THE AXA GROUP 13 1.1 Key figures 14 1.3 Business overview 21
ACTIVITY REPORT AND CAPITAL MANAGEMENT 29 2.1 Market Environment 30 2.2 Operating Highlights 35 2.3 Activity report 40 2.4 Liquidity and capital resources 82 2.5 Events subsequent to December 31, 2019 89
CONSOLIDATED FINANCIAL STATEMENTS 209 5.1 Consolidated statement of financial position 210 5.2 Consolidated statement of income 212 5.3 Consolidated statement of comprehensive income 213 5.4 Consolidated statement of changes in equity 214 5.5 Consolidated statement of cash flows 218 5.6 Notes to the Consolidated Financial Statements 220 5.7 Report of the Statutory Auditors on the consolidated financial statements 366
Appendix I Management’s annual evaluation of internal control over financial reporting 440 Appendix II Statement of the person responsible for the Universal Registration Document 443 Appendix III AXA parent company financial statements 444 Appendix IV Group Embedded Value and Solvency II Own Funds 470 Appendix V Glossary 471 Appendix VI Board of Directors’ report – Cross-reference table 476 Appendix VII Corporate governance report – Cross-reference table 477 Appendix VIII Commission delegated regulation (EU) 2019/980 of March 14, 2019 –
Cross-reference table 478 Appendix IX Annual Financial Report – Cross-reference table 482
Général de l’AMF) (please refer to the cross-reference table on page 482 of this Universal Registration Document which indicates the relevant sections of this Universal Registration Document corresponding to the items referred to in Article 222-3 of the AMF General Regulation), (ii) all disclosure matters required to be included in the Board of Directors’ Report to AXA’s Shareholders’ Meeting to be held on April 30, 2020, established pursuant to Articles L.225-100 et seq. of the French
Commercial Code (Code de commerce) (the relevant sections of this Universal Registration Document corresponding to such required disclosures have been approved by AXA’s Board of Directors and are referred to in the cross-reference table on page 476 of this Universal Registration Document), and (iii) all the elements required to be included in the corporate governance report established pursuant to Articles L.225-37 et seq. of the French Commercial Code (Code de commerce)
Standards (IFRS) (the “Consolidated Financial Statements”) and published in Euro (“Euro”, “euro”, “EUR” or “€”). Unless otherwise stated, all amounts in this Annual Report are (i) expressed in Euro, with applicable foreign exchange rates presented on page 31 of this Annual Report, and (ii) presented in millions for convenience.
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, financial 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 financial condition, results of operations, performance or events may diff er 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 financial market performance and conditions, including fluctuations 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.
AXA’s business and/or results of operations. AXA undertakes no obligation to publicly update or revise any of these forwardlooking statements, whether to reflect new information, future events or circumstances or otherwise, except as required by applicable laws and regulations.
Annual Report refers to certain non-GAAP financial measures, or alternative performance measures, used by Management in analyzing the Group’s operating trends, financial performance and financial position and providing investors with additional information that Management believes to be useful and relevant regarding the Group’s results. These non-GAAP financial measures generally have no standardized meaning and therefore may not be comparable to similarly labelled measures used by other companies. As a result, none of these non-GAAP financial measures should be considered in isolation from, or as a substitute for, the Consolidated Financial Statements included in Part 5 – “Consolidated Financial Statements” of this Annual
The results of our U.S. segment are presented on the basis of IFRS
Commission (“SEC”). For further information on EQH’s financial results and other public reports please consult the SEC website at www.sec.gov.
Health and Protection. This was delivered while securing strong technical profitability.
At the same time, AXA progressed significantly on its transformation journey. The sell-down of our US Life and Asset
Management operations is now complete. The Group has now full control over its P&C business in China – a market in which we are now the largest foreign actor. AXA further simplified its footprint, notably divesting from insurance operations in
Ukraine and banking activities in Belgium. AXA XL’s integration within the Group has been p rogressing quickly. In early 2020,
AXA announced the sale of its insurance and asset management operations in Central and Eastern Europe (Poland, Czech Republic and Slovakia).
To further contribute to the fight against climate change, a major risk for insurers, AXA doubled its green investment target to €24bn, launched transition bonds as a new asset class and tightened its policies regarding coal, both as an investor and an insurer.
As curbing climate change is a collective challenge, AXA joined coalitions, such as the Net Zero Asset Owner Alliance, and forged new partnerships, for instance with the C40, a group of the world’s largest cities.
With a growing consensus that insurance is a condition for growth and prosperity, AXA now provides insurance to 18.6 million emerging customers across nine developing countries, almost doubling from last year. In mature markets, AXA develops leading protection solutions for digital economy workers.
AXA’s score in the Dow Jones Sustainability Index reached 83% in 2019, increasing by four points from last year, with improvements in all of the indices of the ranking. Accordingly, AXA was ranked third most responsible insurer, up two places.
Finally, I would like to send my warmest thanks to all AXA’s employees, agents and partners for their commitment to our company and for their engagement throughout 2019. On my behalf as well on all Board members’, I express our trust in
As uncertainty grows across the world, generating, increasing and changing protection needs, I am convinced that our role as insurer is becoming ever more relevant. In the face of shift ing threats and concerning trends, our mission is to be a stabiliser, helping individuals and organisations overcome hardship, and acting as a force for collective good.
Finally, AXA continued acting as an architect of solutions designed to meet the major challenges facing our societies. In 2019, we have further leveraged our expertise and economic strength to contribute to the fight against climate change by taking a series of new commitments to accelerate our contribution to a low-carbon and more resilient economy.
To summarise, our Focus and Transform strategy is bearing fruit, resulting in improved customer satisfaction (75% of AXA
I would also like to extend my gratitude to all the AXA teams, agents, and partners who have delivered these great results. I
am delighted that employee satisfaction, as measured by the e-NPS(2), increased in 2019. I measure and appreciate their unwavering dedication, eff orts and commitment. Together, we are transforming AXA to make it a simpler and more customerfocused leader of the insurance industry.
■ AXA protects people and businesses worldwide and creates value analyzing, pooling and managing a wide range of risks.
■ AXA is a responsible leader and has launched in 2019 a new phase in its climate strategy to accelerate its contribution to the transition towards a low-carbon and resilient economy.
■ The Group has a proven track record in delivering sustained earnings and dividend growth to its shareholders.
AXA is constantly rethinking and expanding its products, services and business models with the ambition to become a true partner for its clients. Moving from an approach based on risk coverage to a logic relying on ecosystems, the Group is progressively diversifying toward a world of services where, by offering complementary services in addition to insurance coverage, the
Following the transformation initiated in 2018 with the rebalancing of its portfolio towards more technical risks with the acquisition of XL Group, AXA has continued delivering on the bold moves it made: the Group reduced its exposure to financial risks by completing its exit from the US Life & Savings market through the full disposal of its remaining stake in Equitable Holdings, Inc.
Customer satisfaction remains a key pillar of AXA’s strategy and the Group accelerated its eff orts in implementing a customercentric culture. Entities have designed wide-ranging action plans with impact on customer satisfaction expected beyond 2019 (e.g.
The Group confirmed its Ambition 2020 financial targets, with an adjusted ROE target between 14%-16%, a dividend payout range of 50%-60% of adjusted earnings, as well as a Solvency
In parallel, AXA has undertaken a series of initiatives to address social and environmental challenges not only for its clients and partners, employees and shareholders, but for society as a whole. Believing in combining societal and business impact while being relevant for customers and employees, the Group continues to promote its objectives of diversity and inclusion, and its ambitious Corporate Social Responsibility policy.
A s s e t m a n a g e m e n t
P r o d u c t d e sig n
F in a n c ia l m a rk e t e x p e rt is e
(1) Proposed dividend, submitted for approval at the annual shareholders meeting on April 30, 2020.
AXA SA is the holding company of AXA Group, a worldwide leader in insurance, with total assets of €781 billion for the year ended
The main operating activities are Life & Savings, Property & Casualty, Health and Asset Management. In addition, the Group is composed of various companies conducting certain non-operating and banking activities.
The table set out below is only a summary. You should read it in conjunction with the Consolidated Financial Statements for the year ended December 31, 2019 included in Part 5 – “Consolidated Financial Statements” of this Annual Report.
(b) An annual dividend is generally paid each year in respect of the prior year aft er 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 €1.43 per share will be proposed at AXA’s Shareholders’ Meeting that will be held on April 30, 2020. Subject to the Shareholders’ Meeting approval, the dividend will be paid out on May 13, 2020, with an ex-dividend date of May 11, 2020.
The table set out below presents the key activity and earnings indicators. You should read it in conjunction with Section 2.3 “Activity
(a) Alternative Performance Measures. For further information, refer to Section 2.3 Activity R eport and the Glossary set forth in Appendix V of this Annual Report.
Assets backing contracts with financial risk borne by policyholders (Unit-Linked) 72,660 160,176 175,003
(a) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2020.
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.44 per share for fiscal year 2015.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.46 per share for fiscal year 2016.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 30, 2020. The gross amount of dividends will be subject to a unique withholding tax liquidated at an overall rate of 30%, unless in case of express and irrevocable option for the progressive scale on income tax which would then apply to all capital income paid in 2020. The option for the progressive scale would give right to the 40% tax relief pursuant to paragraph 2° of Article 158.3 of the French General Tax Code, i.e. €0.57 per share for fiscal year 2019.
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 financial 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.
(i) prudent capital management, (ii) reinvestment of previous results to support business development, and (iii) an attractive dividend for shareholders.
A dividend of €1.43 per share for the 2019 fiscal year will be proposed to the Shareholders’ Meeting to be held on April 30, 2020.
For further information on AXA’s dividend, see Note 29.4 “Other items: Restriction on dividend payments to shareholders” in Part 5 –
“Consolidated Financial Statements” and Section 6.3 “General information – Bylaws - Dividends” of this Annual Report.
The financial 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 reflect the ability of AXA
The significance and the meaning of individual ratings vary from agency to agency.
The CDP (formerly known as the Carbon Disclosure Project) runs a global disclosure system that enables companies, cities, states and regions to report on their environmental impacts. The CDP
AXA originated from several French regional mutual insurance companies: “Les Mutuelles Unies ”.
Acquisition of (i) Sanford C. Bernstein (United States) by 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,
Sale of (i) AXA’s Australian and New Zealand Life & Savings operations and acquisition of the AXA APH Life & Savings operations in Asia; and (ii) AXA Canada to the Canadian insurance group Intact.
Acquisition of (i) 50% of Tianp ing, a Chinese Property & Casualty insurance company; (ii) 51% of Grupo Mercantil Colpatria’s insurance operations in Colombia; and (iii) 77% of Mansard
Bank (“CIB”) and Legal & General in Egypt and conclusion of an exclusive Life & Savings distribution partnership with CIB; and
(v) Genworth Lifestyle Protection Insurance; Launch of (i) AXA Strategic Ventures, a venture capital fund dedicated to emerging strategic innovations in insurance and financial services; and (ii) Kamet, an InsurTech incubator dedicated to conceptualizing, launching and accompanying disruptive
Standard Life plc; (v) Hungarian banking operations to OTP bank plc.; and (vi) Life & Savings and Property & Casualty operations in
operations (expected to consist of its US Life & Savings business and AXA Group’s interest in AB) subject to market conditions, a strategic decision to create significant additional financial flexibility to accelerate AXA’s transformation, in line with Ambition 2020; Launch of AXA Global Parametrics, a new entity dedicated to accelerate the development of parametric insurance solutions, broaden the range of solutions to better serve existing customers and expand its scope to SMEs and individuals; and
Sale of (i) the Property & Casualty commercial broker in the UK,
Acquisition of (i) the XL Group, creating the #1 global P&C
Holdings, Inc. (1), on the New York Stock Exchange; Exclusivity agreement entered into with Cinven for the potential disposal of AXA Life Europe (2) (“ALE”), a specialized platform which designed, manufactured and distributed AXA’s Variable Annuity products across Europe; and
(2) The completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals.
(3) Excluding shares of common stock of EQH, primarily related to the EQH shares to be delivered on redemption of the AXA SA bonds mandatorily exchangeable into EQH shares, maturing in May 2021.
AXA operates in seven segments (France, Europe, Asia, AXA XL, the
The nature and level of competition vary among the countries where AXA operates. AXA competes with insurance companies and also with banks, asset management companies, investment advisers and other financial institutions.
The table set out below presents AXA gross revenues (aft er intersegment eliminations) by line of business: (in Euro million)
(b) Restated: reclassification of German and Japanese activities of AXA Life Europe (previously reported as part of Germany and Japan respectively) into AXA Life Europe (included in Transversal & Central Holdings).
In Life & Savings, AXA France has commercialized a new pension savings product called P lan d’E pargne R etraite (PER) to comply with the “PACTE” law (P lan d’A ction pour la C roissance et la T ransformation de l’E ntreprise) that came into force in
The latter off ers transparency and flexibility, especially the availability of funds before retirement and the choice between cash or annuity settlement.
In Property & Casualty, AXA France created a legal protection website - “dailydroits.fr” - on which customers can get legal advice. For simple matters, advice is provided, free-of-charge, by a chatbot nurtured by AXA Protection Juridique’s legal experts.
Amongst other benefits, the platform off ers customers negotiated tariff s, as well as guaranteed 24/7 support.
AXA France distribu tes its insurance prod ucts through exclusive and non-exclusive channels, including exclusive agents, salaried sales forces, direct sales, banks, as well as brokers, independent financial advisors, aligned distributors or wholesale distributors and partnerships.
(b) Restated: reclassification of German activities of AXA Life Europe (previously reported as part of Germany) into AXA Life Europe (included in Transversal & Central Holdings).
Except for the United Kingdom and Ireland (where AXA operates only in Property & Casualty and Health), AXA off ers in Europe a full range of insurance products, including Life & Savings, Property
& Casualty and Health. In each country, its off ering covers a broad range of products including motor, household, property and general liability insurance, term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products for both Personal/Individual and Commercial/Group customers.
Gesundheit, AXA Germany’s online health portal, with a number of active customers which increased to 132,000 users in one year; ■ in the United Kingdom, over 500,000 customers have access to
Doctor@Hand, a leading virtual General Practitioners service in the country; ■ in Italy, AXA has made a big step towards its vertical integration strategy with the acquisition of a majority stake in CIDIMU Group diagnostic center, with a view to integrate into a seamless customer journey, teleconsultation and insurance protection capacities. AXA Italy has also accelerated its momentum on
& Silenccio) were concluded successfully, with integration projects underway into a common ecosystem and several pilots with SME customers kicked-off ; ■ in Germany, the first three services were launched: whole-book factoring, purely digital factoring and leasing.
Switzerland further strengthened its mobility ecosystem with its Upto business (fleet management services for corporate and car rental for retail) and in Belgium, the partnership with Fixico has progressed, providing the customers a fully-digital damage handling proposition aimed at improving convenience whether or not customers are covered by the insurance contract, reducing costs and time and, therefore increasing satisfaction.
AXA distributes its insurance products through exclusive and nonexclusive channels that vary from country to country, including exclusive agents, salaried sales forces, direct sales, banks and other partnerships (e.g. car dealers), brokers, independent financial advisors and aligned distributors or wholesale distributors.
Casualty subsidiary in China (AXA Tianping) which has been fully consolidated as at December 31, 2019, and (iii) the Joint-Ventures in China, the Philippines, Thailand, and Indonesia which are consolidated under the equity method.
AXA operates in Asia primarily in Life & Savings and Health activities. Although recent years have seen the emergence of pan-Asian franchises, competition remains driven by local players in most of the countries.
• in Thailand, AXA launched a range of new protection and health products,
• in China, AXA enhanced its off ering on Health side through the launch of in-patient medical reimbursement products, as well the launch of new cancer off ers; ■ in Asia – Direct, AXA Direct Japan introduced new customeroriented innovative services such as multi-language claims related communication with clients, garages counterparts and lawyers, as well as 24/7 phone access to a veterinarian for pet insurance policies, while AXA Direct Korea launched new protection products and a partnership with C-trip, a travel company, for overseas travel insurance.
(b) Includes XL Group contribution for the last quarter of 2018 only.
In 2019, product innovations included: ■ a cyber SME product, which aims to improve customers’ cyber health, help mitigate their cyber risks and give clients easy access to AXA’s on-demand, cloud-based SME cyber insurance product; ■ Cube - a new risk innovation incubator for client risk managers working alongside AXA’s underwriters and risk managers to develop innovative r isk m anagement solutions for the most complex risks; ■ AXA XL HealthAssist - developed through a partnership with IPRS
These are just a sample of the many ways in which innovation makes AXA’s “Payer-to-Partner” promise come alive for AXA XL
Underwriting authority is also contractually delegated to selected third parties which are subject to a financial and operational due diligence review prior to any such delegation of authority, as well as ongoing reviews and audits as deemed necessary with the goal of assuring the continuing integrity of underwriting and related business operations.
In International markets, AXA operates in various geographies, including 14 countries (1) within Europe, Middle East, Africa & Latin
(1) Include Brazil, Colombia, Czech Republic & Slovak Republic, Greece, the Gulf Region, Lebanon, Luxembourg, Mexico, Morocco, Nigeria, Poland, Russia and Turkey.
Bank Belgium. Types and specificities of the products off ered by AXA vary depending on geographies and cover a broad range of products including motor, household, property and general liability insurance, term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investmentbased products for both Personal/Individual and Commercial/
(d) Include fees and charges related to investment contracts with no participating features and revenues from other activities.
(ii) individual investors to whom Mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and unit-linked fund backing insurance products. AXA IM’s expertise includes (i) Fixed
Income, (ii) Framlington and Rosenberg equities, (iii) Multi-Asset client solutions, (iv) Structured Finance, (v) Real Assets, and
Investment off ering all across the spectrum as well as its Private
AXA Assistance is the Group subsidiary providing its customers with assistance services in emergencies and everyday situations.
AXA Assistance operates through six business lines (vehicle, travel, health, home, consumer electronics and legal protection) to off er customer focused services.
In 2019, AXA Assistance launched several innovating digital products. The main ones are: ■ on Demand products in motor and home assistance allowing non covered final clients who face an emergency to benefit from AXA’s network and expertise in assistance services at their own financial burden; ■ E-rescue on motor assistance, a self-service digital application that is live in the United Kingdom, Spain, France, Belgium, and soon in Germany; ■ Pleeze, developed by the travel business line, is a mobile application concierge service allowing to proactively anticipate the customer’s needs through usage of artificial intelligence and international network experience; ■ BeLive, in health business line, is a dedicated unique off er for customers diagnosed with tumors, off ered in partnership with
Market Conditions 31 2.2 OPERATING HIGHLIGHTS 35 2.3 ACTIVITY REPORT 40
Central Banks policies and the temporary relief on trade tensions propelled equity markets to new all-time highs, while Government bond yields bounced back during the second half of the year.
