertaking not to transfer the performance shares before the date on which the benefi ciary retires, subject to the option offered to the benefi ciaries, for diversifi cation purposes, to transfer their shares (after the end of the acquisition period of three years and the holding period of two years) as long as the proceeds of such transfer are invested in a long-term savings plan until the benefi ciary retires.
The Board of Directors, upon recomme ndation of its Compensation & Governance Committee, has decided that the total value of the retirement performance shares to be granted to the Chief Executive Offi cer during 2017 shall not exceed 15% of his cash fi xed and variable annual compensation.
Pursuant to the resolutions 11 and 12 submitted to approval of the Shareholders’ Meeting to be held on April 26, 2017, it is proposed that the shareholders of the Company approve the commitments made to the benefi t of the Chief Executive Offi cer regarding social benefi ts and unemployment benefi ts.
APPOINTMENT OF A NEW CHIEF EXECUTIVE OFFICER AFTER THE SHAREHOLDER’S MEETING TO BE HELD ON APRIL 26, 2017
For purposes of this report only, and in accordance with applicable regulations, the Board of Directors has also considered the hypothetical appointment of a new Chief Executive Offi cer following the Shareholders’ Meeting to be held on April 26, 2017.
Under such circumstances, the compensation structure applicable to a new Chief Executive Offi cer would comply with this policy and the Board of Directors would perform a comprehensive review of the situation of the relevant executive , provided that: ■ the amount and criteria of his compensation would be determined in accordance with existing practices within the Company by reference to compensation practices for similar functions in a sample of CAC 40 fi nancial companies and in the main European insurance companies; and
Finally, in the event that the Chief Executive Offi cer is recruited externally, the Board of Directors retains the right to grant to the newly appointed executive a lump sum (in cash and/or in shares) whose amount, in accordance with the recommendations set forth in the
Afep-Medef Code, may not under any circumstances exceed the amount of the benefi ts the executive would have had to forgo by resigning from his previous position.
For further information on the Chief Executive Offi cer’s compensation, please see Section 3.2 of this Registration Document .
The Board of Directors, upon recommendation of its Compensation & Governance Committee, and in accordance with the recommendations set forth in the Afep-Medef Code, has considered that the most appropriate compensation structure for the
Chairman of the Board of Directors would be the payment of a sole fi xed compensation.
The Board of Directors has also taken into account the extensive role it decided to entrust Mr. Denis Duverne with as Chairman of the Board of Directors. This role is presented in detail in the Board’s Terms of Reference as well as in Section 3.1 of this Registration
France, to which he was entitled as from September 1, 2016 on . Mr. Denis Duverne has decided that he would claim such benefi ts only after the end of his term of offi ce, without application of any retroactive payment.
Finally, there is no employment contract between the Company and the Chairman of the Board of Directors and the Chairman of the
Board of Directors is not entitled to any severance benefi ts or any allowance relating to any non-compete clause in the event that he ceases to be Chairman of the Board of Directors.
The only benefi t in kind granted to the Chairman of the Board of Directors is the use of a company car.
■ the experience and skills of the executive as well as the scope of his assignments as defi ned by the Board of Directors in connection with his appointment would also be taken into account.
For information concerning related-party transactions, please see Note 28 “Related-party transactions” included in Part 5 –
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
On August 2, 2016, the Board of Directors acknowledged the effective renunciation by Mr. Thomas Buberl, in accordance with the
A severance benefi t would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal or nonrenewal further to the Board of Directors’ decision. The payment of the severance benefi t would be subject to the three following performance conditions as determined by the Board of Directors: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 60% of his variable compensation target, (2) evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP)
(in percentage) over a 3-year period preceding the termination of the term of offi ce, and (3) the average consolidated adjusted
The initial amount of the severance benefi t is equal to 12 months of the average compensation (fi xed and variable) paid during the 24-month period preceding termination. One month should then be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
The reasoned opinion of the Board of Directors relies on the position of the Compensation & Governance Committee which highlighted it should be inequitable that the renunciation by Mr. Thomas Buberl of his employment contract prevent him, either immediately or in the future, from having social benefi ts he has or could profi t as an employee.
Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Henri de Castries would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized that Mr. de Castries be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the Afep-Medef recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Henri de Castries as employee.
now on, to the three following performance conditions: (1) Achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target,
These commitments entered into force upon the effective renunciation by Mr. Henri de Castries of his employment contract.
These commitments have expired on August 31, 2016 due to the termination of Mr. Henri de Castries’ mandate as Chairman of the
Board and Chief Executive Offi cer and did not apply in 2016.
With Mr. Denis Duverne (Deputy Chief Executive Offi cer until August 31, 2016)
The Supervisory Board was concerned that the decision of Mr. Duverne to renounce his employment contract, in accordance with the Afep-Medef recommendations, would not jeopardize the continuity of his accrued and future social benefi ts.
These commitments entered into force upon the effective renunciation by Mr. Denis Duverne of his employment contract.
With the following Executive Offi cers: Messrs. Henri de Castries (Chairman & Chief Executive Offi cer until August 31, 2016) and Denis Duverne (Deputy Chief Executive Offi cer until August 31, 2016)
Management Board, were entitled to the supplementary pension scheme for Group directors in the same conditions that apply to director-level employees of the AXA Group in France.
This scheme, which has existed since January 1, 1992, has been modifi ed twice with effect from January 1, 2005 and July 1, 2009.
Under this scheme, a supplementary pension is paid to executives who retire immediately upon leaving the AXA Group and have a minimum length of service of 10 years, of which at least 5 years as executive. May also benefi t from the scheme, executives whose employment contract is terminated by the Company after the age of 55, under the condition that they do not resume any professional activity before retiring.
During 2016, these commitments applied to Messrs. Henri de Castries and Denis Duverne (respectively Chairman & Chief Executive
Offi cer until August 31, 2016 and Deputy Chief Executive Offi cer until August 31, 2016).
September 1, 2016, has decided to waive, for the duration of his term of offi ce as Chairman of the Board of Directors, payment of his benefi ts under the supplementary pension scheme for executives within the AXA Group in France, to which he was entitled as from September 1, 2016 on, and whose annual amount is approximately €750,000. Mr. Denis Duverne has decided that he would claim such benefi ts only after the end of his term of offi ce, without application of any retroactive payment. He does not benefi t as
Risks related to the ownership of the Company’s shares 189 4.2 INTERNAL CONTROL AND RISK MANAGEMENT 190 4.2.1 Governance and Risk Management organization 191 4.2.2 Own Risk and Solvency Assessment (“ORSA”) 198 4.2.3 Internal Model 199 4.2.4 Governance of investment strategy and asset & liability management (ALM) 202 4.3 MARKET RISKS 204
Focus on main market risks and sensitivity analyses 206 4.4 CREDIT RISK 211
Risk control and risk mitigation 211 4.5 LIQUIDITY RISK 214 4.6 INSURANCE RISKS 215
Risk control and risk mitigation 215 4.7 OPERATIONAL RISK 219 4.8 OTHER MATERIAL RISKS 220
Company. The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, fi nancial condition, results of operations or cash fl ows. The Company’s r isk m anagement processes, procedures and controls are described in Section 4.2
While the M anagement devotes very substantial resources to r isk m anagement on an on going basis, the Group’s r isk m anagement activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Part 4 or the losses that may be incurred in connection with these risks. Where the risks described in this Section 4.1 have given rise to quantifi able and material fi nancial impacts and/
or material contingent liabilities, those fi nancial impacts and/or contingent liabilities are refl ected in the Consolidated Financial
Statements. You should also refer to Section 4.3 et seq. of this
Annual Report for quantitative information on the material risks to which AXA is exposed.
