CORPORATE GOVERNANCE 95 2.1 Corporate offi cers, executives and employees 96 2.2 Full disclosure on executive compensation and share ownership 115 2.3 Major shareholders and related party transactions 145 2.4 The offer and listing 152
CONSOLIDATED FINANCIAL STATEMENTS 197 4.1 Consolidated statement of fi nancial position 198 4.2 Consolidated statement of income 200 4.3 Consolidated statement of comprehensive income 201 4.4 Consolidated statement of changes in equity 202 4.5 Consolidated statement of cash fl ows 206 4.6 Notes to the Consolidated Financial Statements 208 4.7 Report of the Statutory Auditors on the Consolidated Financial Statements 343
Appendix IX Commission regulation of April 29, 2004 – Correspondence table 416
Registration Document corresponding to these required disclosures have been approved by AXA’s Board of Directors and are presented in the table page 415 of this Annual Report).
and/or “we” refer to AXA SA together with its direct and indirect consolidated subsidiaries. The Company’s ordinary shares are referred to in this Annual Report as “shares”, “ordinary shares”
Paris, which we refer to in this Annual Report as “Euronext Paris”.
Annual Report as “ADS”. Since the delisting of AXA’s ADS from the New York Stock Exchange on March 26, 2010, AXA’s ADS are traded on the U.S. over-the-counter market and are quoted on the OTCQX platform under the ticker symbol AXAHY. Each ADS
The average and closing exchange rates used in the preparation of the consolidated fi nancial statements, to translate into Euro the results of operations of the principal subsidiaries that are not denominated in Euro, are set out in the table below: E nd of Pe rio d Exchange Rate Average Exchange Rate
in analyzing its business operations and presenting its fi nancial results which may not be comparable with terms used by other companies. These terms are defi ned in the glossary provided at the end of Section 1.3 in Part 1 – “The AXA Group” of this
Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predictions of, or indicate, future events, trends, plans or objectives. Undue reliance should not be placed on such statements because they are by nature subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and AXA’s plans and objectives to differ materially from those expressed or implied in the forward-looking statements (or from past results). These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future weatherrelated catastrophic events or terrorist related incidents. Please refer to Part 3 – “Regulation, risk factors, certain disclosures about market risks and related matters” of this Annual Report for a description of certain important factors, risks and uncertainties that may affect AXA’s business and/or results of operations. AXA
undertakes no obligation to publicly update or revise any of these forward-looking statements, whether to refl ect new information, future events or circumstances or otherwise.
Consolidated underlying earnings, adjusted earnings and net income Group share 35
(a) Includes investment income net of investment management costs, impairments, net realized investment gains and losses and net unrealized investment gains and losses on assets with fi nancial risk borne by the policyholders and on assets designated as at fair value through profi t & loss.
(c) Shareholders’ equity per share is calculated based on the actual number of outstanding shares at each period-end presented. Shares held by AXA and its subsidiaries (i.e. treasury shares) are deducted for the calculation of outstanding shares. Undated debt is excluded from Shareholders’ equity for this calculation.
(d) An annual dividend is generally paid each year in respect of the prior year after the Annual General 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 €1.10 per share will be proposed at AXA’s Shareholders’ Meeting that will be held on April 27, 2016. The dividend will be paid out on May 10, 2016, with an ex-dividend date of May 6, 2016.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on its outstanding undated debt securities. During the last quarter of 2015, AXA indicated that it targets to pay aggregate dividends in a general range of 45% to 55% of this amount (which represents an increase from the prior indicative range of 40% to 50% that had guided
AXA’s dividend policy over the past several years). The dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors (as noted above) which may have an impact on this target from one year to another. In assessing the dividend to be paid in any given year, M anagement tries to strike the appropriate balance between (i) prudent capital management, (ii) reinvestment of previous results to support business development and (iii) an attractive dividend for shareholders.
(b) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.28 per share for fi scal year 2011.
(c) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.29 per share for fi scal year 2012.
(d) Individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. €0.32 per share for fi scal year 2013.
(f) Proposal to be submitted to the Shareholders’ Meeting to be held on April 27, 2016. Individual shareholders who are residents of France for tax purposes will be eligible for a tax relief of 40% on the dividend, i.e. €0.44 per share for fi scal year 2015.
For further information on AXA’s dividend policy, see Part 4 – “Consolidated Financial Statements” and Part 5 – “Certain Additional
AXA is a French société anonyme (a public company) existing under the laws of France. The Company’s registered offi ce is located at 25, avenue Matignon, 75008 Paris, France and its telephone number is +33 (0) 1 40 75 57 00. AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059.