Central Bank (ECB) eased its monetary policy in the third quarter in reaction to a weakening growth outlook, thus sending bond yields to historically low levels in the summer, followed by a slight recovery at the end of the year. Aft er depreciating sharply against the US Dollar until the end of September, the Euro reversed most of its losses in the fourth quarter of 2019, thus limiting its depreciation to 2% over the year.
France fared better than the remainder of the Eurozone, posting a GDP growth of 1.3% in 2019 as its relatively domestic-oriented economy showed a stronger resilience to global trade threats. In the third quarter, international tensions cast a shadow on future economic growth, thus resulting in volatile equity indexes. As some of the concerns vanished in the fourth quarter, French equity markets posted solid gains with the CAC 40 posting a 26% gain over the year, its best annual performance since 1999. Following accommodative announcements made by the ECB, the French government 10-year bond yield reached a historically low level of -0.45% in August, before recovering to 0.12% at year-end.
In the United Kingdom, Brexit-related uncertainties mounted as successive Prime Ministers first postponed the withdrawal from the European Union initially expected on March 31, 2019 then threatened of a hard “no deal” Brexit on October 31, 2019 and finally called for a General Election in December. British voters elected a large Conservative majority that set a clearer path to leaving the European Union in 2020, though areas of uncertainty remain. As a result, the United Kingdom equity markets significantly underperformed both European and American markets, with the FTSE 100 rising by 12% over the year. In parallel, the Sterling rallied over the period, up 4% vs. the US Dollar and 6% vs. the Euro.
In the United States, GDP growth came in at 2.1% and unemployment reached its lowest level in decades. However, concerns emerged around the prospects of a trade-war with
Reserve quickly reacted by accommodating its monetary policy, successively cutting three times its rate by increments of 0.25%
from 2.5% to 1.75% by the end of October. Despite uncertainties on the international stage, the robust health of the domestic economy led to equity markets posting sharp gains in 2019, with the S&P 500 index rising by 29% reaching new all-time highs.
In Asia, growth suff ered from both mounting trade tensions and weakening foreign demand in a context of slowing global economic growth. Japan posted stronger-than-expected GDP
Eurozone increased by 24.8%, the Nikkei index in Tokyo increased by 18.2%, and the FTSE 100 index in London increased by 12.1%.
Government bond yields decreased since December 31, 2018, in mature economies, with the lowest point reached around
September 2019, and slightly increased in the last quarter of the year in most markets: the 10-year US T-bond yield decreased by 77 bps to 1.92%, its lowest point being reached in September at 1.43%, the 10-year German Bund yield decreased by 43 bps to -0.19%, its all-time minimum being reached in September at -0.74%, the French 10-year government bond yield decreased by 59 bps to 0.12%, aft er reaching its all-time lowest point at -0.45% in August, the 10-year Belgium government bond yield decreased by 67 bps to 0.1%, with reaching its all-time lowest point at -0.4% in August, the UK 10-year government bond yield decreased by 44 bps to 0.83%, the 10-year Swiss government bond yield decreased by 30 bps to -0.47%, and the 10-year Japan government bond yield decreased by 2 bps to -0.02%.
In Europe, the iTraxx Main spreads decreased by 44 bps to 44 bps compared to December 31, 2018, and the iTraxx Crossover decreased by 147 bps to 206 bps. In the United States, the CDX
“Eurocroissance” funds, which will help insurance companies to boost sales of capital-light products while granting policyholders both a capital guarantee at maturity and a higher yield. The French
In Europe, political climate and trade tensions resulted in a slow economic environment, constraining Property & Casualty turnover growth. Profitability was impacted by severe natural events such as the storm Eberhard, striking the United Kingdom, Germany and Belgium, as well as Dana floods in Spain. In a context of competitive markets, European insurance players continued to undertake diff erentiating actions including customer satisfaction initiatives and underwriting discipline measures, in particular in the Motor market. In the United Kingdom, the “Ogden” discount rate for personal injury lump sum was raised below industry expectations, resulting in profit pressure and causing Motor insurance prices to increase. In Life & Savings, the drop in interest rates pulled down sales and deteriorated profitability in G/A
As governments are playing a less important role in providing pensions and health services, insurers are seizing the opportunity to expand their off erings in a context of ageing population and rising customer expectations.
In Japan, aft er the slight recovery observed in 2018, the Life &
Property & Casualty insurance market grew by 3.6% and remained dominated by Motor business thanks to the expansion of the scope of coverage off ers despite low prices.
In Hong Kong, the Life & Savings insurance market continued to grow, boosted by the launch of tax incentives on annuity products. The Property & Casualty insurance market recorded the highest year-over-year increase in the past six years driven by the hardening of coverage and pricing conditions following the recent large losses incurred from typhoons and social unrest. The
In the United States, the severity of claims incurred by Commercial insurance companies worldwide over the past few years led in 2019 to an acceleration of the price-firming cycle, with several lines of business experiencing double digits price increases.
The United States Property sector saw carriers take measures in 2019 to restore profitability in a sector that has been, over the past years, impacted by significant natural events and man-made large losses. Property Insurance leaders have therefore continued to increase pricing while also adjusting coverage and deploying capacity selectively. The United States Casualty sector saw a higher severity of claims driven by social inflation over the past year, first in Commercial through bodily injury then in other
US Casualty lines of business. The “Directors & Off icers” sector continues to become more complex with increased regulation and emerging technologies. Third party litigation funding and higher settlement expectations continue to attract litigation in the form of securities class actions.
In Asia High Potentials, the insurance market remained challenged by economic and industry environments. In China,
The Property & Casualty market experienced another year of double-digit growth mainly supported by Non-Motor business. In
In International markets, the Property & Casualty business continued to grow in Mexico, with positive trend in Non-Motor.
The Health and the Life & Savings insurance businesses both experienced a strong growth in Mexico and Brazil.
Switzerland 1 13.0 4 10.0 SIA (Swiss Insurance Association) Market sha re based on statutory premiums and market estimations by the
Belgium 1 19.6 6 7.7 Assuralia (Belgium Professional Union of Insurance companies) based on gross written premium as of
United Kingdom 2 8.1 n/a n/a UK General Insurance: Competitor Analytics 2019, Global
Ireland 1 27.1 n/a n/a Insurance Ireland P&C Statistics 2018 as of December 31,
Spain 5 6.2 11 2.7 Spanish Association of Insurance Companies. ICEA as of
Italy 5 5.7 6 4.3 Associazione Nazionale Imprese Assicuratrici (ANIA) as of December 31, 2018.
China 18 0.5 11 1.8 CBIRC (China Banking and Insurance Regulatory
Mexico 4 8.2 10 2.1 AMIS (Asociacion Mexicana de Instituciones de Seguros) as of September 30, 2019.
As a result, both institutional investors and asset managers continued to work together to explore alternative investments forms including structured products, real estate etc., mainly in the hunt for yields in a depressed economic environment. However, appetite remains somehow restrained by capital constraints on investors sides as well as by the stringent regulatory environment on the asset managers side.
Independent Director. AXA’s Shareholders’ Meeting also ratified the cooptation of Mrs. Elaine Sarsynski as director for the remainder of her predecessor’s term of off ice, i.e. until the close of the
Chief Financial Off icer as of January 1, 2020. Étienne joined the
Risk and Investment Off icer, taking the additional responsibility of overseeing the Group Investment Department, in addition to
Deputy CEO and Group CFO, was appointed Executive Chairman of AXA IM, eff ective on December 1, 2019, to implement the next phase of AXA IM’s strategy with the aim of accelerating the company’s development. Gérald continues to report to Thomas
Andrea Rossi, who led AXA IM since 2013, decided to step down from his role as CEO and became a strategic advisor to
Gérald Harlin on December 1, 2019. All members of the AXA
IM’s Board of Directors since 2014, stepped down from his role.
& IARD Entreprises, was appointed Chief Business Off icer of AXA
International & New Markets and a member of the AXA Group
CEO of AXA Next, became Deputy CEO of AXA France and CEO
At the AXA Group Management Committee level, Benoît Claveranne, in addition to his current role, now assumes oversight of our innovation ecosystem and pursues the development of new business models in healthcare across the Group. As a result, the
of AXA France and CEO of AXA Particuliers & IARD Entreprises.
In her new position, Delphine Maisonneuve will further pursue the endeavors of AXA to design, pilot and implement innovative insurance and service proposals across the Group to serve the
AXA Tianping has been fully consolidated in AXA Group’s financial statements as at December 31, 2019.
AXA Mbask Insurance Company ceased underwriting new insurance business and will exclusively administer the in-force portfolio with the purpose of terminating its insurance activities in
AXA to sell AXA Bank Belgium, and enter into a long-term insurance distribution partnership with Crelan Bank
On October 25, 2019, AXA announced that it has entered into an agreement to sell its Belgian banking operations, AXA Bank
Bank Belgium to Crelan for a total consideration of €620 million, comprised of (i) a total cash consideration of €540 million (7), and (ii) the transfer to AXA Belgium of 100% of Crelan Insurance
(valued at €80 million), the insurance company of Crelan, providing protection insurance linked to loans originated by Crelan.
(2) Ningbo Yi Ke Joint Venture Co., Ltd., Ningbo Hua Ge Industrial Investment Co., Ltd., Tian Mao Industrial Group Joint Stock Corporation, Ningbo Lu Da Sheng Technology Co., Ltd., Ningbo Rixingkang Biology Engineering Co., Ltd.
(3) This includes an immediate cash consideration of RMB 3.5 billion, and a payment of RMB 1.1 billion deferred by 12 months from completion. The deferred payment replaces the capital reduction of AXA Tianping (RMB 1.5 billion) communicated at the time of the signing of the transaction.
(4) EUR 1 = RMB 7.8009 as of December 12, 2019 (Source: Bloomberg).
AXA Group’s Solvency II ratio of ca. 4 points; ■ it resulted in a one-time negative net income impact (1) of approximately €0.6 billion in AXA Group’s 2019 consolidated financial statements; ■ underlying earnings generated by AXA Bank Belgium were
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to be finalized in the second quarter of 2020.
By combining, in one off er, services that are normally delivered by diff erent providers, AXA aims to simplify the healthcare journey of its customers.
On November 27, 2019, AXA announced the launch of a new phase in its climate strategy, which aims to accelerate its contribution to the transition towards a more sustainable and less carbonintensive economy by 2050, in line with the objectives of the Paris
To succeed in this new phase, AXA will use all its levers as a global investor, insurer and cooperation enabler: AS A GLOBAL INVESTOR
AXA will therefore reinforce its divestment policy to completely exit the coal industry by 2030 in the OECD and EU countries, then in the rest of the world by 2040. In the shorter term, existing investment thresholds will be strengthened, with a particularly stringent focus on companies developing new coal capacities.
(3) Crelan has a call option to purchase the Crelan NV and AXA Bank Belgium shares held by AXA.
AXA will leverage its climate expertise and innovative technologies to provide new protection services to its customers and society.
The Group, through AXA Climate, will notably launch FastCat, a new parametric assistance service, in December. It off ers weather alerting solutions and 24/7 real-time assessment through satellite imagery and drones, to support communities and corporations facing natural disasters such as floods, earthquakes, cyclones and wildfires.
Our conviction has always been that the fight against climate change requires cooperation between all stakeholders to drive collective action.
This is why AXA has decided to join the recently launched “Net
Zero Asset Owner Alliance”, a coalition of institutional investors committed to transitioning their investments to “net-zero”
greenhouse gas emissions by 2050 to align their portfolios with a 1.5°C scenario. AXA will notably contribute to this initiative by sharing its expertise on climate finance methodology tools, which are key to eff ectively finance the transition to a green economy eff ectively.
AXA is also joining forces with the C40 network, a coalition of the biggest cities gathering 1 out of 12 inhabitants in the world, to make metropolitan areas more resilient to natural catastrophes.
On December 10, 2019, Fitch Ratings aff irmed the financial strength rating of AXA’s core operating subsidiaries at “AA-”, changing the outlook from stable to positive.
AXA Group unveiled its new global brand positioning: “Know you can”
The new tagline has been deployed with a global campaign featuring one of history’s greatest tennis champions Serena
Protection and Commercial lines insurance, and local market proofs illustrating the Group’s commitment to its customers.
On March 25, 2019, AXA announced that it had successfully completed a secondary public off ering of 40,000,000 shares (the
Net proceeds (3) amounted to USD 1.5 billion or €1.3 billion (4), corresponding to the sale of 76,000,000 EQH shares in the Off ering, the full exercise of the over-allotment option granted to the underwriters, and the Share Buyback. Following this sale, AXA’s ownership in EQH decreased from 60.1% (5) (6) to 48.3% (6).
(4) EUR 1 = USD 1.1297 as of March 22, 2019 (Source: Bloomberg).
(5) EQH’s issued and outstanding common stock as of March 7, 2019, was comprised of 521,051,204 shares.
AXA announced the successful completion of a Secondary Off ering of Equitable Holdings,
Net proceeds (5) to AXA, corresponding to the sale of 40,000,000 EQH
On July 8, 2019, AXA announced that the underwriters in the secondary off ering of shares of common stock (the “Off ering”) of
EQH, completed on June 7, 2019, had fully exercised their option to purchase an additional 6,000,000 shares of EQH’s common stock from AXA, subject to the same terms and conditions as the Off ering.
On November 13, 2019, AXA announced that it had successfully completed the secondary public off ering of 144,000,000 shares of EQH’s common stock. The completion of the Off ering has resulted in net proceeds (6 ) to AXA of approximately USD 3.1 billion or approximately €2.9 billion (12), corresponding to a net price (6 ) of
On December 2, 2019, AXA announced the results of the AXA
The aggregate proceeds from the offering amount to over €375 million, for a total of approximately 18 million newly-issued shares, subscribed at a price of €18.30 for the classic plan and €21.73 for the leveraged plan. The new shares are created with full rights as of January 1, 2019.
Following Shareplan 2019, on December 31, 2019, AXA’s employees held 4.28% of the share capital and 6.09% of the voting rights.
In order to meet its obligation to deliver shares and to eliminate the dilutive eff ect of certain share-based compensation schemes (13)
(1) Including the recycling of related currency translation adjustment, and other comprehensive income.
(2 ) Including the shares to be delivered on redemption of the bonds mandatorily exchangeable into EQH shares, issued by AXA in May 2018.
(9) EQH’s issued and outstanding common stock as of May 9, 2019 comprised 491,138,042 shares.
(10) EUR 1 = USD 1.1219 as of July 5, 2019 (Source: Bloomberg).
On March 25, 2019, AXA completed a further sell down of its shareholding in EQH, bringing AXA’s ownership in Equitable
completed the sale of its remaining stake in EQH, excluding 44,162,500 shares of common stock of EQH, primarily corresponding to the number of EQH shares to be delivered on redemption of the AXA SA bonds mandatorily exchangeable in
May 2021. This sale brought AXA’s remaining participation below 10%. As a result, AXA deconsolidated its remaining ownership in
EQH that was accounted for using equity method, and accounted for its remaining ownership in EQH as an AFS OCI asset, under
As a consequence, in this A ctivity R eport, the United States Gross revenues contribution included 3 months of operations, until the date of the deconsolidation (March 31, 2019).
NBV included operations up to November 13, 2019, on Group share basis, until the loss of the significant influence of AXA over EQH.
(a) Restated: reclassification of German and Japanese activities of AXA Life Europe (previously reported as part of Germany and Japan respectively) into AXA Life Europe (included in Transversal & Central Holdings).
(d) Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premiums, in line with EEV methodology. APE is Group share.
Also, the 2019 comparable basis includes the foreign exchange rate movements mainly due to the depreciation of average Euro exchange rate against major currencies (€-1.9 billion or +1.9 points).
Credit and Lifestyle Protection business (€-83 million); ■ Health (€+263 million or +6%) to €4,619 million driven by higher volumes in Group business (€+233 million) in both international and domestic markets; ■ Other (€+37 million or +26%) to €179 million driven by AXA
(i) Property & Casualty (+1%) driven by Commercial lines due to higher volumes and tariff increases in Workers’ Compensation, while (ii) Life & Savings remained stable; ■ Germany (€+226 million or +2%) to €10,862 million from
(i) Health (+4%) mainly due to the continued growth in the civil servants segment and tariff increases in full benefit insurance,
Property and Liability, and by Personal Non-Motor from tariff increases in Household and Legal Protection, and (iii) Life &
G/A Savings, in line with the strategy; ■ Belgium (€+46 million or +1%) to €3,405 million primarily from
Commercial Property mainly due to higher new business, and in Commercial Motor driven by tariff increases, as well as from
& Casualty (+5%) driven by a strong growth in Commercial lines mainly in Liability and Property as well as in Personal Motor driven by higher volumes, (ii) Life & Savings (+10%) driven by
(ii) Property & Casualty (+3%) driven by higher new business and renewals in both Personal and Commercial lines.
Savings (-1%) mainly due to the temporary discontinuation of the capital light Single Premium Whole Life product as a consequence of the decrease in interest rates and lower sales of tax savings products impacted by a tax rule change, partly off set by Protection with Unit-Linked due to in-force growth and new business, and (ii) Health (+1%) from both in-force growth and new business of Medical Whole Life products; ■ Hong Kong (€+324 million or +10%) to €3,829 million from (i) Life
Risks (€+102 million or +33%), as well as in Accident & Health
(€+67 million or +24%) and Fine Art & Specie (€+66 million or
+15%); ■ Property & Casualty Reinsurance (€+85 million or +2%) to €4,489 million driven by both volume growth and tariff increases in Specialty and Other lines (€+161 million or +10%) mainly from North America Agriculture, Lloyds Whole Accounts and
Credit & Surety, partly off set by lower premiums in Property Cat
(+16%) driven by the acquisition of new large accounts combined with tariff increases, and (ii) Property & Casualty (+2%) mainly driven by higher new business notably in Personal Motor; ■ The Gulf Region (€+37 million or +5%) to €851 million mainly from large accounts in Health (+16%); ■ Colombia (€+38 million or +5%) to €701 million mainly from
Protection and Workers’ Compensation, partly off set by (ii) Life &
Life & Savings (+6%) driven by higher volumes across all lines of business; ■ Poland (€-8 million or -1%) to €573 million mainly from Property
■ Morocco (€+38 million or +10%) to €425 million notably from
Property & Casualty (-7%) mainly due to lower sales reflecting strong market competition.
Motor, as well as (ii) Health (+25%) mainly driven by higher new business; ■ AXA Investment Managers (€-27 million or -2%) to €1,225 million mainly driven by lower realized carried interest, performance fees and distribution fees, partly off set by higher transaction fees.
New business APE was down 9% on a reported basis and remained stable on a comparable basis to €6,029 million driven by France and International, partly off set by Europe, the United
Asia (€1,614 million, 27% of total) up €10 million (+1%) on a comparable basis mainly driven by (i) China (€+68 million) due to strong sales of G/A Savings products during the Chinese New
(+5%) on a comparable basis mostly driven by higher sales of non-GMxB Variable Annuity, partly off set by lower sales of GMxB
(1) New business Annual Premium Equivalent (APE) represents 100% of new regular premiums plus 10% of single premiums, in line with EEV methodology. APE is Group share.