Negative developments in economic and fi nancial market conditions, whether on a national, regional or global basis, may materially and adversely affect our business and profi tability
Regions, including Russia, Ukraine, Syria, Iraq or North Korea, have contributed to increased economic and market uncertainty generally.
More generally, in an economic environment characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our fi nancial and insurance products could be adversely affected. In addition, in such circumstances, we may experience an elevated incidence of lapses or surrenders on certain types of policies, lower surrender rates than anticipated on other types of products, such as certain variable annuities, with in-the-money guarantees, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could accordingly have a material adverse effect on our business, results of operations and fi nancial condition.
Report, and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, M anagement’s evaluation involves a variety of assumptions and estimates about the operations of the issuer and its future earnings potential. Management updates its evaluations regularly and refl ects changes in allowances and impairments as such evaluations are revised. There can be no assurance, however, that M anagement has accurately assessed the level of impairments taken and allowances reflected in our fi nancial statements, and the need for and timing of any additional impairments and/or allowances may have a material adverse effect on our consolidated results of operations and fi nancial position.
Changes in interest rates and credit spreads may adversely affect our business, results of operations and fi nancial condition
Our exposure to interest rate risk relates primarily to the market price and cash fl ow variability associated with changes in interest rates. Changes in interest rates may negatively affect the value of our assets (including fi xed-income investments) and our ability to realize gains or avoid losses from the sale of those assets, all of which also ultimately affect earnings. In particular, negative interest rates and the low level of interest rates generally may negatively impact our net interest income and the profi tability of our Life & Savings business, which may have an adverse impact on Group profi tability.
(in particular in relation to fl exible-premium products), assetliability duration mismatches (as more policies and contracts remain in- force from year-to-year) and an increase in provisions for guarantees included in life insurance and annuity products.
Conversely, in periods of increasing interest rates, the estimated fair value of certain of our fixed-income investments may decrease, which could negatively impact our solvency ratio and net income; surrenders of life insurance policies and fi xed annuity contracts may accelerate, as policyholders seek higher returns, which may cause us to accelerate amortization of deferred policy acquisition costs or to liquidate fi xed maturity investments in order to obtain liquidity to satisfy such obligations, which may result in realized investment losses; our fee income may decrease due to a decline in the value of v ariable a nnuity account balances invested in fi xed income funds; and we may be required, as an issuer of securities, to pay higher interest rates on debt securities, debt and bank facilities, which may increase our interest expenses.
Swiss franc), while our Consolidated Financial Statements are published in euro. Likewise, the part of our debt and other obligations denominated in currencies other than euro is subject to foreign currency exchange rate fl uctuations.
We are also subject to defl ation risk, which has materialized in the Eurozone in recent years. Defl ation may erode collateral values and diminish the quality of certain investment assets, and may negatively impact customer behavior or otherwise negatively affect our business and results of operations.
In recent years, the capital and credit markets have experienced high levels of volatility and disruption which, during certain periods, have signifi cantly limited the availability of additional liquidity in the markets and credit capacity for most issuers, including AXA.
We need liquidity to pay our operating expenses (including claims and surrenders), interest on our debt, dividends and to refi nance certain maturing debts and other liabilities. In addition, we need liquidity in connection with derivatives transactions to which we are party which require us to post cash collateral and/or subject us to margin calls in certain circumstances. The availability of additional fi nancing to supplement internal liquidity resources will depend on a variety of factors such as market conditions, the overall availability of credit to the fi nancial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long-term or short-term fi nancial prospects if we incur large investment losses or if the level of our business activity decreases due to a market downturn. While management has put in place a liquidity Risk Management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, liquidity constraints over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position.