Sale of (i) AXA’s Australian & New Zealand operations and acquisition of the AXA APH Asia Life operations; and (ii) AXA
Re” ), the leading reinsurer in Africa (1); (ii) BRE Insurance, mBank’s Property & Casualty subsidiary in Poland; (iii) the P&C
Lifestyle Protection Insurance, the 7th creditor insurance player in Europe (2); Launch of (i) AXA Strategic Ventures, a €230 million venture capital fund dedicated to emerging strategic innovations in fi nancial services; and (ii) Kamet, a €100 million InsurTech incubator dedicated to conceptualizing, launching and accompanying disruptive products and services for insurance clients; and
Note 2 “Scope of consolidation” included in Part 4 – “Consolidated Financial Statements” of this Annual Report.
At January 20, 2016, the relevant ratings for the Company and its principal insurance subsidiaries were as follows: Agency Rating Outlook
The ratings set forth before may be subject to revision or withdrawal at any time by the assigning rating agency. None of these ratings is an indication of the historic or potential performance of AXA‘s ordinary shares, ADSs, ADRs or debt securities and should not be relied upon for purpose of making an investment decision with respect to any of these securities.
The Company accepts no responsibility for the accuracy or reliability of the ratings.
(a) Defi nition of Vigeo Eiris ratings: --: least advanced; -: companies that fall below the average for their sector; =: companies that are within the average for their sector; +: active companies; ++: the most committed companies in the sector.
The Company is the holding company for the AXA Group, a worldwide leader in fi nancial protection. Based on available information at December 31, 2015, the AXA Group was the world’s largest insurance group with total assets of €887 billion and consolidated gross revenues of €99 billion for the year ended December 31, 2015. Based on available information at December 31, 2015, the AXA Group was the world’s 10th largest asset manager (1) with total assets under management of €1,363 billion.
Pacifi c Region and, to a lesser extent, in other regions including the Middle East, Latin America and Africa.
The table below sets forth the total assets managed by AXA’s subsidiaries, including assets managed on behalf of third parties: ( in Euro million)
Fees and charges relating to investment contracts with no participating feature 371 327
For additional information on markets, see Section “Insurance and Asset Management Markets” included in Section 1.3
Health products marketed to individual and commercial clients. The Life & Savings products offered by AXA include term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. The Health products offered include critical illness and permanent health insurance products. The types and specifi cities of the products offered by AXA vary from market to market.
Gross written premiums by main product lines (a) Years ended December 31,
Contracts with fi nancial risk borne by policyholders (Unit-Linked) 17,383 30% 15,650 29% 195,005
(b) Includes revenues from other activities (mainly commissions and related fees on Mutual funds sales).
To attract and retain clients, especially in the segments identifi ed as strategic, AXA has developed solutions designed to meet the needs of the targeted customer groups. In addition, new products are designed to support AXA’s cross-selling strategy and thus improve client retention and enhance value for the clients. AXA also aims to reuse across markets successful products and experiences developed for individual country markets.
Company’s products on an exclusive basis; ■ Direct sales relate to all sales made through mail, telephone or internet; ■ Brokers are independent fi rms that negotiate with insurance companies, in return of a commission, on behalf of customers seeking coverage. As opposed to exclusive agents, brokers usually work with different insurance companies; ■ Independent Financial Advisors (IFAs) are individuals or fi rms that provide fi nancial advice to customers and negotiate related policies with insurance companies on behalf of customers. IFAs usually work with different insurance companies; ■ Aligned distributors are independent individuals or fi rms who have chosen AXA to provide them with a full range of dealership services. They negotiate, on behalf of customers, policies of various insurance companies among a range of products selected by AXA; ■ Distribution partnerships are generally structured as sales agreements between an insurance company and another company from the fi nancial services industry, especially banks, or from other industries. This may take the form of a joint venture between the insurance company and its partner or an exclusive or non-exclusive distribution arrangement.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2015 and 2014, is presented below: Based on gross revenues in 2015
Total surrenders and lapses for 2015 amounted to €28,638 million (2014: €28,096 million) and the ratio of surrenders and lapses was 6.3% (2014: 6.8%).