(“APMs”) as defined in ESMA’s guidelines and the AMF’s related position statement issued in 2015. A reconciliation from Adjusted
Earnings per share are reconciled to the financial statements in the table set forth on page 51 of this Annual Report, and Debt
Adjusted Earnings represent the net income (Group share) as disclosed in the above tables, before the impact of the following items net of policyholder participation, deferred acquisition costs,
Report; ■ without undated subordinated debt as disclosed in Part 5.4 -
Statement of Changes in Equity” and financial debt as disclosed in
The Underlying Combined Ratio is the sum of the all accident year loss ratio and the underlying expense ratio.
■ Underlying expense ratio is the ratio of: • underlying expenses (excluding claims handling costs, including changes in VBI amortization); to
(shareholders’ equity excluding undated subordinated debt and reserves relating to the change in the fair value of financial instruments and of hedge accounting derivatives plus gross debt).
Furthermore, following the deconsolidation of EQH, mandatory exchangeable bonds issued by AXA in May 2018 were excluded from the Debt Gearing.
Underlying earnings before tax from insurance activities increased by €273 million (+4%) on a constant exchange rate basis to €7,702 million: ■ lower investment margin (€-18 million or 0%) driven by
(€+78 million) from lower profit-sharing; ■ higher fees & revenues (€+260 million or +5%) driven by
(€+28 million) reflecting the growth of the portfolio in Italy, and
(iii) Asia (€+43 million) mainly in Japan (€+20 million) due to in-force growth in Protection with Unit-Linked; ■ higher net technical margin (€+734 million or +6%) mainly driven by (i) Europe (€+417 million) from Property & Casualty
Switzerland, Germany, the United Kingdom & Ireland and Italy, despite higher Nat Cat charges (+0.4 point) mainly in Italy and
Morocco (€+48 million) mainly due to a positive impact from prior year reserve developments, Colombia (€+38 million) due to volume eff ects and Brazil (€+28 million) due to a more favorable claims experience, as well as from Health (€+34 million) driven by Mexico (€+17 million) due to volume eff ects, and (iii) France
(€-249 million) mainly from Germany (€-150 million) due to the full consolidation of a newly acquired Legal Protection company
(€-35 million) mainly at AXA Assistance (€-44 million) driven by higher commissions from a change in business mix towards large partnerships, notably in Home; ■ higher VBI amortization (€-31 million or +57%) driven by Europe
(-2%) on a constant exchange rate basis to €323 million mainly driven by France (€-9 million) due to the disposal of Natio in 2018.
(€-0.1 billion) in the Bahamas and in the United States, as well as elevated levels of large non-catastrophe losses and a higher current year loss ratio primarily in long-tail lines of business reflecting an update in assumptions related to claims inflation.
Income tax expenses were €-125 million reflecting positive pretax underlying earnings.
The Property & Casualty Combined Ratio improved by 0.6 point to 96.4%. On a constant exchange rate basis and excluding the contribution of AXA XL, the Property & Casualty Combined
due to current year catastrophe losses, higher levels of individual large non-catastrophe losses, and higher current year loss ratio primarily in long-tail lines of business.
driven by the transformation of the in-force Group Life business to a semi-autonomous model.
Net realized capital gains and losses attributable to shareholders amounted to €393 million. On a constant exchange rate basis, net realized capital gains and losses attributable to shareholders increased by €83 million due to: ■ €+217 million lower impairments to €-227 million mainly driven by equity securities (€+167 million to €-98 million) from the strong equity market performance in 2019 versus the late 2018 turmoil, as well as alternative investments (€+61 million to €-53 million) and fixed income assets (€+26 million to €-7 million), partly off set by real estate (€-37 million to €-69 million); ■ €-99 million lower net realized capital gains to €752 million mainly driven by equity securities (€-390 million to €233 million)
As a result, adjusted earnings amounted to €6,844 million, up €355 million (+5%). On a constant exchange rate basis, adjusted earnings increased by €206 million (+3%).
Inc. (€-590 million), combined with the impairment of the participation in non-consolidated subsidiaries (€-245 million), partly off set by (ii) the non-repeat of the transformation of the in-force Group Life business model to a semi-autonomous model in Switzerland (€+421 million); ■ an unfavorable change in the fair value of derivatives net of foreign exchange impacts, down 816 million to €-960 million driven by: • the change in the fair value of equity, interest rates and credit derivatives not eligible for hedge accounting under IAS 39, down €615 million to €-754 million, mainly driven by equity hedging derivatives (€-525 million) in a context of strong equity market recovery during the year and the impact of the decrease in interest rates on swaps hedging the financial debt at AXA SA (€-129 million),
to €-449 million mainly due to XL Group integration costs (€227 million), partly off set by the decrease of the costs of voluntary leave and pre-retirement plans in AXA Investment Managers
Reserves relating to changes in fair value of financial liabilities measured at fair value through profit and loss that are attributable to changes in own credit risk (13)
Net income (Euro per ordinary share) 1.51 1.51 0.79 0.79 91.8% 91.9%
Underlying earnings (Euro per ordinary share) 2.60 2.59 2.48 2.48 4.7% 4.7%
(in Euro million, except percentages) December 31, 2019 December 31, 2018
(a) Including adjustment to reflect net financial charges related to undated subordinated debt (recorded through shareholders’ equity) and preferred shares. Following the deconsolidation of Equitable Holdings Inc. (“EQH”), it includes an adjustment to reflect financial charges for only the first three months of the year 2019 related to the equity component of mandatory exchangeable bonds into shares of EQH.
Profit or loss on financial assets (under fair value option) and derivatives 83 (91)
Gross revenues increased by €1,008 million (+4%) to €26,182 million. On a comparable basis, gross revenues increased by €972 million (+4%): ■ Life & Savings (€+655 million or +5%) to €14,325 million, mainly driven by strong sales of G/A capital light products through the bancassurance channel and higher sales of Eurocroissance products (€+76 million or +61%) through the proprietary channel. Unit-Linked gross revenues contributed to 38% (1) of total Individual Savings compared to 27% (1) on average for the market. Protection revenues increased by €198 million (+5%)
from growth of in-force on both Individual and Group businesses; ■ Property & Casualty (€+17 million or 0%) to €7,059 million, mainly driven by Commercial lines (€+28 million or +1%)
Property and Construction, partly off set by continued selectivity in the Credit and Lifestyle Protection business, while Personal lines revenues remained in line with previous year (€-11 million or 0%); (1) Including Eurocroissance.
APE (€-155 million or -7%) to €2,077 million. On a comparable basis, APE decreased by €168 million (-7%) mainly driven by
Group Health (€-296 million or -38%) due to the non-repeat of exceptional sales in Group International business in 2018, partly off set by Savings (€+87 million or +9%) and Protection (€+38 million or +9%) due to higher sales in Group International business.
NBV Margin increased by 2.0 points to 31.5%. On a comparable basis, NBV Margin increased by 2.2 points driven by an assumption update in Protection and a favorable business mix, partly off set by lower interest rates and higher expenses.
to €2,368 million: ■ Property & Casualty (€+118 million or +12%) to €1,140 million, mainly driven by a higher net technical margin (€+90 million)
Income tax expenses decreased by €95 million (-13%) to €-660 million mainly driven by the non-repeat of negative tax one-off s in 2018 (€+61 million), the favorable eff ect of the upcoming decrease in corporate tax rate as well as higher dividend distributions on investment funds benefiting from lower taxation, partly off set by higher pre-tax underlying earnings.
Adjusted earnings increased by €178 million (+10%) to €1,882 million driven by higher underlying earnings and higher net realized capital gains.
Net income increased by €306 million (+19%) to €1,940 million driven by higher adjusted earnings and a favorable change in the fair value of both Mutual funds and derivatives not eligible to hedge accounting, partly off set by the non-repeat of the gain relating to the discontinuation of the partnership with BNP Paribas
Net capital gains or losses attributable to shareholders net of income tax 162 266
(a) Restated: reclassification of German activities of AXA Life Europe (previously reported as part of Germany) into AXA Life Europe (included in Transversal & Central Holdings).
Profit or loss on financial assets (under fair value option) and derivatives 1 (5)
On January 1, 2019, AXA Switzerland transformed its main occupational benefits foundations from full insurance to semiautonomous. As a result, the change in gross revenues on a comparable basis excludes the savings portion of the 2018 premiums related to the transformed in-force Group Life business.
NBV Margin decreased by 6.3 points to 46.7%. On a comparable basis, restated for the impact of the transformation of the in-force
On a constant exchange rate basis, adjusted earnings decreased by €69 million (-8%) as higher underlying earnings were more than off set by lower net realized capital gains.
Net capital gains or losses attributable to shareholders net of income tax 1 127
Rechtsschutz has been fully consolidated starting from October 1, 2018. Property & Casualty comparable basis has been adjusted to include Roland Rechtsschutz gross revenues from January 1, 2018.
(+2%): ■ Property & Casualty (€+81 million or +2%) to €4,392 million, driven by (i) Commercial Non-Motor (€+52 million) mainly due to new business as well as higher average premium in Property and Liability, and (ii) Personal Non-Motor (€+47 million) due to tariff increases in Household and Legal Protection; ■ Health (€+127 million or +4%) to €3,259 million, mainly due to the continued growth in the civil servants segment and tariff increases in full benefit insurance;
APE increased by €35 million (+10%) to €375 million. On a comparable basis, APE increased by €26 million (+7%) mainly due to higher new business in G/A capital light products (€+18 million)
due to lower attritional losses mainly in Personal Motor from improved pricing and claims management and in Mid-Markets due to lower claims frequency; ■ Life & Savings (€+24 million or +16%) to €174 million, mainly due to a higher investment margin from lower policyholders’
participation, partly off set by higher VBI amortization reflecting the decrease in interest rates assumptions; ■ Health (€+16 million or +14%) to €133 million, driven by both higher volumes and a lower combined ratio (-0.3 point) due to lower profit sharing; ■ Other (€-69 million or -65%) to €38 million, from Holding (€70 million) mainly due to the non-repeat of an exceptional distribution from an investment fund and higher pension costs.
Income from affiliates and associates decreased by €2 million to €0 million.
Net income decreased by €193 million (-29%) to €479 million driven by lower adjusted earnings and an unfavorable change in the fair value of interest rates and foreign exchange derivatives not eligible for hedge accounting, as well as from the non-repeat of the positive impact in 2018 related to the disposal of a part of the occupational pension business.
Profit or loss on financial assets (under fair value option) and derivatives (97) (42)
Market segments, notably in the Public sector, and SMEs due to new business and tariff increases, as well as from Personal lines (€+11 million or +1%) in Household mainly due to tariff increases; ■ Life & Savings (€+6 million or +1%) to €1,201 million, from
Unit-Linked and G/A Savings pension products, partly off set by the decrease in Protection with Savings and Pure G/A Savings products, in line with the strategy to exit Individual Savings market; ■ Health stable at €103 million.
to €516 million: ■ Life & Savings (€+11 million or +4%) to €292 million, driven by lower general expenses (€+9 million) mainly resulting from the cost savings program and lower deferred acquisition costs amortization due to the update of economic assumptions
(€-7 million) due to the non-repeat of favorable prior year reserve developments; ■ Property & Casualty (€-22 million or -9%) to €224 million, mainly driven by a lower investment income (€-11 million) and a higher current year combined ratio (+0.8 point) due to higher attritional losses in Personal Motor driven by the increase in average claims costs and in Workers’ Compensation combined with higher large losses and an exceptional negative impact on prior year premiums, partly off set by a lower expense ratio resulting from the cost savings program; ■ Health (€+1 million) to €2 million; ■ Other (€-3 million) to €-2 million.
Income tax expenses increased by €10 million (+8%) to €-134 million mainly driven by the non-repeat of a positive tax one-off in 2018 (€-14 million).
Adjusted earnings increased by €72 million (+16%) to €526 million as lower underlying earnings were more than off set by higher net realized capital gains (€+94 million) mainly due to the exceptional sale of a building (€+85 million).
(+3%): ■ Property & Casualty (€+145 million or +4%) to €3,536 million, from Personal lines (€+100 million or +6%) mainly in Motor reflecting higher new business and tariff increases, and from
Commercial lines (€+45 million or +3%) mainly in Property due to higher new business and in Motor due to tariff increases; ■ Health (€+36 million or +2%) to €1,790 million, mainly driven by volume growth and new partnerships in international business; ■ Life & Savings - Architas (€-17 million or -30%) to €40 million.
(-1.5 points) notably following the change in Ogden discount rate, partly off set by (ii) a higher current year combined ratio
■ Other (€+11 million) to €12 million, mainly due to lower interest charges resulting from lower financing debt; ■ Life & Savings - Architas (€-3 million) to €0 million.
On a constant exchange rate basis, income tax expenses decreased by €1 million (-2%) due to lower pre-tax underlying earnings and higher positive tax one-off s (€+9 million).
Net capital gains or losses attributable to shareholders net of income tax (2) 6
(+6%): ■ Property & Casualty (€+75 million or +5%) to €1,719 million, driven by a strong growth in Commercial lines (€+42 million or
and Protection (€+13 million or +7%); ■ Health (€+15 million or +8%) to €217 million, driven by higher volumes and tariff increases.
APE increased by €15 million (+18%) to €103 million. On a comparable basis, APE increased by €15 million (+18%) mainly driven by a strong growth in Unit-Linked (€+9 million or +27%).
to €264 million: ■ Property & Casualty (€+22 million or +15%) to €175 million, mainly driven by strong volumes growth combined with cost containment initiatives, more favorable prior year reserve developments and a higher investment income, partly off set by an increase in Personal Motor Bodily Injury average claims costs;
■ Life & Savings (€+5 million or +7%) to €75 million, mainly driven by both higher Unit-Linked management fees and loadings on premiums in Protection, in line with higher volumes, partly off set by a lower investment margin; ■ Health (€-8 million or -36%) to €14 million, mainly due to a less favorable current year profitability.
Adjusted earnings increased by €8 million (+4%) to €200 million driven by higher underlying earnings, partly off set by lower net realized capital gains.
Net income increased by €22 million (+15%) to €169 million mainly driven by higher adjusted earnings as well as lower restructuring costs.
Net capital gains or losses attributable to shareholders net of income tax 11 8
Profit or loss on financial assets (under fair value option) and derivatives (6) (9)
(€+185 million or +21%) mainly from the sales of hybrid and
APE increased by €53 million (+17%) to €368 million. On a comparable basis, APE increased by €53 million (+17%) mainly from G/A Savings (€+37 million or +26%), and Unit-Linked
NBV Margin increase d by 2.5 points to 33.2% mainly due to an improved product mix with higher share of hybrid products and the tightening of spreads of Italian government bonds.
(€+6 million) driven by in-force growth and lower minimum guaranteed rates; ■ Property & Casualty (€+15 million or +8%) to €209 million, mainly due to favorable prior year reserve developments (-0.8 point) as well as an improved expense ratio (-0.2 point) driven by higher volumes combined with cost containment initiatives, partly off set by a lower net investment income; ■ Health (€+2 million) to €3 million, mainly driven by volume growth.
Income tax expenses increased by €8 million (+8%) to €-109 million driven by higher pre-tax underlying earnings, partly off set by positive tax one-off s.
Net capital gains or losses attributable to shareholders net of income tax 4 8
as a consequence of the decrease in interest rates and lower sales of tax savings products impacted by a tax rule change
(€-59 million or -4%), partly off set by Protection with Unit-Linked
(€+171 million or +31%) from in-force growth and new business; ■ Health (€+17 million or +1%) to €1,472 million, mainly due to both in-force growth and new business of Medical Whole
Life products, partly off set by lower new business of Medical
APE decrea sed by €16 million (-3%) to €531 million. On a comparable basis, APE decreased by €49 million (-9%) mainly driven by lower sales of tax savings products impacted by a tax rule change (€-132 million or -61%) and the temporary discontinuation of the capital light Single Premium Whole Life product (€-14 million or -41%), partly off set by Protection with
Income tax expenses increased by €25 million (+13%) to €-215 million. On a constant exchange rate basis, income tax expenses increased by €11 million (+6%) mainly driven by higher pre-tax underlying earnings combined with lower positive tax one-off s (€-15 million).
Profit or loss on financial assets (under fair value option) and derivatives 7 (5)
NBV Margin decreased by 2.8 points to 44.4% mainly driven by a change in distribution mix combined with low interest rates.
to €463 million. On a constant exchange rate basis, underlying earnings before tax increased by €35 million (+9%): ■ Life & Savings (€+15 million or +4%) to €393 million, mainly due to volume growth; ■ Health (€+15 million or +59%) to €41 million, mainly driven by a better claims experience combined with volume growth; ■ Property & Casualty (€+6 million or +26%) to €29 million, mainly due to volume growth in both Personal and Commercial lines, and pricing actions mostly in Workers’ Compensation.
Underlying earnings increased by €43 million (+11%) to €434 million. On a constant exchange rate basis, underlying earnings increased by €20 million (+5%).
On a constant exchange rate basis, net income increased by €35 million (+10%) mainly driven by higher adjusted earnings and lower restructuring costs.
Profit or loss on financial assets (under fair value option) and derivatives (7) (8)
(AXA Tianping) has been fully consolidated as at December 31, 2019, and therefore contributes only to the underlying earnings, adjusted earnings and net income; (iii) the Joint-Ventures in
China, the Philippines, Thailand, and Indonesia are consolidated under the equity method and contribute only to the non-GAAP
APE increased by €81 million (+16%) to €598 million. On a comparable basis, APE increased by €55 million (+11%): ■ China (€+68 million or +32%) to €286 million, due to strong sales of G/A Savings products during the Chinese New Year
(€+69 million or +48%); ■ Thailand (€-11 million or -8%) to €141 million, mainly driven by lower sales of Unit-Linked products (€-10 million or -95%); ■ Indonesia remained stable at €118 million; ■ The Philippines (€-3 million or -5%) to €53 million, in Protection with Savings (€-6 million or -13%) due to lower sales in the bancassurance channel.
to €7 million. On a constant exchange rate basis, underlying earnings before tax increased by €1 million (+16%): ■ Life & Savings (€-4 million or -54%) to €4 million, in Indonesia mainly driven by lower volumes; ■ Health (€-3 million or -49%) to €3 million, primarily in Indonesia
Income tax expenses decreased by €4 million to €2 million. On a constant exchange rate basis, income tax expenses decreased by €3 million mainly driven by lower pre-tax underlying earnings in Indonesia, partly off set by higher pre-tax underlying earnings in Thailand.