Downgrades in our insurer fi nancial strength and credit ratings could adversely impact our competitive position and damage our relationships with creditors or trading counterparties
(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 reinsurance cost,
(v) negatively impacting our ability to obtain fi nancing and/or increasing our cost of fi nancing, (vi) harming our relationships with creditors or trading counterparties and/or (vii) adversely affecting public confi dence in us. Any of these developments could have a material adverse effect on our business, liquidity position, results of operations, revenues and fi nancial condition.
The fi nancial condition and conduct of our counterparties could negatively impact us
We have signifi cant exposure to a risk of insolvency should any of the third parties that owe us money, securities or other assets fail to perform their obligations. Such third parties include private sector and government (or government-backed) issuers whose securities we hold in our investment portfolios (including mortgage-backed, asset-backed, government bonds and other types of securities), borrowers under mortgages and other loans that we extend, reinsurers to which we have ceded our insurance risks, customers, trading counterparties, counterparties under swap and other derivative contracts, and other counterparties including brokers and dealers, commercial and investment banks, hedge funds, other investment funds, clearing agents, and market exchanges.
In addition, we carry out certain of our operations through joint ventures, and part of our product distribution is carried out through distribution arrangements with third parties that we do not control. As a result, we face operational, fi nancial and reputational risk in the event that any of our joint venture partners fails to meet its obligations under our joint venture agreements, or fails to comply with applicable laws and regulations, or in the event of any disruption to our distribution arrangements.
There can be no assurance that defaults by the foregoing or other counterparties would not materially and adversely affect our business and results of operations.
Adverse experience relative to the assumptions and judgment used in setting reserves, developing and pricing products and calculating industry measures of value may signifi cantly affect our results of operations or performance indicators, which may have an adverse impact on the price of our securities
The profitability of our businesses largely depends on a variety of factors including social, economic demographic trends (including, in the life insurance business, mortality and morbidity trends), policyholder behavior (including surrender and persistency rates), court decisions, changes in laws and regulations, inflation, investment returns and underwriting expenses. We make assumptions about these factors in determining the pricing of our products, establishing insurance and employee benefi ts reserves and reporting capital levels and business results (using such industry measures of value as Life &
In our Life & Savings businesses, our earnings depend significantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. In certain cases, product features such as minimum guarantees or options to swap between underlying funds in certain savings products may with time result in higher realized losses than anticipated in initial assumptions. In particular , assessing the impact of minimum guarantees (the “Accumulator guarantees”) which are contained within certain of our Variable Annuity products, such as Guaranteed Minimum Death Benefi ts (GMDB), Guaranteed
(GMWB), and the adequacy test performed on the reserves for life policies (which encompasses the recoverability of DAC, Value of Business In-Force and deferred participation assets) involves a signifi cant degree of management judgment. While we use both our own experience and industry data to develop products and to estimate future policy benefi ts, including information used in pricing the insurance products and establishing the related actuarial liabilities, there can be no assurance that actual experience will match these estimates and that emerging risks would not result in loss experience inconsistent with our pricing and reserve assumptions.
In addition, in accordance with industry practices and accounting and regulatory requirements, we establish reserves for claims and claims expenses related to our Property & Casualty business. Reserves do not represent an exact calculation of liability, but instead represent expectations of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity and frequency, actuarial experience on past events, legal liability and other factors. While we continually review the adequacy of our claims reserves, because the establishment of claims reserves is an inherently uncertain process involving numerous estimates, including the impacts of any regulatory and legislative changes and changes in economic conditions, there can be no assurance that ultimate losses will not materially exceed our claims reserves and have a material adverse effect on our results of operations.
Further, while our NBV and EEV calculations are done on a market consistent basis, changes in assumptions used in calculating these measures may have a material adverse effect on the level of our NBV and/or EEV. For example, our NBV
is sensitive to interest rate movements and, consequently, an adverse evolution of interest rates relative to our assumptions may have a signifi cant impact on our NBV and a corresponding impact on the trading price of our securities.