The Group has implemented an organization by global business line since 2010 to support a new stage of its development. AXA
In addition, the Group announced in December 2014 the creation of a third global business line (alongside the global business lines Life & Savings and Property & Casualty)
In the Property & Casualty segment, AXA operates mainly in the largest Western European markets. AXA also offers Personal and Commercial Property & Casualty insurance products in other countries in Central and Eastern Europe as well as in Asia
AXA’s Property & Casualty insurance operations offer a broad range of products including Motor, Household, property and general liability insurance for both Personal and Commercial customers (targeting mainly small-to medium-sized companies)
The split of distribution channels used by AXA’s Property & Casualty operations (excluding Direct), based on gross revenues for the year ended December 31, 2015 and 2014, is presented below: Based on gross revenues in 2015
& Casualty strategy and objectives. AXA Global P&C is responsible for managing activities that have been identifi ed as being critical to the profi tability and growth of the Group’s
Property & Casualty business: cost control, optimized claims management, creation of a professional family made up of
Property and Casualty, loss prevention, risk management, underwriting and claims handling and to specialty markets
(Marine, Aviation, Space) worldwide; ■ AXA Global Life and AXA Global Property & Casualty, alongside their role of global business lines, are in charge of analysis, structuring and placement of reinsurance treaties on behalf of AXA Group insurance companies to a selection of third party reinsurers. AXA Global P&C activity is mainly driven by its Property pool which provides AXA entities with cover on natural catastrophes; ■ AXA Assistance is the Group subsidiary committed to servicing its customers in emergencies and everyday situations. AXA Assistance operates through four business lines (Vehicle, Travel, Health and Home) to offer customer focused services; ■ AXA Liabilities Managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios; ■ AXA Corporate Solutions Life Reinsurance Company is a reinsurance company in the United States, in run-off, notably managing a book of reinsurance contracts of Variable
AXA Corporate Solutions Assurance: In the global risks market, AXA Corporate Solutions Assurance is acting at a worldwide level with multinational clients placing their risks beyond their countries of origin via international programs or in key global market places. AXA Corporate Solutions Assurance underwrites large insurance risks such as property damage, liability, construction risks, Motor fl eet, marine and aviation.
AXA Corporate Solutions Assurance also offers loss-prevention and risk management services.
AXA Corporate Solutions Assurance reviews annually its exposure to ensure that the risks underwritten are diversifi ed geographically and by lines of business in order to manage concentration risk. In 2015, AXA Corporate Solutions Assurance ceded €909 million of premiums (2014: €779 million) to thirdparty reinsurers.
(2014: €760 million), mainly for Property & Casualty business but also for Life & Savings business.
The development of asset management activities is a key part of AXA’s fi nancial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the management’s belief that its asset management expertise will enable AXA to benefi t in the future from the expected growth in savings-related products in the markets where it operates. For the year ended December 31, 2015, the
Assets backing contracts with fi nancial risk borne by policyholders (Unit-Linked) 57,179 51,999
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on asset management companies only. AXA Group (including insurance companies) assets under management amounted to €1,363 billion as of December 31, 2015.
Holding) is listed on the New York Stock Exchange under the ticker symbol “AB”.
AB’s offering includes: ■ diversifi ed investment management services through separately managed accounts, hedge funds, Mutual funds, and other investment vehicles to private clients (such as high net worth individuals and families, trusts and estates, and charitable foundations); ■ management of retail Mutual funds for individual investors; ■ management of investments on behalf of institutional clients; and
■ fundamental research, quantitative services and brokeragerelated services in equities and listed options for institutional investors.
At December 31, 2015, AB had €454.9 billion of assets under management, including €323.6 billion of assets managed on behalf of third party clients (2014: €412.6 billion and €300.0 billion, respectively). AB accounted for €2,580 million or 68% of the Asset Management segment consolidated gross revenues for the year ended December 31, 2015 (2014: €2,175 million or 65%).
AXA IM, headquartered in Paris, is a signifi cant player in the international Asset Management business. AXA IM provides its clients with a wide range of global products and expertise principally via Mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (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 expertises include (i) Fixed Income,
At December 31, 2015, AXA IM had €669.4 billion of assets under management, including €246.5 billion of assets managed on behalf of third party clients (2014: €623.0 billion and €222.3 billion, respectively). AXA IM accounted for €1,242 million or 32% of Asset Management segment consolidated gross revenues for the year ended December 31,
at year-end 2015. The major activities of AXA Bank are loans, deposits and investment funds. These products are mainly sold through the tied agent network of AXA Germany.
In Europe and in the US, the sustained low interest rate environment led to a continuing shift in insurers’ investment portfolio mix towards higher-risk assets such as equities, and less liquid assets such as infrastructure and private equity.
Low interest rates have driven insurers in many countries to reduce guarantees and profi t sharing. Regulatory changes have also made savings-type insurance more expensive through measures such as higher capital requirements for long-term guarantees, decreasing their attractiveness for both policyholders and insurers.