Net capital gains or losses attributable to shareholders net of income tax 78 (27)
Profit or loss on financial assets (under fair value option) and derivatives (16) (63)
The comparable basis includes XL Group contribution to Gross revenues from January 1, 2018, to September 30, 2018. AXA
(€+145 million or +32%); ■ Property & Casualty Specialty (€+261 million or +6%) to €4,940 million, driven by both volume growth and tariff increases across most lines of business, notably in Political
+15%); ■ Property & Casualty Reinsurance (€+85 million or +2%) to €4,489 million, driven by both volume growth and tariff increases in Specialty and Other lines (€+161 million or +10%) mainly from North America Agriculture, Lloyds Whole Accounts and
Underlying earnings before tax reported were €634 million: ■ Property & Casualty reported earnings were €711 million mainly driven by a strong net investment income and the emergence of expense synergies related to the integration within AXA. This was partly off set by current year catastrophe
losses in excess of the normalized level in 2H19 (€-0.4 billion), notably from Typhoons Hagibis (€-0.2 billion) and Faxai (€0. 1 billion) in Japan and Hurricane Dorian (€-0.1 billion) in the
Income tax expenses reported were €-125 million reflecting positive pre-tax underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax (9) (4)
Profit or loss on financial assets (under fair value option) and derivatives 12 39
Republic Life & Savings, Greece and Brazil are fully consolidated; (ii) Russia (Reso), India, Nigeria and Lebanon are consolidated under the equity method and contribute only to the underlying earnings, adjusted earnings and net income.
Commercial lines mainly driven by a further reduction of the size of a large Motor fleet, partly off set by higher volumes in
• Malaysia (€-18 million or -7%) to €241 million, mainly due to lower sales reflecting strong market competition; ■ Health (€+186 million or +14%) to €1,550 million, mainly in
(€+30 million or +23%) to €160 million driven by a large account in Unit-Linked, partly off set by a decrease in (iii) Colombia (€44 million or -25%) to €121 million mostly due to G/A Savings run-off portfolio; ■ Other (€+2 million or +1%) to €313 million, at AXA Bank Belgium.
NBV Margin increased by 7.5 points to 43.9%. On a comparable basis, NBV Margin increased by 7.6 points mainly in Poland from a more favorable business mix towards Protection and lower expenses.
Income tax expenses increased by €60 million (+65%) to €-153 million. On a constant exchange rate basis, income tax expenses increased by €60 million (+65%) mainly driven by higher pre-tax underlying earnings combined with negative impact of tax one-off s (€-14 million in 2019 vs. €+11 million in 2018).
On a constant exchange rate basis, adjusted earnings increased by €61 million (+15%) mainly driven by higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax (16) (14)
Profit or loss on financial assets (under fair value option) and derivatives (621) (77)
Profit or loss on financial assets (under Fair Value option) and derivatives (15) (1)
to €348 million. On a constant exchange rate basis, underlying earnings before tax increased by €2 million (+1%) as a result of lower expenses from eff iciency initiatives, partly off set by lower gross revenues.
Income tax expenses increased by €12 million (+14%) to €-97 million. On a constant exchange rate basis, income tax expenses increased by €11 million (+13%) mainly driven by the non-repeat of the impact of a low tax regime on realized carried interests.
Underlying earnings and adjusted earnings decreased by €6 million (-2%) to €264 million. On a constant exchange rate basis, underlying earnings and adjusted earnings decreased by
On a constant exchange rate basis, net income increased by €68 million (+39%) mainly driven by the non-repeat of an exceptional tax charge related to the transfer of AB shares to
Net capital gains or losses attributable to shareholders net of income tax 0 (2)
Profit or loss on financial assets (under fair value option) and derivatives (4) (7)
(+7%): ■ Property & Casualty (€+57 million or +5%) to €1,231 million, from higher volumes in both Non-Motor (€+47 million or
(€+11 million or +2%); ■ Health (€+36 million or +25%) to €184 million, mainly due to higher new business.
to €6 million: ■ Property & Casualty (€-24 million or -67%) to €12 million, mainly driven by higher commissions from a change in business mix, notably in Home, as well as higher investments to improve customer experience and simplification, partly off set by lower attritional losses in Home and Motor; ■ Health (€+11 million or +65%) to €-6 million, mainly from higher volumes combined with lower expenses, partly off set by higher attritional losses due to an increase in service usage.
Net capital gains or losses attributable to shareholders net of income tax 36 (23)
Profit or loss on financial assets (under fair value option) and derivatives (587) (68)
Underlying earnings decreased by €107 million to €-810 million mainly driven by (i) temporary higher financial charges, notably in the context of the acquisition of XL Group and the change in the accounting methodology of the mandatory exchangeable bonds triggered by the deconsolidation of Equitable Holdings, Inc., as well as (ii) tax paid on higher dividends received from subsidiaries.
Adjusted earnings decreased by €48 million to €-774 million mainly driven by lower underlying earnings, partly off set by the positive impact of derivatives set up to reduce the Group exposure to equities.
Net income decreased by €1,108 million to €-1,928 million mainly due to (i) an unfavorable change in the fair value of derivatives not eligible for hedge accounting, (ii) the negative impact linked to the deconsolidation of Equitable Holdings, Inc., and (iii) the non-repeat of the 2018 one-off benefit from the reimbursement of the tax paid on dividends received from European subsidiaries held for more than 95% following the decision from the European
Note 4 - “Financial and insurance Risk Management” in Part 5 -
“Consolidated Financial Statements” of this Annual Report. The report of the Statutory Auditors on the Consolidated Financial
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 XL Group
Holding SA, are also holding companies and consequently, depend on dividends received from their own subsidiaries to meet their obligations. The Group’s operating (re)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 fluctuate as a result of cashsettled margin calls from counterparties related to collateral agreements on derivatives. The Company’s statutory results may be significantly impacted by unrealized gains and losses on derivatives used to hedge, in particular, currency and interest rate risks. In the context of the regular review of its exchange rate hedging strategy and its eff ectiveness, the Company has adjusted in 2020 the protection of its net foreign-currency investments in its main subsidiaries outside the Eurozone to focus it on near term expected cash flows.
The Company anticipates that cash dividends received from its operating subsidiaries and other financing sources available to the
Company will continue to cover its operating expenses (including interest payments on its outstanding debt and borrowings)
expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash flow remaining aft er payments of dividends and operating expenses, proceeds from the sale of non-strategic assets and businesses as well as future issuance of debt and/or equity instruments.
As a holding company, AXA is not subject to legal restrictions on dividend payments, provided that its accumulated profits are suff icient to cover distributions. However, many subsidiaries, particularly insurance subsidiaries, are subject to local regulatory restrictions on the amount of dividends they can pay to their shareholders. For more information on these restrictions, see
Note 29.4 “Other items: restrictions on dividend payments to shareholders” in Part 5 - “Consolidated Financial Statements”
The financing needs of Asset Management subsidiaries arise principally from their activities, which require working capital, in particular to finance prepaid commissions on some mutual fund-type products at AB or to constitute seed money for new funds at both AB (1) and AXA Investment Managers.
Term Note (“EMTN”) program (of which €15.3 billion have already been issued) and €1.5 billion of French titres négociables
has slightly increased (10.5x at year-end 2019, versus 10.4x at year-end 2018).
AXA has put in place a robust liquidity Risk Management framework which is reviewed 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” (5) and
In addition, as part of its risk control framework, the Company remains vigilant regarding contractual provisions, such as rating triggers or restrictive covenants in financing 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 eff ect on the Group’s consolidated financial position. At year-end 2019, AXA had no rating triggers and no financial covenants in its credit facilities.
On a consolidated basis, subordinated debt that qualifies as financing debt (excluding derivative instruments) amounted to €11,393 million as of December 31, 2019 (€11,294 million including derivatives) aft er taking into account all intra-group eliminations and excluding undated subordinated debt that qualifies as equity (TSS/TSDI, which are included in shareholders’
The Group’s subordinated debt is described in Note 17 “Financing debt” in Part 5 - “Consolidated Financial Statements” of this
(4) Including interest charge on undated subordinated debt, preference shares and Mandatory Exchangeable Bonds until deconsolidation of Equitable Holding, Inc. (please refer to Note 3 – “Consolidated statement of income by segment”- Part 5 “C onsolidated F inancial S tatements” of this Annual Report).
(5) Only information contained in Section 4.2 “Internal control and risk management” of this Annual Report and referred to in Note 4 “Financial and insurance risk management” in Part 5 – “Consolidated Financial Statements” of this Annual Report is covered by the report of the Statutory Auditors on the Consolidated Financial Statements.
(6) This information is not required under IFRS and as such is not part of the Consolidated Financial Statements. Therefore, it is not covered by the report of the Statutory Auditors on the Consolidated Financial Statements.
December 31, 2019 (no derivatives associated), a decrease of €4,058 million from €5,096 million at the end of 2018 (€5,096 million including derivatives) mainly driven by the deconsolidation of
At December 31, 2019, the Group did not owe any financing debt to credit institutions.
Debt (other than financing debt) owed to credit institutions is described in Note 18 “Payables” in Part 5 - “Consolidated Financial
Newly issued shares arising from long term incentive plans (stock options) amounted to 4.2 million shares in 2019. To eliminate the dilutive impact of the newly issued shares, AXA bought back the equivalent number of such shares.
Interest paid by the Company in 2019 amounted to €1,097 million
Dividends paid to AXA SA’s shareholders in 2019 in respect of the 2018 financial year amounted to €3,189 million, or €1.34 per share, versus €1.26 per share paid in 2018 in respect of the 2017 financial year (€2,998 million in total). Those dividends were paid in cash.
In the event that the Group or any of its (re)insurance subsidiaries fails to meet minimum regulatory capital requirements, insurance regulators would have broad authority to require or take various regulatory actions. A failure of the Group and/or any of its (re)
The Group was in compliance with the applicable solvency requirements as of December 31, 2019 and monitors compliance with such requirements on a continuous basis.
The AXA Group defined a clear framework for its capital management policy around a central regulatory Solvency II
Company before the impact of any tiering eligibility restrictions and aft er consideration of the potential non-availability of certain elements of capital.
II regulations. The classification 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)
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
Hybrid debt instruments eligible for Tier 1 must not exceed 20%
Subordinated notes issued by the Company since January 18, 2015 have been structured to be eligible as own funds regulatory capital under Solvency II regulations. Subordinated notes issued prior
P rudentiel et de R ésolution (the“ACPR”), (ii) the absence of any event (a) making the own funds of the Company and/or the
Meeting to be held on April 30, 2020. Subject to the Shareholders’
Meeting approval, the dividend will be payable on May 13, 2020 with an ex-dividend date of May 11, 2020.
For other subsequent events, please refer to Note 32 “Subsequent events” in Part 5 - “Consolidated Financial Statements” of this
2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2019 2.5 EVENTS SUBSEQUENT TO DECEMBER 31, 2019
On February 7, 2020, AXA announced that it has entered into an agreement with UNIQA Insurance Group AG (“UNIQA”) to sell its operations in Poland, Czech Republic and Slovakia.
Since December 2019, a significant number of cases of pneumonia associated with the Coronavirus, now called COVID-19 by the
Information in this section should be read in conjunction with the paragraph “Pricing and Underwriting-related risks” in Section 4.1 “Risk Factors” of this Annual Report.
(2) Price/2019 IFRS Net income (including the 2019 IFRS Net income of Czech Republic and Slovakia P&C operations which are not consolidated in AXA Group’s financial statements).
Anticipating the rapidly evolving needs of its customers, AXA’s strategy is articulated around its preferred segments (P&C
AXA is resolutely focused on the delivery of its Ambition 2020 plan and the successful integration of XL Group, solidifying AXA’s position as the #1 global P&C Commercial lines insurer.
With the full disposal of Equitable Holdings, Inc., successfully achieved in 2019, the Group’s profile has changed significantly, with a higher proportion of technical margin earnings and a reduced sensitivity to financial markets.
With its clear strategy, a simplified organization designed to foster growth across its preferred segments, a significant shift in strategic profile and a strong balance sheet with financial flexibility, AXA
is well positioned to create lasting shareholder value and off er an attractive return.
Compensation policy of the Company’s corporate off icers (Ordinary and Extraordinary Shareholders’ Meeting of April 30, 2020) 147 3.3 CORPORATE GOVERNANCE CODE OF REFERENCE 152 3.4 RELATED PARTY TRANSACTIONS 153
Implementing sound corporate governance principles has been a priority at AXA for many years. In this context, AXA chose to adopt, in 2008, the Corporate Governance Code for French corporations
Code”). The Board of Directors believes that AXA’s corporate governance practices are in line with the recommendations of the
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 of Directors determines the strategic orientations of the Company and ensures their implementation
AXA’s Board of Directors should consist of high calibre men and women from diverse backgrounds.
The Board of Directors also believes that such diversity is essential for the Board to function optimally, and that diversity is a source of creativity and boosts performance. It also broadens the analytical perspective of the issues discussed at Board meetings.
Group’s Management in the development of its strategic plan and the definition of its long-term objectives.
Committee regularly examine the composition of the Board and its Committees.
In this context, the Compensation & Governance Committee regularly calls upon external consultants to assist it in identifying and interviewing candidates meeting defined selection criteria.
Representation of women on the Board: ■ 8 women (stable compared to 2018) and 7 men (1 less than in 2018)
Balanced and complementary composition in terms of tenure on the Board (average tenure between 4 and 8 years)
■ Between 8 and 12 years: 3 directors (versus 4 in 2018)
■ Directors’ average tenure on the Board at December 31, 2019: 5 years
Age of directors No more than one-third of directors over the age of 70
At December 31, 2019, 9 out of 15 directors were independent, i.e. 60%
of members of the Board of Directors (62.5% at December 31, 2018).
The kills matrix below presents the number of directors with skills and expertise considered critical for AXA’s Board of Directors: Oversight of sustainability and environmental stewardship
(1) For further information on the expertise, experience and directorship of the members of the Board of Directors, please refer to Section “Information on current members of the Board of Directors” below.
Chairman of Temaris & Associés 40, rue François 1er – 75008 Paris – France
Co-founder and Chairman of the Board of Directors of yes.com AG (Switzerland) and co-founder and Vice-Chairman of the Board of Directors of Acqupart Holding AG (Switzerland)
Changes within the membership of the Board of Directors and its Committees in 2019
Board of Directors whose term of off ice is ending (Mrs. Angelien
In this context, the Board of Directors proposed, based on the recommendation of the Compensation & Governance Committee: ■ the appointment of Mrs. Isabel Hudson as director, for a fouryear term, replacing Mrs. Irene Dorner whose term of off ice will expire at the close of this Shareholders’ Meeting; ■ the appointment of Mr. Antoine Gosset-Grainville as director, for a four-year term, replacing Mr. François Martineau whose term of off ice will expire at the close of this Shareholders’ Meeting; ■ the appointment of Mrs. Marie-France Tschudin as director, for a four-year term; and
■ the appointment of Mrs. Helen Browne, representing the employee shareholders, for a four-year term, replacing
Mrs. Doina Palici-Chehab, whose term of off ice will expire at the close of this Shareholders’ Meeting.
Subject to the April 30, 2020 Shareholders’ Meeting approval, the Board of Directors would therefore be comprised of sixteen members including nine women (56% (1)) and eleven members considered independent (69%) by the Board of Directors in accordance with the Afep-Medef Code criteria.
The gender diversity policy applied to the Group’s management bodies and the objectives of this policy, together with an action plan and the timeframe within which these actions will be carried out, are presented in Section 7.2 “Social information” of this
Tax Department of the French Ministry of Finance, and aft er 2 years as commercial counsellor for the French Consulate
Board of Directors of AXA. Since September 2018, he has been
(UK) and a Ph.D. in Economics from the University of St Gallen
In March 2015, he became Chief Executive Off icer of the Global
Mr. Thomas Buberl has been Chief Executive Officer and director of AXA.
Director or member of the Management Committee or member of the Supervisory Board: AXA ASIA (SAS), AXA
International Treasurer in Renault Véhicules Industriels, and then as Chief Financial Off icer of Renault Crédit International.
Officer. She was Chief Executive Officer of Artémis, the investment company of the Pinault family, from 1992 to 2018.
Lyon (France). From 1984 to 1988, Mrs. Martine Bièvre was a damage regulations and civil liability editor at the
AXA Entreprises – IARD Department (from 2004 to 2011) and at AXA Particuliers and IARD Entreprises (since 2011). From 2015 to 2018, she was director representing the employees on the board of directors of AXA France IARD. In June 2018,
Mr. Jean-Pierre Clamadieu is a graduate of the École Nationale Supérieure des Mines 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 Ministry of Labour. In 1993, he joined the Rhône-Poulenc Group and held various executive positions. In 2003, he was appointed Chief Executive Off icer of the Rhodia Group and in 2008, Chairman & Chief Executive
Officer. In September 2011, further to the combination between the groups Rhodia and Solvay, Mr. Jean-Pierre
Clamadieu was Chairman of the Executive Committee and member of the Board of Directors of Solvay. Since May 18, 2018, Mr. Jean-Pierre Clamadieu has been Chairman of the
Board of Directors of Engie. On April 2019, the AXA Board of
Member of the Board of Directors and Senior Independent Director of AXA
Since May 2017, she has been a member of the Supervisory
Member of the Board of Directors of AXA representing the employees
In 1986, she joined Samuel Montagu as Head of the Legal
Executive Off icer & President of HSBC USA. Whilst in this role,
American Banker elected her the first most powerful woman in the banking sector. She was also Group Managing Director of HSBC Holdings (United Kingdom) and member of the
HSBC Group Management Board. In 2014, Mrs . Irene Dorner retired from HSBC. From March 1, 2018 to October 15, 2018,
Kingdom). Since January 26, 2020, she has been Chairman of the Board of Directors of Taylor Wimpey plc (United Kingdom).
Chief Executive Officer and member of the Management Board: HSBC Holdings plc (United Kingdom)
In 2010, Mrs. Rachel Duan was named as President & Chief
Executive Off icer of GE Healthcare China. In 2014, she was appointed as President & Chief Executive Off of GE China, becoming the first native-Chinese to take this role in GE’s largest single country market outside US. Since January 2019,
Senior Vice President of GE and President & Chief Executive Off icer of GE Global Markets (China)
Administration (MBA) from the Harvard Business School. He began his career, in 1984, at Morgan Stanley in New York and then in London and in Paris, where he was in charge of the opening of Morgan Stanley French off ice. Aft er a sixteen-year career at Morgan Stanley, he joined, in 2000, BC Partners
(Paris and London) as Managing Partner until December 2014 and then as Senior Advisor until December 2015. From
Poncet was a Partner at the French asset manager CIAM in
Paris. Since January 1, 2018, Mr. André François-Poncet has been Group CEO of Wendel SE.
Vice-Chairman of the Board of Directors and director: Bureau Veritas* **
University from 1988 to 1991. In 1992, she joined Robeco NV
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. In 1993, he became Chairman of the Management Board of Bavarian Re. Mr. Stefan Lippe was appointed a member of Swiss Re’s Executive Board in 1995, as Head of the Bavarian Re Group. In 2001, he was assigned the role of Head of the Property & Casualty Business Group and appointed a member of Swiss Re’s Executive Committee.