Over the past several years, changing weather patterns and climatic conditions, including as a result of global warming, have added to the unpredictability, frequency and severity of natural disasters and created additional uncertainty as to future trends and exposures. In particular, the consequences of climate change are expected to significantly impact the insurance industry, including with respect to risk perception, pricing and modelling assumptions, and need for new insurance products, all of which may create unforeseen risks not currently known to us.
Taskforce on Climate-Related Financial Disclosures. Article 173 of the law on “energy transition for green growth”, which is applicable from the 2016 fi nancial year, includes requirements for institutional investors such as AXA to include in their Annual
Report a description of how their investment policies take into consideration social, environmental and governance objectives, and contribute to the transition to a low-carbon economy. These and similar regulatory requirements, as well as any further regulations regarding energy transition or our energy-related investments, could increase our compliance costs and adversely affect our business or the value of our investments.
We conduct businesses in highly competitive environments with evolving trends that could adversely impact our results of operations and fi nancial condition
Our competitors include m utual fund companies, a sset m anagement fi rms, private equity fi rms, hedge funds, commercial and investment banks and other insurance companies, many of which are regulated differently from us and offer alternative products or more competitive pricing than we do.
The insurance industry faces disruptive competitive challenges from the emergence of new actors, such as fi nancial technology companies, or fi ntech, and insurance technology companies, or insurtech, which generally benefi t from less extensive regulatory
Our r isk m anagement programs may be inadequate to protect us against the full extent of the exposure or losses we seek to mitigate and may leave us exposed to unidentifi ed, unanticipated or incorrectly quantifi ed risks that could result in signifi cant losses
In certain cases, however, we may not be able to apply these techniques to effectively hedge our risks as intended or expected or may choose not to hedge certain risks because the derivative markets in question may not be of suffi cient size or liquidity, the cost of hedging may be too expensive (as a result of adverse market conditions or otherwise), the nature of the risk itself may limit our ability to effectively hedge or for other reasons. This may result in higher realized losses and unanticipated cash needs to collateralize or settle transactions. Hedging counterparties may fail to perform their obligations, resulting in unhedged exposures and losses on positions that are not collateralized. Furthermore, the operation of our hedging program is based on models involving numerous estimates and management judgments, including among others, mortality, lapse rates, election rates, volatility and interest rates and correlation among various market movements. Our hedging program may change in time and there can be no assurance that actual experience will not differ materially from our assumptions, which could adversely impact our results of operations and fi nancial condition.
AXA RE Arizona Company (“AXA RE Arizona”), an indirect wholly owned captive reinsurer subsidiary of the Company, which hedges these risks using the techniques described above. In the event AXA RE Arizona were not able to post required collateral or cash to settle such hedges when due, AXA RE Arizona may be required to reduce the size of its hedging program which could ultimately impact its ability to perform under the reinsurance arrangements and AXA US’s ability to receive full statutory reserve credit for the reinsurance arrangements.
(“NAIC”) and various state regulators continue to consider additional regulations relating to the use by insurance companies of captive reinsurers, like AXA RE Arizona, as part of their capital management strategy. If state insurance regulators were to restrict the use of such captive reinsurers or impose additional capital requirements or if AXA US otherwise is unable to continue to use a captive reinsurer, the capital management benefi ts received under this reinsurance arrangement could be adversely affected which could cause AXA US to, among other things, recapture the business reinsured by AXA RE Arizona.
The failure to respond effectively to various emerging technological changes may affect our business and profi tability
An ongoing challenge we face is the effective adaptation to a constantly changing technological landscape. If we are not effective in anticipating the impact on our business of changing technologies, such as driverless cars, connected devices, artifi cial intelligence or roboadvisors our ability to successfully operate our business may be impaired. Technologies that facilitate ride or home sharing could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses. These changes could also affect our ability to accurately price our products and
Furthermore, if we are unable to effectively use and update or replace our key technology systems as they become obsolete or as emerging technology renders them competitively ineffi cient, or if we fail to develop the talent and skills of our human resources to meet the new technological challenges, and to attract and assimilate new talents into our Group consistent with our business goals, our business, prospects, competitive position and fi nancial condition could be adversely affected.