Life & Health Underwriting activities; and in September 2008, he took over as Chief Operating Off icer of Swiss Re and was also appointed Deputy Chief Executive Off icer of Swiss Re.
Re and stayed in this function until January 2012. Mr. Stefan
Lippe was named Reinsurance CEO of the year 2011 by the leading industry publication, Reaction, and he was recognized at the Worldwide Reinsurance Awards 2013 ceremony with the “Lifetime Achievement Award”. Aft er nearly 30 years with
Lippe co-founded Acqupart Holding AG of which he serves as Vice-Chairman of the Board of Directors, and Acqufin AG.
In May 2013, he co-founded Paperless Inc. renamed as yes. com AG in 2018 and currently serves as Chairman of the
Lippe was elected as Chairman of the Board of Directors of
Director or member of the Supervisory Board: Commerzbank AG (Germany), Extremus Insurance Ltd.
Co-founder and Chairman of the Board of Directors of yes. com AG (Switzerland) and co-founder and Vice- Chairman of the Board of Directors of Acqupart Holding AG (Switzerland)
Bar School (EFB) and since 1998, he is Honorary Professor at the Law and Political Sciences School of Lima (Peru). In 1996, he became an Expert at the Council of Europe and fulfilled various missions in Eastern Europe countries regarding the reform of the Code of the Judicial Organization, the reform of the magistrates’ and lawyers’ training and the revision of the Code of Civil Procedure. He also taught professionals at the École Nationale de la Magistrature (ENM). Since 1987,
Mr. Ramon de Oliveira is a graduate of the University of
Paris and of the Institut d’études politiques (Paris). Starting in 1977, Mr. Ramon de Oliveira spent 24 years at JP Morgan
JP Morgan & Co. asked to join the Executive Committee of the new firm with operating responsibilities. Between 2002 and 2006, Mr. Ramon de Oliveira was an Adjunct Professor of Finance at both Columbia University and New York
Equitable Holdings (EQH) and AllianceBernstein (AB), both based also in New York.
Reinsurance of AXA Global P&C in Paris (France). From 2010 to March 2013, she was Chief Executive Off icer of AXA
Business Services in Bangalore (India). From April 2013 to December 2016, she was Chief Executive Off icer of AXA
Pte Ltd (Singapore) (new entity further to the merger of the two entities in Singapore). From July 1, 2017 to March 2018, she served as interim Chief Executive Off icer of AXA Asia. From
Since November 2019, Mrs. Doina Palici-Chehab serves on the Supervisory Board of AXA Konzern AG (Germany). Since
April 2012, Mrs. Doina Palici-Chehab has been the employee shareholder representative to the AXA Board of Directors.
Member of the Management Committee of the General Insurance Association of Singapore to the Board of Governors: Singapore College of Insurance (Singapore)
Member of the Board of Directors of AXA representing the employee shareholders
Casualty (Hartford, United States), where she held various positions, notably Head of the Corporate Finance Department
Insurance Company (Springfield, United States), where she was Managing Director at Babson Capital Management LLC, a MassMutual subsidiary. In 2006, she became Executive Vice
The following table summarizes the position of each director of the Company with regard to the criteria of the Afep-Medef Code at
3 Not have significant business relationships ✔ ✔ ✔ ✔ ✔
* The Company considers that the fact that certain members of the AXA Board of Directors hold or have held during the last five years non-executive directorships in one or more Group subsidiaries owned, directly or indirectly, by AXA does not automatically (i) place them in a situation of conflict of interest, or (ii) impair their independence in any way. The Board believes that permitting its members to sit on the boards of certain Group subsidiaries is beneficial to the Board’s overall knowledge and appreciation of the Group’s operations, strategy and risk profile. Directors who also serve on the boards of Group subsidiaries, however, are required to abstain from participating in the debates and decisions of the AXA Board which could aff ect the interests of the entity in which they hold a directorship to prevent any conflict of interest or potential independence issues.
** As Mr. François Martineau is Chairman of the AXA Mutuals’ Strategy Coordination Committee, the Board of Directors concluded that he was no longer independent.
On February 19, 2020, the AXA Board of Directors determined that, at December 31, 2019, nine of the fift een Board members were independent aft er assessing the criteria of the Afep-Medef
The Board is collectively responsible for determining the strategic orientations of the Company, ensuring their implementation in accordance with its corporate purpose and taking into consideration the social and environmental challenges of its activity, and establishing the internal framework for oversight of
Risk and Solvency Assessment – report); ■ proposes Statutory Auditors for appointment to the
The Chief Executive Off icer, who is also a Board member, 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. However, the Board of Directors also reserves the approval of certain material transactions to itself in its Terms of Reference, including sales or acquisitions (over €500 million), significant financing operations and any material transactions outside the strategy announced by the Company.
Following its decision to appoint Mr. Denis Duverne as Chairman, the Board decided, in light of his experience and expertise and knowledge of the AXA Group, to extend the role of the Chairman as follows (2): ■ promote the Company’s values and culture in particular in relation to corporate responsibility and professional ethics; ■ upon request by the Chief Executive Off icer, represent the
■ at the request of the Chief Executive Off icer, participated in internal meetings in connection with significant events concerning the Company (e.g. acquisition and disposal projects).
Director also reviews, with the Chairman of the Board of Directors, the agenda of Board meetings and the quality of information provided to the Board.
Généraux Adjoints)); ■ was actively involved in the preparation of Board meetings, working closely with the Chairman of the Board of Directors and the Executive Management; ■ contributed to the selection process of the future members of the Board of Directors and its Committees; ■ worked closely with the Chairman of the Board on the organization of the annual self-assessment of the Board; ■ contributed to the review of all communications made to shareholders in particular on corporate governance topics and Executive Management compensation.
In 2019, the Board of Directors met ten times and held three executive sessions without the presence of Executive Management.
In 2019, the Board notably focused on the review of the Group’s strategy, the examination of the 2018 financial statements and the 2019 half-year financial statements, the review of proposed significant acquisitions and disposals, the integration of the XL
Recovery Plan, the Group’s dividend policy, the i nternal control and r isk m anagement, the approval of non-audit services, the selfassessment of the Board of Directors and the re-appointment and independence of its Board members, the review of the composition of the Board of Directors and its Committees and the succession plans of the Chairman of the Board and the Executive Management.
In March 2019, the Board of Directors held its annual two-day off -site strategy session with presentations by Group senior executives on a variety of key strategic topics related to the implementation of the Group’s 2020 Strategic Plan.
In 2018, the Board self-assessment was carried out by a consultant
(SpencerStuart) who collected each of the individual director’s inputs, views and suggestions on the Board work and its performance. Each director’s view on other members’ participation and contribution to the Board work was also collected.
her assessment and suggestions on the personal contribution of the Chairman of the Board of Directors. The conclusions of these interviews were then submitted by the Chairman of the
Compensation & Governance Committee to the Chairman of the Board of Directors.
The 2019 Board self-assessment demonstrated that all of the directors agreed that the functioning of the Board had either improved or remained unchanged at a high level due to the maturity of processes and the eff iciency of the team formed by the Chairman and the Chief Executive Off icer.
marketing skills), and (ii) an additional seasoned and active or former Chief Executive Off icer; ■ further involve the entire Board in the selection process of new directors, in particular the Chairman of any Committee in which the identified candidates are expected to sit; ■ strengthen the involvement of the entire Board in the process of setting the objectives of the Chief Executive Off icer, assessing his performance and discussing his compensation by organizing two executive sessions prior to final decisions by the entire
Board; ■ closely monitor the selection of any future Chairman of the
Board strategic seminar or during personal trips); ■ provide the Board with post-mortem analysis or follow-up reports on the main decisions or projects discussed/approved by the Board; ■ continue to involve the directors in the choice of training sessions; and
The role, organization and responsibilities of each Committee are set out in the Board’s Terms of Reference and in the Audit
Composition: Stefan Lippe (Chairman) – Irene Dorner – Angelien Kemna – Ramon de Oliveira – Elaine Sarsynski
The scope of the Audit Committee’s responsibilities is set out in its
The principal missions of the Committee are to: ■ monitor the financial reporting process and the integrity of the publicly reported results and disclosures made in the financial statements; ■ monitor the adequacy and eff ectiveness of the internal control and risk management frameworks; ■ form an opinion on the effectiveness, performance and independence of the Group’s internal auditors; ■ consider the appointment and oversee the process for selecting
Statutory Auditors, monitor the Statutory Auditors’ audits and review of the Group’s consolidated financial statements, as well as the auditors’ independence and the breakdown of their fees and make recommendations to the Board as to the appointment of the Statutory Auditors to provide non-audit services.
Company’s principal risk exposures and where applicable the material off -balance-sheet commitments.
The Committee examines and issues an opinion on documents required by the Solvency II.
Off icer, the Global Head of Internal Audit, the Group Chief Risk Off icer, the Group Chief Accounting Off icer, as well as the Statutory Auditors attend each Audit Committee meeting.
ORSA, SFCR and RSR reports; ■ the results of internal and external audit work; ■ the review of Management’s draft response to requests sent by the ACPR; ■ the review, for recommendation to the Board, of the non-audit services provided by the Statutory Auditors; ■ the review of the Statutory Auditors’ rotation process; and
The principal missions of the Committee are: ■ to examine and issue an opinion on any plan to sell some or all ownership interests held by the Company, or any acquisition or strategic partnership, whatever form they may take, when their immediate or deferred value exceeds the €500 million threshold; ■ to examine and issue an opinion on any sureties, guarantees, endorsements and warrantees in favor of third parties which exceed the delegations of power granted to the Chief Executive
Off icer by the Board of Directors; ■ to examine and issue an opinion on any of the following: – securities issuances giving a claim, whether directly or indirectly, to the Company’s share capital,
Company’s financial structure; ■ to examine any plan to perform a financial operation of significant size for the AXA Group; ■ to examine any subject relating to the financial management of the AXA Group including: – the policy on financial risk management,
– solvency and capital management; ■ to examine the impact of the main orientations and limits of
The Committee focused, in particular, on the following issues: ■ macroeconomic environment; ■ capital and solvency; ■ debt and liquidity; ■ financial risk management; ■ risk appetite and asset allocation; ■ review of the 2019 investment strategy; ■ the Pre-emptive Recovery Plan; ■ M&A projects (above €500 million); ■ the impact of low rates environment; ■ review of financial authorizations including guarantees; and
Composition: Jean-Pierre Clamadieu (Chairman) – Patricia Barbizet – Bettina Cramm - Rachel Duan – André François-Poncet
– the amount of directors’ fees for the members of the Board of Directors to be submitted to the Shareholders’ Meeting,
– the number of Company performance shares to be granted to the Chief
The Committee prepares, with the Chairman of the Board of Directors and the
The Committee in particular focused on the following issues: Compensation issues: ■ the compensations paid to the Chief Executive Off icer, the Company dirigeants effectifs (as defined under the Solvency II) and the members of the Management Committee; ■ the 2019 and 2020 equity allocations (performance shares) and performance conditions; ■ the grant of performance shares relating to retirement; ■ the Group Remuneration policy and its evolution; ■ the ex post and ex ante “say-on-pay” for corporate off icers; ■ the compensation ratios (PACTE law); and
■ the succession plan (including the emergency succession plan) of the Executive Management.
The Chief Executive Off icer is assisted in the day-to-day operational management of the Group by a Management Committee and a
In addition, the Board’s Terms of Reference provide for specific limitations of the powers of the Chief Executive Off icer and require, in addition to legal requirements, prior Board approval for certain significant transactions as indicated in the Section “Board of
The Chief Executive Off icer reports to the Board on a regular basis on the Company’s financial condition and all key issues, and provides regular written updates to the Board between meetings.
George Stansfield Group Deputy Chief Executive Off icer (Directeur Général Adjoint ) & General Secretary
Alban de Mailly Nesle Group Chief Risk and Investment Off icer
Board of Directors and/or the Senior Independent Director of any situation concerning her/him which may create a conflict of interest with the Company or the companies of the AXA Group, and to abstain from voting on any related resolution.
Off icer do not currently carry out any professional activity or hold any directorship outside the AXA Group that the Board believes substantially interfere with or impede in any material way their availability to focus on the Group and its business. Certain members of the Board of Directors, however, are corporate off icers and/or executives of companies that may have agreements or enter into transactions from time to time with the AXA Group including furnishing services or goods, providing credit facilities, purchases of securities (for their own account or for third parties), and/or underwriting of securities, and/or product and service providing.
To the best of the Company’s knowledge, none of the members of its Board of Directors have been, during the last five years
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by segment: Salaried employees (Full time equivalent)
Of which Belgium (including AXA Bank Belgium) (e)(f) 3,767 3,881 4,019
(b) A portion of the employees of AXA’s French aff iliates is included in GIEs.
(d) In 2019, the decrease by 332 in Germany reflected eff iciency programs.
(i) In 2019, the increase by 108 in AXA XL is mainly due to the internal transfer of employees to AXA Art.
(k) In 2019, the increase by 310 in International (excluding AXA Bank Belgium), was mainly driven by Mexico (+162) due to business growth and higher recruitments related to projects and Colombia (+101 ) due to business growth.
(l) In 2019, the increase by 595 was mainly driven by AXA Group Operations (+485) from internal transfer of employees from GIE AXA to AXA Group Operations, as well as the development of shared services centers in both the Philippines and Malaysia.
AXA’s global executive compensation policy is designed to align the interests of the executives with those of the Company and 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.
AXA Group’s overall policy on executive compensation focuses on the variable part of the compensation package, which is the compensation at risk for beneficiaries. The structure of AXA’s executive compensation is composed of a variable portion which represents a significant part of the aggregate compensation. 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
Committee of AXA’s Board of Directors is to formulate propositions to the Board regarding, in particular, (i) the Company’s compensation policy and principles, (ii) the determination of the corporate off icers’ compensation and performance assessment, and (iii) the grant of AXA performance shares to the Group
Committee are independent. Their independence is assessed annually by the Board in accordance with the criteria set forth in the Afep-Medef Code. The Senior Independent Director is the
Chairman of the Committee and presents the compensation policy of the Company each year at the Shareholders’ Meeting.
The Committee meets frequently with the Group Executives and the departments of the Company including Group Human
In this context, AXA has undertaken a comprehensive review of its existing compensation policies and practices against the requirements of Solvency II and has adopted a Remuneration
■ ensure compliance of the Group’s practices with all applicable regulatory requirements.
It follows four main guiding principles: ■ competitiveness and market consistency of the remuneration practices; ■ fairness based on individual and collective performance, in order to ensure remuneration is reflecting employee’s individual quantitative and qualitative achievements and impact; ■ internal equity based on remuneration policies and procedures designed to ensure that employees are paid equitably based on criteria such as role, skills, contribution or impact, and do not discriminate on the basis of gender or other irrelevant factors; ■ achievement of the Group’s overall financial and operational objectives over the short, medium and long term as well as execution against medium and long-term strategic objectives as a prerequisite to fund any mid-to-long term award.
AXA applies a pay-for-performance approach which (i) promotes long-term sustainable performance by incorporating risk adjustment mechanisms in variable compensation schemes, and
(ii) recognizes employees who bring the greatest value to the firm on the basis of financial results while demonstrating individual leadership and behaviours. The intent of this approach is to attract and retain the best skills and talents, to foster employee engagement and to strengthen AXA’s leadership.
The target level of the executives’ compensation and the structure of the elements which compose such compensation are based on a detailed analysis of market practices as well as potential applicable national and international regulations, and also take into consideration various other factors including the equity principles within the Group and the previous compensation level of the executive.
or geographic coverage); ■ a second market composed exclusively of international financial companies comparable in size and scope to the AXA Group
Compensation & Governance Committee, has decided to maintain unchanged in 2019 the total annual cash compensation target of the Chief Executive Off icer, Mr. Thomas Buberl, at €2,900,000.
Governance Committee, has decided to maintain unchanged in 2019 the fixed annual compensation of the Chairman of the
In order to determine Mr. Denis Duverne’s fixed compensation, the Board of Directions consulted an external advisory firm (Willis
Towers Watson) regarding compensation practices for similar positions within a sample of CAC 40 companies as well as the main European companies in the financial sector (insurance companies, banks).
Mr. Denis Duverne has decided not to receive payment of these annuities until termination of his term of off ice as Chairman of the Board without retroactive payment.
The determination of the variable compensation to be paid to the Chief Executive Off icer, Mr. Thomas Buberl, was based in 2019 on the following two metrics: ■ Group performance for 50%. This metric is measured based on (i) underlying earnings per share, (ii) return on equity
The selected indicators to measure the Group performance reflect objectives widely disclosed internally and externally with respect to growth, profitability, capital management, operational eff iciency and proximity with clients. Thus, these indicators, directly linked to the strategic orientations of the
Group, are both financial and operating criteria and rely on achievement of a predefined budget and on target figure; ■ Individual performance for 50%, which is evaluated based on objectives specifically related to strategic initiatives set and reviewed each year.
Performance within the variable compensation assessment will increase to 70% leading to a decrease of the Individual
In order to evaluate Mr. Thomas Buberl’s individual performance in 2019, the Board of Directors assessed the achievement of the following objectives set in his target letter: ■ XL integration: • Realize the planned synergies of the XL integration,
■ Simplification: Make further progress on AXA’s portfolio transformation: • Continue the sell down of EQH, if market allows it,
• Further strengthen diversity by 3 points within the newly created Global Leadership Network (GLN),
• Manage the succession of the Group CFO; ■ Execute selected key initiatives: • Progress on the implementation of the China strategy
• Progress on the implementation of AXA IM’s strategy and transformation.
A deferral mechanism applies to 30% of his variable compensation over a two-year period.
Code, the payment of the Chief Executive Off icer’s 2019 variable compensation is withheld until the approval of the Shareholders’
The variable compensation of Management Committee members who hold Group key functions as defined under the
(ii) qualitative factors, including leadership skills demonstrated by the members of the Management Committee measured against the goals listed below: ■ improving customer satisfaction; ■ rolling-out diff erentiated Payer-to-Partner Services; ■ making AXA XL a success; ■ accelerating simplification; ■ striving to be the most inspiring company to work for and boost employee engagement.
The variable compensations paid to the Management Committee members for 2017, 2018 and 2019 were:
(a) This amount includes the part of the variable compensation with respect to 2017, 2018 and 2019 which has been deferred in accordance with the mechanism described on page 125 . The total amount paid will depend on performance conditions and may then vary.
(d) As at December 31, 2019, the Management Committee was comprised of 13 members (compared to 11 as at December 31, 2018).
The variable compensation deferral component is subject to a clawback mechanism which, while not required by law in France, is designed to further align AXA’s policy with current practices, laws and regulations on executive compensation in the financial services sector internationally.
At the end of February 2020, (i) the second tranche of Mr. Thomas
Buberl’s deferred variable compensation for the 2017 fiscal year, i.e. an amount of €244,125 and (ii) the first tranche of Mr. Thomas
Buberl’s deferred variable compensation for the 2018 fiscal year i.e. an amount of €260,575 were paid.
All the amounts presented in this Section 3.2 are gross amounts and before taxation.
These performance shares are integrally subject to performance conditions (please refer to pages 131 and following) and therefore do not guarantee any grant or minimal gain for the beneficiaries.
Duverne, as Chairman of the Board of Directors shall not receive any performance shares or other long-term incentive during his term of off ice.
(a) This amount includes the part of the variable compensation with respect to 2018 or 2019 which has been deferred in accordance with the mechanism described on page 125 . The total amount paid will depend on performance conditions and may then vary.
standards. This is a historical value on the date of grant, calculated for accounting purposes as described in Note 26.3.1
Amounts granted with respect to the year Amounts paid during the year
Board fees indicated in the above tables paid for Board memberships held in AXA Group companies and are deducted by 70% (of their net value) from the variable compensation of the same year in accordance with the Group policy applicable to all employees who benefit from Board fees. This principle of deduction of 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 beneficiary, because of the decrease of the gross compensation.
(b) Pursuant to Article L.225-100 III of the French Commercial Code, the payment of the the Chief Executive Off icer’s 2019 variable compensation is withheld until the approval of the Shareholders’ Meeting on April 30, 2020.
(a) The elements of compensation selected for the purpose of the table above are: the fixed and variable compensation, LTIs (in IFRS value), Board fees, benefits in kind and collective profit-sharing, paid or granted to each relevant executive or employee during the fiscal year.
As required by the regulation in force, the annual evolutions over the five most recent fiscal years of (i) the E xecutive O ff icers’ compensations of the Company (AXA SA), (ii) the performance of AXA, (iii) the mean compensation of employees of the Company (AXA SA) and, on a voluntary basis, (iv) of the employees of the Group’s France-based entities, and (v) the hereinabove mentioned ratios, are disclosed in the table below.
Ratio between AXA SA Chairman & CEO’s compensation and the mean compensation of AXA SA employees -14.22% (b ) N/A N/A N/A
Ratio between AXA SA CEO’s compensation and the mean compensation of AXA SA employees N/A N/A (d ) -10.19% (e ) +13.57%
Ratio between AXA SA Chairman’s compensation and the mean compensation of AXA SA employees N/A -14.35% (g ) -14.01% +6.44%
Ratio between AXA SA Chairman & CEO’s compensation and the median compensation of AXA SA employees -23.49% (b ) N/A N/A N/A
Ratio between AXA SA CEO’s compensation and the mean compensation of employees of AXA in France N/A N/A (d ) +0.89% (e ) +4.08%
Ratio between AXA SA Chairman’s compensation and the mean compensation of employees of AXA in France N/A -1.73% (g ) -3.40% -2.45%
(a ) The term of off ice of the Chairman & CEO ended on September 1, 2016.
(g ) The compensation granted to the Chairman in 2016 has been annualized for the purpose of the table above.
During the fiscal year 2019, the members of the Board of Directors, except for the corporate off icers, only received directors’ fees as compensation from the Company. The amount of directors’ fees paid to each AXA Board member is indicated in the table below.
Jean-Pierre Clamadieu – Senior Independent Director as from April 24, 2019 176,418.14 103,085.99
Jean-Martin Folz – Senior Independent Director until April 24, 2019 70,678.39 219,824.42
(a ) Mmes Martine Bièvre and Bettina Cramm, members of the Board of Directors representing the employees, are employed by subsidiaries of the Company and as such, receive a compensation that has no link with their directorship. Their compensation as employees is therefore not published.
(b ) Directors’ fees due to Mrs. Martine Bièvre, member of the Board of Directors representing the employees, were, at her request, directly paid by the Company to the “Fédération des Banques et des Assurances CFDT” (French trade union organization).
No directors’ fees are paid by the Company to the corporate off icers
(i.e. Chairman of the Board of Directors and Chief Executive Off icer).
The total maximum amount of directors’ fees is determined by the 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
■ the remaining 35% shall be allocated by the Board of
Performance shares are usually granted to beneficiaries residing in France while international performance shares are generally granted to beneficiaries residing outside of France.
Board of Directors approves all performance share programs prior to their implementation.
Individual grants of performance shares are then decided by the Board of Directors, provided that individual grants to the
The Board of Directors also decided that the total number of performance shares granted to the Company’s executive off icers each year may not exceed 10% of the aggregate number of performance shares granted during the same year, to avoid an excessive concentration of performance shares granted to the executive off icers.
During the performance period, all performance shares initially granted are integrally subject to performance conditions regardless of the beneficiary’s status. These criteria measure both the financial and operational performance of the AXA Group as well as the beneficiary’s operating business performance, according to predetermined targets.
• 100% of the shares shall be granted if AXA’s score is equal to the 85th percentile, and
• a maximum of 130% of the shares shall be granted if AXA’s score is equal or greater than the 95th percentile; Between these minimal and maximal performance levels, the number of shares definitely granted are calculated on a linear basis depending on the performance achieved; ■ one financial criterion of relative performance is meant to compare the growth of the total return of the AXA share (Total
Shareholder Return – “TSR”) with the growth of the TSR of the stock reference index of the insurance sector (SXIP (2)) in order to adjust upwards or downwards within the limit of 5 points the global performance rate. Thus, AXA’s outperformance (150%
Between the diff erent levels of performance listed above, the number of shares definitively granted to beneficiaries is calculated on a linear basis depending on the achieved performance of the various indicators used.
(2) SXIP index (STOXX Insurance Index): a capitalization-weighted index, which includes European companies that are involved in the insurance sector. As at December 31, 2019, the index included 35 companies of the sector.
The performance conditions are summarized in the chart below: Executive off icers & Management Committee Other beneficiaries
AEPS over the 3 years immediately prior to the grant date the 2020 grant onwards)
In any event the total number of shares definitely acquired is capped at 130% of the initial grant.
Committee members) were conditioned to a 3-year acquisition period, corresponding to the performance measurement period but were not restricted from sale (“holding period”) aft er the acquisition period.
Committee members were subject to a 3-year performance period followed by a 1-year deferred acquisition period.
The amounts corresponding to International Performance Shares are expensed each year under the variable accounting method.
They do not create any dilution for shareholders since no new shares are issued. The payment is made in shares. Should this type of payment not be possible for legal, tax or any other reason, the payment could be made in cash.
Shares granted to the Chief Executive Off icer will remain acquired at the end of a 3-year acquisition period and restricted from sale during a 2-year holding period.
Grant date (Board of Directors) 19/06/2015 06/06/2016 21/06/2017 27/06/2018 19/06/2019 12/03/2020
Total number of International Performance from which granted to: Corporate off icers: Acquisition date of the International Performance Shares 19/06/2019 06/06/2020 21/06/2021 27/06/2022 19/06/2022 (b) 12/03/2023 (d)
(b) The members of Management Committee have a 1-year deferred acquisition period.
Date of the Shareholders’ meeting 23/04/2014 27/04/2016 27/04/2016 27/04/2016 24/04/2019 24/04/2019
Total number of Performance Shares granted 2,459,256 2,358,236 2,486,368 2,979,171 2,961,225 4,020,077 from which granted to: Corporate off icers: Acquisition date of the shares 19/06/2018 06/06/2019 (a) 21/06/2020 (b) 27/06/2021 (c) 19/06/2022 12/03/2023
End of restriction 19/06/2020 06/06/2021 21/06/2022 27/06/2023 19/06/2022 (d) 12/03/2023 (f)
Number of shares acquired at 31/12/19 2,275,750 2,036,436 147 (e) 168 (e) - -
(b) Three employees have chosen the 4+0 vesting calendar (aquisition at June 21, 2021 with no restricted period), based on the plan rules due to moves out of France during the acquisition period.
(c) Six employees have chosen the 4+0 vesting calendar (aquisition at June 27, 2022 with no restricted period), based on the plan rules due to moves out of France during the acquisition period.
Chief Executive Off icer 19/06/2019 Performance Shares per share adjusted earnings underlying earnings 12/03/2020 Performance Shares per share adjusted earnings underlying earnings
Directors 19/06/2019 Performance Shares per share adjusted earnings underlying earnings 12/03/2020 Performance Shares per share adjusted earnings underlying earnings
Annual Report. This value does not represent a current market value, a current valuation of these performance shares or the actual proceeds if and when the performance shares are acquired.
(a) The performance rate of 114% is composed of: 1/3 x 106% (Adjusted earnings per share) + 2/3 x 118% (Adjusted earnings and Underlying earnings).
(b) The performance rate of 94% is composed of: 1/3 x 106% (Adjusted earnings per share) + 2/3 x 87% (Adjusted earnings and Underlying earnings).
From 1989 to 2018, AXA granted stock options to its corporate off icers and its employees in France and abroad. The purpose of these grants was to associate them with AXA’s share price performance and encourage their performance over the long term. In 2019, aft er having progressively reduced the number of stock options beneficiaries over the past few years, AXA’s Board of Directors, upon recommendation from its Compensation &
On December 31, 2019, more than 2,100 AXA employees held a total of 15,154,663 outstanding options, representing 0.63% of the Company’s share capital on the same date.
Pursuant to this performance condition, the options become fully exercisable only if the AXA share price performs at least as well as the stock reference index of the insurance sector (1).
No option submitted to such performance condition can be exercised as long as this criterion has not been reached. This external performance condition subjects the acquisition of the right to exercise the options to the achievement of a fully objective and public performance and allows to measure the relative performance of AXA compared to its main European competitors over a period of at least three years.
Furthermore, the Board of Directors decided that a second performance condition would apply to the all options granted in 2017 and 2018, pursuant to which beneficiaries would not be able to exercise their stock options in the event the net income of the Group share is negative, and for as long as it remains.
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 22/04/2008 22/04/2008
Expiry date of options 20/03/2019 20/03/2019 02/04/2019 10/06/2019 10/06/2019 21/09/2019 08/12/2019 08/12/2019 19/03/2020 19/03/2020
Exercise schedule of options 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y 33% aft er 2 y 66% aft er 3 y 100% aft er 4 y 100% aft er 4 y
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
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
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
Grant date (Board of Directors or Management Board) 22/03/2013 24/03/2014 19/06/2015 06/06/2016 21/06/2017 27/06/2018
or purchased, from which to be subscribed or purchased by: corporate off icers: The first 10 employees beneficiaries
Representative of employee shareholders to the Board of Directors 24/03/2014 subscription or purchase 4,702 18.68 24/03/2024 Last third of options: SXIP Index 19/06/2015 subscription or purchase 4,487 22.90 19/06/2025 Last third of options: SXIP Index 06/06/2016 subscription or purchase 5,010 21.52 06/06/2026 Last third of options: SXIP Index
AXA implemented a shareholding policy applicable to the main senior executives of the Group. This policy imposes that each executive hold, during the entire duration of his/her functions, a minimum number of AXA shares (the “Minimum Shareholding
AXA shares, ADS AXA or shares of listed Group subsidiaries, held directly or indirectly through Mutual funds or similar investment vehicles, regardless of their acquisition procedure, are taken into account for the purposes of calculating this Minimum Shareholding
Shareholding Requirement within a period of 5 years as from the date of her/his first appointment.
Commercial Code, the Board of Directors has decided that, as long as the Chief Executive Off icer has not met his Minimum
Shares granted to him will be subject to the following restrictions: ■ upon each exercise of these stock options granted, the Chief
Executive Off icer must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise.
These shares shall be held during his entire term of off ice as
Chief Executive Off icer; ■ for Performance Shares granted, the Chief Executive Off icer must, at every performance share acquisition date, hold in registered form at least 25% of the Performance Shares acquired during his entire term of off ice as Chief Executive Off icer.
On December 31, 2019, based on the AXA share value on that date (€25.11), the Chief Executive Off icer meets his Minimum Shareholding
On December 31, 2019, based on the AXA share value on that date (€25.11), the members of the Management Committee held, on average, 2.2 times the equivalent of their fixed annual compensation, it being specified that all members of the Management Committee are still within the 5-year time following their nomination date allowing them to comply with their minimal shareholding requirement.
December 31, 2019, the number of AXA shares or ADS AXA indicated in the table below.
Denis Duverne – Chairman of the Board of Directors 1,558,366 18,734
I Transactions involving Company securities completed in 2019 by the members of the Board of Directors
Detailed information about all of these transactions, as well as individual disclosures filed in accordance with Articles 223-22 and 223-25 of the AMF General Regulations, are published on the Company’s website (www.axa.com) and on the AMF website
Savings Plan of dividends attached to shares held in the Company
Pursuant to the AXA Group Compliance & Ethics Code, corporate off icers and other employees of the Company must refrain from any purchase or sale of AXA securities during specific time periods
Mr. Denis Duverne as former Deputy Chief Executive Off icer of the Company participated, as all other executive employees
Executive Off icer on August 31, 2016, and was appointed Chairman of the Board of Directors as of September 1, 2016, claimed his pension rights according to the collective defined benefit pension scheme as of September 1, 2016. However, Mr. Denis Duverne decided to waive payment of the annuities amounting to circa €750,000 per year before taxes and social security charges, until termination of his term of off ice as Chairman of the Board without any retroactive payment.
Council of April 16, 2014, provides that, as from January 1, 2020, future pension rights must be portable and consequently can no longer be acquired in the existing defined benefit pension scheme.
December 18, 2009. The individual employer contribution rate is set at 0.75% of the total gross compensation, which is not capped (the contribution base is the same as the one used for contributions related to the Social Security General Scheme).
Since December 2016, AXA has implemented a retirement performance shares plan which benefits to all executive employees
Parliament and of the Council of April 16, 2014 on minimum requirements for enhancing worker mobility between Member
States by improving the acquisition and preservation of supplementary pension rights.
Between these performance levels, the number of shares definitely acquired will be calculated, on a linear basis depending on the achieved performance.
AXA’s Chief Executive Off icer representing 3.3% of the total grant.
All retirement performance shares granted are subject to the performance conditions described above and calculated over a three-year period beginning on January 1, 2019, and ending on
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 benefits
(health insurance, life insurance, disability insurance, etc.) to which Mr. Thomas Buberl was entitled as an employee. In this context, the Board of Directors was concerned that the decision of Mr. Thomas Buberl to renounce his employment contract in accordance with the recommendations of the Afep-Medef Code would jeopardize the continuity of his accrued and future social benefits.
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 would continue to have social benefits (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 employee under the 1993 collective agreement covering director-level employees of the insurance sector, but with the addition of performance conditions in accordance with the Afep-Medef recommendations. A severance benefit would be applicable, except in the case of gross or willful misconduct, solely in the event of dismissal or non-renewal further to the Board of
These commitments were approved by AXA’ Shareholders’ Meeting of April 25, 2018. They took eff ect upon Mr. Thomas Buberl’s eff ective renunciation of his employment contract on September 1, 2016, and will continue as such for the duration of his mandate and under any potential renewed mandates.
The Compensation & Governance Committee, the role and composition of which are presented in detail in Section 3.1 of this Annual
Group’s Management and the departments of the Company including Group Human Resources and Group Legal. The Committee is also empowered to undertake or commission specific reviews by external experts when deemed appropriate. Such reviews allow the
AXA’s compensation policy is designed to support the Company’s long-term business strategy and to align the interests of its Management with those of its shareholders and all other stakeholders by (i) establishing a close relation between performance and compensation over the short, medium and long term, (ii) ensuring that the Group can off er competitive compensation that is consistent with the various markets in which it operates while avoiding potential conflicts of interests that may lead to undue risk taking for short-term gain, and (iii) ensuring compliance of the Company’s practices with all applicable regulatory requirements.
In this context, the compensation policy for the Chief Executive Off icer is based on a pay-for-performance approach which (i) requires the achievement of challenging financial and operational targets that are defined and aligned with the Group’s strategy, (ii) promotes long-term sustainable performance while incorporating risk adjustment measures in performance metrics, and (iii) determines the eff ective amount of the actual individual compensation on the basis of both financial and non-financial results.
Thus, the “at-risk” portion of the Chief Executive Off icer’s total compensation (variable compensation and share-based compensation)
represents a significant component of his compensation structure, with a view to aligning his compensation more directly with the operational strategy of the Group and the interests of the shareholders.
The determination of the amount of the Chief Executive Off icer’s fixed 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, skills, as well as criticality and scarcity of such skills, and the Group’s fairness principles or the individual’s compensation history.
With respect to the 2020 fiscal year, the determination of the actual amount of variable compensation to be paid to the Chief Executive
With this evolution, the Board of Directors, upon recommendation from its Compensation & Governance Committee, wished to strengthen the formulaic/quantitative component of the Chief Executive Off icer’s variable compensation, in line with market practices in France and abroad, as well as feedback received from a number of institutional investors.
In order to ensure that AXA remains aligned with current market practice and regulations, both in France and abroad, within the financial industry, the Board of Directors has decided to continue to use a deferral mechanism with respect to the Chief Executive
Should a significant change aff ecting the calculation of the Group’s economic parameters emerge (significant patrimonial transaction approved by the Board of Directors, change in accounting norms…), the Board will be able to calculate the parameters mutatis mutandis , i.e. without taking into account extraordinary external elements.
L.225-100 of the French Commercial Code, should any particular circumstance arise and justify an exceptional adjustment, either upwards (within the limit of 150% of the target variable compensation) or downwards, of one or several of the criteria composing the
This adjustment may apply to the Chief Executive Off icer’s compensation following a justified decision of the Board of Directors, upon proposal by its Compensation & Governance Committee.
Incentives (LTI) to the Chief Executive Off icer in the form of performance shares.
The perfor mance shares granted to the Chief Executive Off icer are entirely subject to demanding internal and external performance conditions (the details of which are presented in Section 3.2 of this Annual Report), which are assessed over a minimum period of three years (followed by a two-year holding period), and do not guarantee a minimum grant or gain. Moreover, the performance shares plan rules provide that in the event the Chief Executive Off icer leaves his position (1 at any time before the end of the performance period, any performance shares initially granted are irremediably lost, unless otherwise decided by the Board of Directors in a motivated decision disclosed at the time of the off icer’s departure (in such case, all or part of the performance shares could be maintained and the vesting calendar and performance conditions of the performance shares set at the grant date would remain unchanged).
Given the principles presented above and following an analysis of practices observed on the market for similar functions in CAC 40 companies of similar size and scope, the Board of Directors, upon proposal of its Compensation & Governance Committee, has decided that the total value of the performance shares to be granted to the Chief Executive Off icer during 2020, shall not exceed 150% of the amount of his annual variable compensation target.
Acquisition of the performance shares is subject to the satisfaction of a performance condition (the details of which are set out in
The commitments made to the benefit of the Chief Executive Off icer regarding social benefits and unemployment benefits are presented in more detail in the 2019 Annual Report.
Appointment of a new Chief Executive Off icer aft er the Shareholder’s Meeting to be held on April 30, 2020
For further information on the Chief Executive Off icer’s compensation, please see Section 3.2 of this Annual Report.