Operational risk is inherent in our business and can manifest itself in various ways, including business interruption, poor vendor performance or default (including under significant outsourcing arrangements), systems malfunctions or failures, computer viruses, hacking incidents and/or other unauthorized access to our websites and/or systems, misappropriation of sensitive information, corruption of data or operational disruption, regulatory breaches, human errors, defective products, employee misconduct, external fraud, natural or manmade disasters and terrorist attacks. We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other fi nancial intermediaries we use to facilitate our securities transactions.
result in fi nancial loss, impairment to our liquidity, a disruption of our businesses, legal claims, regulatory sanctions or damage to our reputation. Notwithstanding the measures we take to manage such risk, operational risk is part of the business environment in which we operate and we may incur losses from time to time due to these types of risks.
The Group or its insurance subsidiaries’ failure to meet their solvency capital requirements could have a material adverse effect on our business, liquidity, ratings, results of operations and fi nancial position
Autorité de contrôle prudentiel et de resolution (ACPR), may impose changes to the internal model we use to calculate our solvency capital which may adversely affect our solvency ratio.
The designation of the AXA Group as a GSII by the Financial
In recent years there also has been an increase in legislative or regulatory initiatives and enforcement actions in the areas of fi nancial crime compliance, anti-money laundering, international trade sanctions and anti-bribery laws and regulations (including the U.S. Foreign Corrupt Practices Act, and the U.K. Bribery
(EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products). Implementation of these and any future regulations may increase the costs of compliance, limit or restrict our ability to do business or subject us to the possibility of civil or criminal actions or proceedings, all of which carry signifi cant fi nancial and reputational risk.
For a description of the regulations and supervision framework applicable to the Group, please refer to Section 6.3 “General information – Regulation and S upervision” of this Annual Report.
The global nature of our business exposes us to a wide variety of local political and regulatory, business, and fi nancial risks and challenges which may affect the demand for our products and services, the value of our investment portfolios, the levels of capital and surplus that we are required to hold, and the credit quality of our counterparties. These risks include, for example, political, social or economic instability in the countries in which we operate, including the risk of nationalization, expropriation, price controls, capital controls, restrictions on foreign trade and investment (such as changes to authorized levels of foreign ownership, which may affect our ability to conduct business in certain countries through joint ventures), fl uctuations in foreign
currency exchange rates, credit risks of our local borrowers and counterparties, lack of local business experience in certain markets, risks associated with exposure to insurance industry insolvencies through policyholder guarantee funds or similar mechanisms and, in certain cases, risks associated with the potential incompatibility with foreign partners, especially in countries in which we are conducting business through joint ventures or other entities that we do not control.
(both class actions and individual lawsuits) and involved in various regulatory investigations and examinations and may be involved in such proceedings in the future. Certain of these lawsuits and investigations seek significant or unspecified amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these proceedings have substantial powers over the conduct and operations of our business. The introduction of a class action system in France in 2014 and similar developments in certain other European jurisdictions are likely to increase litigation risks and costs. Due to the nature of certain of these lawsuits and investigations, we cannot estimate the potential losses or predict with any certainty the potential impact of these suits or investigations on our business, fi nancial condition, results of operations or reputation.
Data collection, transfer and protection are critical to the operation of our business. Regulations in this area are quickly evolving in the European Union, which could adversely affect our business if we fail to timely adapt our rules and strategy to the emerging regulatory environment.
Regarding transfer of data to the United States of America, following invalidation by the European Union Court of Justice of the European Commission’s Safe Harbour Decision, which allowed for the transfer of personal information for commercial purposes from companies in the EU to companies in the United
Organization/Governance policy designed to manage risks related to data protection, there is no assurance that our existing or planned data protection rules and governance organization will not need to be updated or replaced to comply with new laws and regulations applicable in the European Union (including the General Data Protection Regulation, which will be directly applicable in all Member States from May 2018) or other jurisdictions where we operate or may operate in the future.