In determining the fixed annual compensation of its Chairman, the Board of Directors has consulted an external advisory firm (Willis
The Board of Directors has also taken into account the extensive role it decided to entrust Mr. Denis Duverne with as Chairman of the
In addition, the Board of Directors has taken into account the fact that Mr. Denis Duverne, who claimed his pension rights on
September 1, 2016, has decided to waive, for the duration of his term of off ice as Chairman of the Board of Directors, payment of his benefits (approximately €750,000 per year) under the supplementary pension scheme for executives within the AXA Group in France, to which he was entitled as from September 1, 2016. Mr. Denis Duverne has decided that he would claim such benefits only aft er the end of his term of off ice, without application of any retroactive payment.
The commitments made to the benefit of the Chairman of the Board of Directors regarding social benefits are presented in more detail in the Statutory Auditors’ special report.
For purposes of this policy only, and in accordance with applicable regulations, the Board of Directors has also considered the hypothetical appointment of a new Chairman of the Board of Directors following the Shareholders’ Meeting to be held on April 30, 2020.
Under such circumstances, the compensation structure applicable to a new Chairman of the Board of Directors 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 fixed 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 companies and in the main European companies in the financial sector; and
The members of the Board of Directors (1) other than the corporate off icers (dirigeants mandataires sociaux) are paid directors’ fees as sole compensation from the Company.
Criteria for allocation of directors’ fees (compensation in accordance with Article L.225-45, paragraph 1 of the French Commercial Code)
For further information on the members of the Board of Directors’ compensation, please see Section 3.2 of this Annual Report.
In December 2008, AXA adopted all of the Afep-Medef recommendations, including the recommendations on the compensation of corporate officers of October 2008, as its
Directors hold or have held over the last five years a nonexecutive directorship in one or more Group subsidiaries owned, directly or indirectly, by AXA, the Company considers that this does not automatically (i) place them in a situation of conflict of interest, or (ii) impair their independence in any way. The Board believes that permitting its members to sit on the Boards of certain Group subsidiaries is beneficial to the
Board’s overall knowledge and appreciation of the Group’s operations, strategy and risk profile. Directors who also serve on the Boards of Group subsidiaries, however, are required to abstain from participating in the decisions of the AXA Board which could aff ect the interests of the entity in which they hold a directorship to prevent potential independence issues.
At its meeting of February 19, 2020 and in accordance with
Article L.225-39, paragraph 2 of the French Commercial Code, the Board of Directors adopted a procedure to regularly assess whether agreements relating to ordinary transactions concluded at arm’s length terms and conditions actually meet these conditions.
Article L.225-38 of the French Commercial Code, regardless of the ordinary nature of the transaction or the arm’s length basis of the agreement. This information enables the Group Legal
agreements procedure provided for under Articles L.225-38 et seq. of the French Commercial Code or whether it is exempt from such procedure. To this end, the Group Legal Department may seek the advice of AXA Group’s other relevant departments and of the Company’s Statutory Auditors.
Legal Department considers that an agreement initially qualified as ordinary and concluded at arm’s length terms and conditions constitutes a “regulated” agreement, the Board of Directors decides on the qualification of the said agreement and on the actions to be taken on it according to the qualification adopted.
In our capacity as Statutory Auditors of AXA, we hereby report to you on regulated agreements.
Commercial Code in relation to the implementation during the year of agreements already approved by the Shareholders’ Meeting.
We performed the procedures that we deemed necessary in accordance with professional standards applicable in France to such engagements. These standards consisted in the verification of the consistency of the information we received with the basis documentation from which they are extracted.
In accordance with Article R.225-30 of the French Commercial Code, we were advised of the following regulated agreements, approved during previous years, which remained in force during the past year.
Agreement with Mr. Denis Duverne (Chairman of the Board of Directors)
Governance of investment strategy and asset & liability management (ALM) 188 4.3 MARKET RISKS 190
Focus on main market risks and sensitivity analyses 192 4.4 CREDIT RISK 197
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 aff ect our business, financial condition, results of operations or cash flows.
The Company’s Risk Management processes, procedures and controls are described in Section 4.2 “Internal Control and Risk
In presenting the risks set forth in this Section 4.1, M anagement has identified the primary categories and the most material risks in a manner that corresponds to management’s current view as to the materiality of such risk factors for the AXA Group, based on the perceived likelihood of the occurrence of such risks and the expected magnitude of their negative impact. As more fully described below, such categories include market-related risks, credit and liquidity-related risks, pricing and underwriting-related risks, operational-related risks, regulatory-related risks and risks related to the ownership of the Company’s shares. Further, there can be no assurance that M anagement’s assessment of the relative importance of such risk factors may not change over time, whether to reflect new information, events, circumstances or otherwise.
Negative developments in economic and financial market conditions, whether on a national, continental or global basis, may materially and adversely aff ect our business and profitability
Our businesses, financial position and results of operations are impacted by global financial market fluctuations and economic conditions generally. While financial market results and economic conditions were generally favorable in 2019, there remains a wide variety of factors which could negatively impact economic growth prospects and contribute to high levels of volatility in financial markets. These factors include, among others, concerns over a potential slowdown in economic growth and levels of consumer confidence generally; current market conditions, including asset valuations and volatility, that may lead to an abrupt and significant repricing in financial markets; the strengthening or weakening of foreign currencies, in particular the US Dollar, against the Euro; the availability and cost of credit; the stability and solvency of certain financial institutions and other companies, including related systemic credit risk concerns; rising trade tensions, “trade wars”, and other governmental measures, either enacted or being contemplated relating to tariff s or international trade agreements and policies; continuing concerns over certain sovereign debt issuers; inflation or deflation in certain markets; central bank intervention in the financial markets, such as the recent decision of the European Central Bank to restart its asset purchase program, and uncertainty regarding potential central bank intervention in European and other markets, through quantitative easing or similar programs or the winding down or cessation of such programs; changes in reference rates, including reforms to and potential changes aff ecting Libor, Euribor and other indices; volatile energy costs; adverse geopolitical events (including acts of terrorism or military conflicts) and rising geopolitical tensions in various regions, including Russia, Ukraine, Latin America,
Syria, Iraq or North Korea; recent developments such as the latest political events in the United Kingdom, Spain, Germany,
In addition, specific concerns regarding the Eurozone, including the financial condition of certain EU sovereign debt issuers, uncertainty regarding membership in the European Union, relationships between European institutions and certain Member
States, potential structural reforms or other changes made to the Euro, the Eurozone or the European Union, have resulted in significant disruptions in financial markets in recent years and could have similar eff ects in the future. In particular, the decision of the United Kingdom to leave the European Union in accordance with Article 50 of the Treaty on European Union, on March 29, 2017 (“Brexit”) and the resulting negotiations between the United Kingdom and the European Union to reach a withdrawal agreement, which entered into force on January 31, 2020 (the “Withdrawal Agreement”), have materially impacted and are likely to continue to materially impact financial markets and macroeconomic conditions. Pursuant to the Withdrawal
United Kingdom to be taken before July 1, 2020. The European
Member State levels in case no agreement on such relationship is reached and, more generally, the United Kingdom’s future relationship with the European Union. While the Group actively follows Brexit-related developments and has developed Brexit contingency plans, there can be no assurance that Brexit and its related consequences will not have an adverse eff ect on the
More generally, to the extent the economic environment in the jurisdictions in which we do business may become characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our financial and insurance products could be adversely aff ected. In addition, in such circumstances, we may experience an elevated incidence of lapses or surrenders on certain types of policies or funds, lower surrender rates than anticipated on other types of products, and our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. These developments could accordingly have a material adverse eff ect on our business, results of operations and financial condition.
Our exposure to changes in credit spreads primarily relates to the impact of such changes on market prices and cash flow variability. A widening of credit spreads will generally reduce the value of fixed income securities we hold (including credit derivatives where we assume credit exposure) and increase our investment income associated with purchases of new fixed income securities in our investment portfolios; and, as issuer, we may be facing increased interest expenses. Conversely, credit spread tightening will generally increase the value of fixed income securities we hold and reduce our investment income associated with new purchases of fixed income securities in our investment portfolios. For additional information on the sensitivity of our
Although we take measures, including hedging through derivative instruments, to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities.
Due to the geographical diversity of our business, we are subject to the risk of exchange rate fluctuations since a significant portion of our shareholdings and investments, revenues and expenses are denominated in currencies other than Euro, while our Consolidated
The impact of inflation on loss costs could be more pronounced for those Property & Casualty lines of business that are considered
“long tail” such as general liability, worker’s compensation and professional liability, and other specialty lines of our AXA XL
We are also subject to deflation risk, which has materialized in the
Eurozone in recent years. Deflation may erode collateral values and diminish the quality of certain investment assets, and may negatively impact customer behavior or otherwise negatively aff ect our business and results of operations.
Business and market conditions as well as accounting rules may impact the amount of goodwill we carry in our consolidated balance sheet, our pattern of DAC, VBI and other intangible assets amortization and the value of our deferred tax assets and deferred participation assets. The value of certain of our businesses is significantly impacted by such factors as the state of the financial markets, particularly equity markets, and ongoing operating performance.
Adverse experience relative to the methodologies, estimations and assumptions used by M anagement in valuing investments and determining allowances and impairments may materially adversely aff ect our results of operations
Certain of our invested assets, for which there is no active trading market or other observable market data, are valued using models and methodologies that involve estimates, assumptions and significant M anagement judgment. During periods of market disruption, a larger portion of our investment assets may be valued using these models and methodologies as a result of less frequent trading or less observable market data with respect to certain asset classes that were previously actively traded in liquid markets. There can be no assurance that our valuations on the basis of these models and methodologies represent, for example, the price for which a security may ultimately be sold or sold at any specific point in time. The choice of models, methodologies and/or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse eff ect on our results of operations and financial condition.
The determination of the amount of allowances and impairments that we recognize with respect to the invested assets we hold varies by investment type, and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. In considering impairments, M anagement considers a wide range of factors, including those described in Note 1.8.2
availability of additional financing to supplement internal liquidity resources will depend on a variety of factors such as market conditions, the overall availability of credit to the financial 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 financial prospects if we incur large investment losses or if the level of our business activity decreases due to a market downturn. While M anagement 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 eff ect on our business, results of operations and consolidated financial position.
(iv) increasing our reinsurance cost, (v) triggering termination provisions or collateral delivery requirements, or requiring us to return unearned premiums to cedants, under certain of our reinsurance and retrocessional agreements, (vi) negatively impacting our ability to obtain financing and/or increasing our cost of financing, (vii) harming our relationships with creditors or trading counterparties and/or (viii) adversely aff ecting public confidence in us. Any of these developments could have a material adverse eff ect on our business, liquidity position, results of operations, revenues and financial condition.
(directly or indirectly) our insurance risks, customers, ceding companies, service providers, partners, 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. We may also have exposures to such counterparties under insurance policies that we have written, including in respect of D&O, surety and similar coverages. Moreover, we are exposed to counterparty risk with respect to certain policies we write that provide coverage to our policyholders for their credit risk exposures to third parties.
Under our reinsurance and retrocessional arrangements (including similar protection aff orded through risk transfer transactions to capital markets), other insurers, reinsurers or capital market counterparties assume a portion of the losses and related expenses under policies we issue, although we remain liable as the direct
(re)insurer on all risks reinsured. While we evaluate periodically the financial condition of our reinsurers, retrocessionaires and capital market counterparties to minimize our exposure to significant losses from reinsurer/retrocessionaire/capital market counterparty insolvencies, such counterparties may become financially unsound by the time their financial obligations to us become due and force us to recapture the reinsured or retroceded business. For information on the ratings of our reinsurers, please refer to Section 4.4 “Credit risk-Risk control and risk mitigation-
The profitability of our businesses largely depends on a variety of factors including social, economic and 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 estimating our risk exposures, determining the pricing of our products, establishing (re)insurance and employee benefits reserves and reporting capital levels and business results (using such industry measures of value as NBV or European Embedded Value (“EEV”)).
(e.g., scenarios, predictive, stochastic and/or forecasting), using both proprietary and third-party models, data analytics and related analyses. Model outputs and related analyses are subject to various assumptions, uncertainties, model errors and the inherent limitations of any statistical analysis (including availability, use, accuracy and relevance of historical, internal and industry data)
and incorporate numerous assumptions and forecasts about market conditions (such as interest rates, inflation and currency exchange rates), capital requirements, loss frequency and severity, and policyholder behavior. The use of such models can also be aff ected by operational risks, including input, data and human error. Adverse experience relative to such assumptions, use of and reliance on inaccurate or incomplete models, or inherent product defects may result in an increase in the pricing of our insurance products or the need for us to strengthen our product reserves, which may in turn have an adverse eff ect on our results of operations and financial position, or lead to litigation.
(which encompasses the recoverability of DAC, VBI and deferred participation assets) involve a significant degree of management judgment. While we use both our own experience and industry data to develop products and to estimate future policy benefits, 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.
Furthermore, 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 eff ect 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 significant impact on our NBV and a corresponding impact on the trading price of our securities.
Catastrophic events are inherently unpredictable. Our exposure to natural and man-made disasters depends on various factors and is oft en more pronounced in certain geographic areas, including major urban centers, with a high concentration of customers, employees and/or insured property and assets.
Our acquisition of the XL Group in 2018 complemented and diversified our existing Property & Casualty Commercial lines portfolio, provided us with additional reinsurance capabilities and further strengthened our specialty platform and presence in
North and Latin America, Europe, Lloyd’s and Asia-Pacific. AXA XL’s operations are significantly exposed to natural and man-made catastrophes and, as a result, our overall exposure to such events has increased compared to prior years.
Catastrophic events, whether natural or man-made, such as hurricanes, tornadoes, windstorms, hailstorms, earthquakes, volcanic eruptions, freezes, floods, explosions, wildfires, pandemic diseases, terrorist attacks, cyber events, systemic cyber failures, military actions, and power grid and other core infrastructure
(e.g., telephony or Internet infrastructures) failures could result in substantial volatility in or adversely aff ect our operations, results, financial condition, cash flows or solvency position, including as a result of claims occurring at higher levels or materially earlier than anticipated; losses resulting from disruptions in our operations or failures of our counterparties to perform; or declines in value of our investment portfolio. We monitor the evolution of these risks closely and generally seek to manage our exposure to them through individual risk selection, modelling and monitoring overall exposures and risk accumulation, purchase of third-party reinsurance and risk transfer transactions to capital markets.
There can be no assurance, however, that we will be able to adequately anticipate such evolution, as a single catastrophic event, an accumulation of losses resulting from several events or an unusual frequency of smaller losses in a particular period may aff ect multiple geographic areas and lines of business, and the frequency or severity of catastrophic events could exceed our estimates. Accounting principles and rules preventing (re)
The occurrence of catastrophic events may also result in an increase of our reinsurance/retrocession for own account and limit or prevent us from obtaining adequate types and amounts of reinsurance/retrocession (or entering into adequate risk transfer transactions to capital markets) for certain risks or regions.
Hubei in the People’s Republic of China, it h as spread across other countries, resulting in reported infections and deaths in numerous countries , including South Korea, Iran, Italy, France, the United Kingdom and the United States , and new cases and fatalities are reported daily. Furthermore, it is currently not possible to know or to predict the extent to which the current levels of reported cases reflect the actual transmission of the virus within populations, and accordingly the scale of the pandemic may be significantly larger than is presently recorded.
Given the very recent emergence of COVID- 19, we are currently unable to predict the potential impact thereof on our business in 2020 or future periods. AXA is monitoring potential adverse eff ects of the spread of COVID- 19 on the Group’s operations and business activities, in particular, the scope and severity of any further downturn in global financial markets and the global economy and consequential impacts on our investment portfolio; the extent of insurance coverage impacted, including L ife, H ealth,
P rotection and P roperty & C asualty insurance and reinsurance cover (following, for example, increased business interruptions, travel and event cancellations and higher medical costs); and on new business. Depending on the rate of transmission and related mortality, COVID- 19 may have material adverse eff ects on our business, operations and financial results.
Historically, Property & Casualty insurers and reinsurers have experienced significant fluctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer/reinsurer, including competition, frequency or severity of loss events, levels of underwriting capacity by region or product line, general economic conditions and other factors, including the development of the insurance-linked securities market and other alternatives to traditional Property & Casualty insurance and reinsurance products. Changes in customer expectations for appropriate premium levels, the frequency or severity of claims or other loss events, including losses incurred by our ceding insurers, or other factors aff ecting the Property & Casualty insurance business may have an adverse eff ect on our results of operations and financial condition.
We employ a range of risk mitigation strategies, including reinsurance for own account and capital markets solutions (such as catastrophe bonds), in order to avoid or limit losses and liabilities.
The failure of any of our Risk Management strategies could result in significant losses and have a material adverse impact on our financial condition, results of operations, and cash flows.
Our business is highly dependent on the eff ective operation of our information technology, telecommunications, electronic data and other operational systems. We rely on these systems to perform necessary business functions, including providing insurance quotes, processing applications and claims, providing information and support to customers and distributors, administering complex products, conducting actuarial analyses and keeping financial records. We also use computer systems to store, retrieve, evaluate and utilize significant amounts of sensitive customer, employee and company data and information, including proprietary and confidential information. Some of these systems, in turn, rely on third-party systems. Systems failures or outages could compromise our ability to perform necessary business functions in a timely manner, which could harm our ability to conduct business and hurt our relationships with our customers and business partners.
In the event of a disruption, our systems may be inaccessible, and our employees unable to perform their duties, for an extended period of time.
For additional information on the risks relating to the protection, processing and transfer of personal data (including customer and employee data), see the paragraph below “The evolving and complex regulatory environment surrounding data protection and transfer in the European Union could increase our costs and adversely impact our business”.
The increasing frequency and sophistication of hacking incidents and other cyber security threats directed at major financial institutions and other corporations recently has made clear the significance of these cyber risks and the damage, both financial and reputational, they can potentially inflict.
Despite the Group’s implementation of a variety of security measures, the Group’s computer systems, technologies and networks, as well as the services we provide or rely on (including mobile and cloud services), may in the future be subject to unauthorized intrusions, such as physical or electronic breakins, cyber-attacks, unauthorized tampering or other security breaches. Like other global financial institutions and companies, the Group has, from time to time, experienced threats to its data, systems, technologies and networks, including malware attacks, unauthorized access, systems failures and disruptions.
AXA Bank Belgium; and the reorganization of AXA Switzerland’s operations in 2018 and 2019. All of these initiatives are designed to focus on operational delivery, reduce our exposure to financial risks (including market, credit and life risks), bring us closer to our customers and demonstrate our commitment to sustainable value creation for our shareholders. There can be no assurance, however, that any or all of such initiatives will be successful, or that the process of achieving their implementation will not cause significant disruption to our business operations, management and personnel in particular periods. Any failure to properly manage and successfully implement these strategic initiatives could in turn materially impact our results of operations, share price, and competitive position.
External growth transactions involve risks that could adversely aff ect our operating results, including the substantial amount of management time that may be diverted from operations to carry out such transactions and related integration eff orts. Such transactions could also result in new debt or equity issuances, financing arrangements, and the incurrence of additional costs, contingent or unforeseen liabilities or risks and impairment and amortization expenses relating to goodwill and other intangible assets, and failure to mitigate the risks and uncertainties arising from such transactions through due diligence and indemnification provisions, all of which could materially and adversely aff ect our business, financial condition, results of operations and growth.
ratio, if any), innovation, operational eff iciencies and business development from acquisitions within the forecast periods or at all, or we may be required to spend additional time and money on integration, any of which could adversely aff ect our business, financial condition, results of operations and growth. In case of adverse developments relating to an acquired company, modifications to our expected strategy with respect to such company, or more generally our overall strategy, might have to be considered. We may also be exposed to liabilities and risks that were not known or assessed correctly at the time of the transaction and/or need to address capital, regulatory, tax or accounting issues that arise aft er transactions have closed, which may not be covered by, or exceed the amounts of, any indemnities provided to us by the sellers and could adversely aff ect our business and results of operations. In particular, we may be subject to, or engage in, litigation in connection with or as a result of acquisitions, which could have an adverse eff ect on our results of operations.
AXA Switzerland from 2018 to 2019, which may have adverse eff ects on our business, financial condition or results of operations. Such divestitures and reorganizations may not be carried out within the expected timeframe or at all, due to the failure to obtain regulatory or other approvals or other reasons; the anticipated profit and/or positive eff ect on our overall risk profile, SCR and
Solvency II ratio may not be realized; or we may incur a loss on such transactions. Divestments of equity participations we hold may also be subject to volatility and other market-related risks, which could impact the carrying value of our remaining stake in such companies, including related goodwill, and adversely aff ect our results of operations. For additional information on the impact of divestitures, acquisitions and other transactions on goodwill, please refer to Note 5 “Goodwill” in Part 5 “Consolidated
In addition, part of our (re)insurance business is underwritten by third parties under contractual arrangements, which typically authorize such third parties to bind us to new policies and to renew policies, within the terms of our licenses and subject to various contractual obligations and restrictions. If these third parties do not abide by the terms of our licenses and breach their contractual obligations to us, we could be subject to fines, penalties, injunctions or other similar restrictions for breach of outsourcing/licensing requirements and be liable under the policies issued by breaching third parties.
We may also not be fully indemnified for the contractual breaches of our third parties.
We and our subsidiaries are subject to evolving solvency and capital adequacy requirements, including the Solvency II
In addition, supervisory authorities may become more conservative in the interpretation, application and enforcement of relevant regulations, as a result of which they may, for example, impose increased reserving requirements for certain types of insurers or certain types of risks, greater liquidity requirements, higher discounts/“haircuts” on certain assets or asset classes, more conservative calculation methodologies or take other similar
has broad resolution powers with respect to insurance groups, insurance holding companies, such as AXA SA, and (re) insurance companies, including prohibiting payment of dividends and ordering portfolio transfers.
A failure of the Group and/or any of its (re)insurance subsidiaries to meet its regulatory capital requirements and/or a deterioration of its solvency position may also result in the need for significant amounts of new capital, which could adversely aff ect our liquidity position, results of operations and financial position.
(the “ComFrame”) developed by the International Association of Insurance Supervisors (“IAIS”) could, in case of adoption of implementing legislation in relevant jurisdictions, result in the imposition of similar or other restrictions on the transfer of funds, including intra-group financing arrangements, which could negatively impact the fungibility of our capital. These factors may adversely impact our liquidity position and capacity to pay dividends.
We may, from time to time, retain insurance or reinsurance obligations and other contingent liabilities in connection with our divestiture, liquidation or run-off of various businesses. We may also, from time to time and in the course of our business, provide guarantees and enter into derivative and other types of off -balance sheet transactions that could result in income statement charges.
Supervision” of this Annual Report. The following summarizes recent developments impacting our required levels of capital and surplus; anti-money laundering and related anti-corruption measures; regulatory pronouncements with respect to interest rate and other “benchmarks”, as well as climate change-related initiatives; and potential developments at Lloyds.
ComFrame, which will apply to IAIGs, including AXA, as well as potential changes to applicable solvency and capital adequacy requirements, such as the regulatory framework established under the Solvency II Directive, could increase operational complexity, regulatory costs and competition. In this regard, a review of the Solvency II framework by the European Commission and
EIOPA is currently ongoing and could significantly and adversely aff ect our Internal Model, EOF or Solvency II ratio, in addition to operational constraints resulting from changes to our group supervision. For additional information on the risks relating to the Solvency II review, see the paragraph above “The Group’s or its (re)insurance subsidiaries’ failure to meet their solvency and capital adequacy requirements could have a material adverse eff ect on our business, liquidity, ratings, results of operations and financial position.”
Corrupt Practices Act, the UK Bribery Act of 2010, French Law
Eonia, and their related benchmark methodologies have been made subject to review. Certain critical benchmarks might be discontinued in the future, including, Eonia, which is currently expected to cease being published on January 3, 2022, and
can be expected to increase our costs in relation to operations, information systems, legal and compliance, and may also limit or restrict our ability to do business or expose us to civil, criminal or regulatory actions, proceedings or sanctions, which may adversely impact our brand or reputation.
Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector or Regulation (EU) 2019/2089 amending the Benchmark Regulation as regards EU Climate
Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks; or (iii) new requirements relating to the inclusion of environmental, social and governance considerations into insurance and Asset Management products and advice. In particular, EIOPA is working towards the integration of sustainability considerations into the prudential and conduct framework for (re)insurance undertakings and insurance distributors. These and similar regulatory requirements, as well as any further regulations regarding the transition to a lower-carbon economy, climate change or our energy-related investments, could increase our legal and compliance costs and adversely aff ect our business or the value of our investments. For further information on investment-related climate risk analysis, please refer to Section 7.3 “Climate change and biodiversity –
In particular, the implementation of IFRS 17 “Insurance Contracts”, which will replace IFRS 4, and IFRS 9 “Financial Instruments” within the Group is in progress and M anagement is currently assessing the impact of their adoption, which may significantly aff ect the accounting treatment of insurance liabilities and financial assets.
Lloyd’s. Following the acquisition of XL Group in 2018, we have been managing, through Catlin Underwriting Agencies Limited,
Syndicate 2003, one of the Lloyd’s largest underwriting syndicates and, as a result, are exposed to a variety of Lloyd’s-related regulatory risks. For instance, the Council of Lloyd’s has wide discretionary powers to regulate members of Lloyd’s, and may vary the method by which the capital solvency ratio is calculated, or impose additional or special levies on members. In addition, if
Lloyd’s fails to satisfy the Financial Conduct Authority (the “FCA”)’s and the Prudential Regulation Authority’s annual solvency test in any given year, Syndicate 2003 could be required to cease or reduce underwriting through Lloyd’s. A downgrading of the
National Association of Insurance Commissioners (the “NAIC”). If some or all of the issuing banks under our credit facilities cease to be NAIC approved and we are unable to replace them with
The global nature of our business exposes us to a wide variety of local political, regulatory, business and financial risks and challenges, which may aff ect 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.
We have been and may become in the future subject to lawsuits and/or regulatory investigations which may aff ect our business, brand, reputation, relations with regulators and/or results of operations
Union, which could adversely aff ect our business if we fail to timely adapt our rules, internal controls and strategy to the emerging regulatory environment.
Regulation (EU) 2016/679 of April 27, 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (as amended, the
“GDPR”) entered into force on May 25, 2018. GDPR significantly modified the EU data protection framework and, in particular, imposed new restrictions on data usage/processing (including profiling), disclosure to customers and a stronger enforcement regime, under which competent data protection authorities will be able to fine companies which do not comply with EU rules up to 4% of their global annual turnover. While we have adopted a global Data Privacy Organization/Governance policy designed to manage risks related to data protection, there can be no assurance that our existing or planned data protection rules, including our privacy-related Group Binding Corporate Rules, and governance organization will not need to be updated or replaced to comply with new laws and regulations and regulatory guidance applicable in the European Union or other jurisdictions where we operate or may operate in the future.
Group entity or a third-party service provider, could result in significant regulatory sanctions, penalties, injunctions or other similar restrictions, damage to our reputation, need to compensate customers, customer litigation (including class actions and individual lawsuits), and consequently have a material adverse eff ect on our business, results of operations and prospects.
Regarding transfer of data to the United States, following invalidation in 2015 of the European Commission’s Safe Harbor
Decision”), which allowed under certain conditions for the transfer of personal information from EU companies to US companies, transatlantic data flows between companies continued using other mechanisms, such as standard contractual clauses with
US companies and binding corporate rules for transfers within a multinational corporate group. While a new safe harbor, referred to as the “EU-US Privacy Shield”, was adopted in July 2016, banks and (re)insurance companies are generally not currently eligible to register on the EU-US Privacy Shield list and the AXA Group has accordingly been relying on the above-mentioned mechanisms to transfer personal data from the Company or its EU-based aff iliates to its banking and (re)insurance aff iliates based in the
United States. While we currently anticipate that we can continue using such mechanisms to transfer data into the United States, there is no guarantee that such mechanisms will not be subject to challenge or to stricter scrutiny by the competent authorities or that further changes in the regulation will not potentially increase our legal and compliance costs, or result in regulatory sanctions or damage to our brand or reputation.
In addition, Brexit could significantly impact transfers of data to or from the United Kingdom if no agreement is reached between the
United Kingdom and the European Union, with its consequences being comparable to those of the 2015 ECJ Decision. EU-UK data flows between companies would continue, but rely on other mechanisms than before Brexit, such as standard contractual clauses with UK companies and binding corporate rules for transfers within a multinational corporate group. Although we currently anticipate that we can continue using such mechanisms to transfer data to or from the United Kingdom, there is no guarantee that such mechanisms will be fully implemented in time by all external providers, given the overall uncertainty surrounding a potential withdrawal agreement, contingency plans at EU and Member State levels and, more generally, the
There can be no assurance that such mechanisms will not be challenged or impeded by competent authorities or as result of amendments to applicable regulations, or that Brexit and its related consequences will not increase our legal and compliance costs, result in regulatory sanctions or damage to our brand or reputation, or otherwise have an adverse eff ect on the Group’s business and financial condition.
As a global company operating in numerous jurisdictions, we are subject to various tax regimes and regulations. Changes in tax laws could result in higher tax expenses, payments and compliance costs. In particular, while we continue to expect the Tax Cuts and
Uncertainties in the interpretation or future developments of tax regimes, including the development of the US tax system following the enactment of the US Tax Act, may aff ect our tax liability, return on investments and business operations. We have been and may increasingly become exposed to the risk of tax audits and investigations in the various jurisdictions in which we operate. The international tax environment continues to change as a result of actions taken by the OECD, the European
The Mutuelles AXA, which comprise two French mutual insurance companies, together held 14.45% of the Company’s outstanding shares and 24.21% of its voting rights as of December 31, 2019.
The Mutuelles AXA have stated their intention to collectively vote their shares in AXA and may have interests conflicting with other shareholders’ interests. For example, even though the Mutuelles
AXA do not hold a majority of the total voting rights in AXA, eff orts by the Mutuelles AXA to decline or deter a future off er to acquire control of AXA, which other shareholders may find 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.
To manage these risks, the Group has put in place a comprehensive system of internal control and risk management designed to ensure that executives are informed of significant risks on a timely basis and can manage these risks, so that the Consolidated
line of defense responsible for day-to-day risk and control management and decision-making
line of defense responsible for providing independent assurance on the eff ectiveness of the overall control environment
Internal Model and any subsequent changes made to it as well as the analysis of the performance of this model and the production of summary reports thereof. The holder of the Risk
Management function, including the internal control function, at Group level is the Group Chief Risk Off icer; ■ the compliance function is responsible for advising on compliance with laws, regulations and administrative provisions regarding insurance, reinsurance, asset management and banking activities as well as monitoring that compliance is eff ective. The compliance function holder at Group level is the
Group Chief Compliance Off icer; ■ the internal audit function is responsible for performing an evaluation of the adequacy and eff ectiveness 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. The internal audit function holder at Group level is the Global Head of
The holders of key functions have direct access to the Board of
Solvency II, are deemed to be “persons who eff ectively run” the
Group, and the key functions holders must fulfil the requirements for a fit and proper assessment, as set in the Group’s internal policy, adopted in compliance with the requirements of the
Solvency II regulation, both at appointment and on an ongoing basis. These requirements are: ■ appropriate competence and capability, taking into account professional qualifications, training, knowledge and relevant experience including understanding of regulatory requirements to enable sound and prudent management (fit); and
Furthermore, appointments to any of these positions must be notified to the French Autorité de contrôle prudentiel et de résolution
(2) Until December 31, 2019, the Group Deputy Chief Executive Off icer – Group Chief Financial Off icer was also deemed to be a “person who eff ectively runs” the Group.
Management is in place across the Group. In this context, it can undertake all controls and verifications as it deems appropriate.
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 Risk Management related issues.
The scope of the Audit Committee’s responsibilities is set forth in the Audit Committee Terms of Reference, approved by the Board of Directors and available on www.axa.com.
The Finance Committee examines the impact on capital and solvency at Group level of the main orientations and limits of the
Asset-Liability Management (“ALM”) policy; and reviews the risk appetite framework developed by the Executive Management for financial, insurance and operational exposures.
The Audit Risk and Compliance Committee (“ARCC”) was created in 2016 by the Chief Executive Off icer with the view to strengthening the Group’s overall Risk Management governance and is chaired by the Group General Counsel with the purpose of reviewing all material audit, risk and compliance issues faced by the Group.
Solvency II reports (Group Solvency and Financial Condition report, Group Regular Supervisory Report, Actuarial Function
Liquidity Risk Management Plan, Recovery Plan); ■ the major findings identified by internal audit; and
Chief Risk and Investment Off icer. This Committee determines the Group ALM policies and ensures that the Group exposures are within the Group risks limits; ■ for operational, other material risks (strategic, reputation, emerging) and internal control: the Operational Audit Risk &
As an integrated part of all the Group’s business processes, GRM
The ERM framework is based on the following five pillars, cemented by a strong risk culture: Extensive use of Internal Model based on a robust economic capital metric
1. Risk Management independence and comprehensiveness: Chief Risk Off icers are independent from operations (first line of defense) and Internal Audit department (third line of defense). The Risk Management Department, together with the Compliance and Internal Control departments, constitute the second line of defense, whose objective is to develop, coordinate and monitor a consistent risk framework across the Group; 2. Common risk appetite framework: Chief Risk Off icers are responsible for ensuring that senior management reviews and approves the risks to which the relevant entity or business unit is exposed, understands the consequences of an adverse development in such risks, and have action plans that can be implemented in case of unfavorable developments; 3. Systematic second opinion on key processes: Chief Risk
framework. The Internal Model is designed as a consistent and comprehensive Risk Management tool, which also forms an important element in the capital management and planning process; 5. Proactive Risk Management: Chief Risk Officers are responsible for early detection of risks. This is ensured through challenge of and constant dialogue with the relevant business and supported by the AXA Group’s emerging risks management framework.
GRM oversees the operating entities’ adherence to the ERM, supported by the local Risk Management teams. It coordinates
Group. Since September 2019, the former Group Insurance Off ice teams have been fully integrated within GRM. They gather Life &
Savings, Health & Protection, and Property & Casualty business experts in charge of promoting technical excellence and ensuring compliance with Group insurance guidelines and standards.
Since September 2019, the newly created Portfolio Management team is in charge of steering the Group Solvency ratio in cooperation with Finance, and initiating, supporting or conducting initiatives aiming at optimizing further AXA Group balance sheet from a risk and solvency perspective (encompassing both the assets and the liabilities). The Head of Portfolio Management reports to the Group Chief Risk and Investment Off icer.
reports to the Group Chief Risk and Investment Off icer. Its main mandate is to contribute to the protection of the Group through the centralization of the Group’s purchase of reinsurance. For additional information on the reinsurance strategy, please see
Executive Management and the Board of Directors on applicable compliance laws, regulations and administrative provisions, and on the impact of regulatory change on AXA Group’s operations.
The Group Compliance function provides expertise, advice and support to AXA entities to assess significant compliance matters, analyzes the major compliance risks and contributes to designing solutions to mitigate the risks to which the Group is exposed. The
Group Compliance function manages a wide range of compliance related matters including (i) financial crime (which includes anti-bribery and corruption, anti-money laundering programs and international sanctions/embargo compliance), (ii) data privacy, (iii) compliance & ethics, (iv) the monitoring of other major compliance and regulatory risks, and (v) regular reporting of significant compliance and regulatory matters to Executive
The Compliance section of the Group Standards contains standards and policies on significant risk areas aff ecting compliance activities and sets out the high-level controls and monitoring principles to which the entities must adhere. Adherence to the Standards and
Risk Assessment exercise via which entities are required to identify the most significant compliance risks to which they are exposed. Based on this assessment, an Annual Compliance Plan is developed for the following year. Based on the same methodology and to comply with the French extraterritorial law (Sapin II), an
To further strengthen its control environment, the AXA Group established in 2017 a centralized Internal Control function within the second line of defense independent from business operations.
Group Head of Internal Control is reporting to the Group Head of
The Internal Control framework of the AXA Group: ■ is based on the principle of proportionality and takes into account the nature, scale and complexity of the entities operations; ■ is aligned with the COSO “Internal Control – Integrated
Executive Management with a view of the risk and control environment; ■ is underpinned by the Group Internal Control Standard and
Financial Control, please refer to the paragraphs “Financial reporting, disclosure, controls and procedures” and “Internal
On a regular basis, the Group Internal Control reports to the Group
Group Internal Audit sets an annual plan of work, based on an assessment of both the inherent risk and the adequacy of controls as well as consideration of the audit cycle. The plan is formally approved and its performance formally monitored by the Group
They are mandatory for all Group entities within scope unless otherwise indicated. The Standards focus on critical requirements and form part of the overall Risk Management framework which allow the Group to have a clear understanding of risks, both locally and Group-wide.
Chief Executive Off icers are required to certify annually to the
Group Chief Risk Off icer to ensure the alignment of central and local interests.
The minimum missions required for local Risk Management teams are: ■ coordinating the second line of defense locally (which covers among others Compliance, Internal Control, Security) through a specific system of governance framework; ■ ensuring that the risk appetite is implemented with respect to all risks consistently with the Group’s risk appetite, with enhanced reporting, risk limits and decision processes; ■ providing a second opinion on key processes, such as the definition of characteristics for new products before launch, reserves, ALM studies & asset allocation and reinsurance strategies; ■ with respect to the Internal Model, checking the adequacy of the local risk profile, and implementing, testing and validating the Internal Model.
Group Chief Risk Off icer chairs the Chief Risk Off icers’ meeting composed of the Chief Risk Off icers of AXA’s main subsidiaries, that meets on a quarterly basis and have monthly calls.