European Union and national governments intended to address concerns over perceived international tax avoidance techniques.
We take tax positions that we believe are correct and reasonable in the course of our business with respect to various tax matters.
The Mutuelles AXA, which comprise two French mutual insurance companies, together held 14.13% of the Company’s outstanding shares and 23.93% of its voting rights as of December 31, 2016.
Mutuelles AXA do not hold a majority of the total voting power in AXA, efforts by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may fi nd attractive, may prevent other shareholders from realizing a premium for their AXA ordinary shares. The Mutuelles AXA may decide to increase their ownership interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.
The AXA Group is engaged in Insurance and Asset Management business on a global scale. As such, it is exposed to a wide variety of risks, including market risks, credit risk, insurance risks, operational risk and other material risks, as further described in this Part 4 “Risk Factors and r isk m anagement” (1) and in Note 31
In order to manage these risks, the Group has put in place a comprehensive system of internal control and r isk m anagement designed to ensure that executives are informed of signifi cant risks on a timely and continuing basis and have the necessary information and tools to appropriately analyze and manage these risks, and that the Consolidated Financial Statements and other market disclosures are timely and accurate.
The three lines of defense are: Responsi bilities Owners 1st line of defense responsible for day-to-day risk and control management and decision-making
Compliance Internal Financial Control 3rd line of defense responsible for providing independent assurance on the effectiveness of the internal control system
Group Level is the Group Chief Compliance Offi cer; ■ the internal audit function, which is, in particular, responsible for performing an evaluation of the adequacy and effectiveness of the Group’s internal control system and other elements of the system of governance. The internal audit function must be objective and independent from the operational functions.
suffi ciency and quality of the data used in this calculation and comparing best estimates against experience, expressing an opinion on the overall underwriting policy and on the adequacy of reinsurance arrangements. The actuarial function holder at Group level is the Group Actuarial Function Holder.
For further information on the actuarial function, please refer to Section 4.6 “Insurance r isks” of this Annual Report (1).
Offi cer and the Group General Secretary, who, under Solvency II, are deemed to be “persons who effectively run” the Group, and the key functions holders must fulfi l the requirements for a fi t and proper assessment, as set in the Group’s internal procedure, adopted in compliance with the requirements of Solvency II
Board of Directors and its Specialized Committees (Audit Committee, Finance Committee, Compensation & Governance Committee)
The Board of Directors is responsible for ensuring that an appropriate and effective system of internal control and Risk
Management is in place across the Group. In this context, it can undertake all controls and verifi cations as it deems appropriate.
The Board of Directors has established three Committees to assist it in fulfilling its responsibilities: an Audit Committee, a Finance Committee and a Compensation & Governance
Committee. All the Board Committees constitute an important part of the Group’s overall internal control environment, and play a major role in reviewing internal control and r isk m anagement related issues.
The Audit Committee (i) considers the Group’s internal control systems and procedures for r isk m anagement with a view to obtaining reasonable assurances as to their effectiveness and consistent application and (ii) monitors the Group’s major risk exposures (insurance and operational), the results of the risk assessments performed, and the steps management has taken to monitor that such exposures remain within the risk appetite set by the Group.
Executive Management oversees the implementation of the internal control system and the existence and appropriateness of internal control, as well as r isk m anagement monitoring systems within the Group.
The Audit Risk and Compliance Committee (“ARCC”) has been created in 2016 by the Chief Executive Offi cer with the view to strengthen the Group’s r isk g overnance and is chaired by the Group General Secretary with the purpose of reviewing all material audit, risk and compliance issues faced by the Group.
Plan, Liquidity Risk Management Plan, Recovery Plan); ■ the major fi ndings identifi ed by internal audit; and