China, India and most other Asian countries. In China, premium income growth was supported mostly by sales of traditional life policies, while Unit-Linked investment products and participating life policies were negatively hit in 2015 by stock market volatility.
France 3 8.9 3 8.8 FFSA as of January 31, 2016 and January 31, 2015.
United States Life 17 1.7 18 1.8 LIMRA Life sales as of September 30, 2015 and December 31, 2014.
United Kingdom – Platform funds under management 2.6 2.5 Platforum reports for UK platform market as of September 30, 2015 and September 30, 2014.
Japan 18 1.6 18 1.7 Life Insurance Association Japan of Insurance Research Institute (excluding Kampo Life) for the 12 months ended September 30, 2015 and December 31, 2014.
Germany Health 5 7.5 Market Factbook 2014. 2015 information not available.
Switzerland 2 27.0 2 28.5 SIA (Swiss Insurance Association) as of December 31, 2015 and December 31, 2014; Market share based on statutory premiums and market estimations by the SIA.
Belgium 2 12.6 2 11.9 Assuralia (Belgium Professional Union of Insurance companies) based on gross written premium as of September 30, 2015 and December 31, 2014.
Italy 6 5.1 Associazione Nazionale Imprese Assicuratrici (ANIA). Ranking and Market Share as of December 2014. 2015 information not available.
Greece 8 3.2 Hellenic association of Insurance Companies as of December 31 2014. 2015 information not available.
India 18 1.4 14 1.5 IRDA statistics as of November 30, 2015 and December 31, 2014 measured on fi rst year premium.
Philippines 2 11.6 Insurance Commission as of December 31, 2014 measured on total premium income. 2015 information not available.
In most European countries, the P&C market showed a limited slowdown, with growth sustained by moderate tariff increases in Germany, France and the United Kingdom. On the contrary,
Italy saw its premium income decrease sharply in a very soft
Europe still benefi ting from prior year releases and low level of natural catastrophes. However, profi tability was impacted by lower reinvestment yields in most economies.
France 2 15.0 2 15.1 FFSA as of January 31, 2016 and January 31, 2015.
United Kingdom 2 7.9 Based on 2014 PRA Returns. 2015 information not available.
Spain 5 5.7 4 6.3 Spanish Association of Insurance Companies. ICEA as of September 30, 2015 and December 31, 2014.
Greece 7 5.5 Hellenic Association of Insurance Companies as of December 2014. 2015 information not available.
Mexico 2 11.6 2 13.6 AMIS (Asociacion Mexicana de instituciones de Seguros) as of September 30, 2015 and December 31, 2014.
Turkey 3 11.3 2 13.6 Turkish Association of Insurance Companies as of November 30, 2015 and December 31, 2014.
After several years of soft underwriting conditions, corporate risks insurance pricing conditions continued to tighten in 2015, across all business lines.
In a market environment characterized by low interest rates and high volatility, Institutional investors focusing on balance sheet management have implemented further risk-mitigating strategies and transferred risk from the institution’s balance sheet to the end investor, mainly translating into a shift from
Main Funds to Unit-Linked for Insurance Companies. With more funding or solvency fl exibility, Institutional investors have reconsidered equity investments and further increased and diversifi ed their allocation to credit assets such as High Yield, loans and private debt, and to Real Estate and Infrastructure investments. Moreover, in the context of the COP21 conference,
(1) Ranking established by AXA based on information available as of September 30, 2015.
In 2015, markets were impacted by the monetary policy divergence between the Fed and the European Central Bank
(ECB), another bout of uncertainty in Greece, the migrant crisis in Europe, further declines in commodity prices, and concerns about China and emerging markets more generally. 2015 started with the implementation of new policies by the Swiss
In the US, economic growth was stable in 2015 compared to 2014, at around 2.5%, driven mainly by Household consumption and construction investment. Fixed investment was hampered by lower corporate profi ts, because of the
In the Eurozone, economic expansion accelerated to 1.5% in 2015. Private consumption, especially in Spain, contributed most while public spending proved more dynamic than in previous years. The Euro depreciation, fall in oil prices and low interest rates, especially in peripheral countries, counted as additional tailwinds. Infl ation surprised again on the downside
In Switzerland on January 15, 2015, the SNB decided to discontinue the minimum exchange rate of 1.20 Swiss Franc per Euro and to decrease the interest rate on sight deposit balances to -0.75%. As a consequence, the Swiss Franc increased sharply against the Euro.
August, markets struggled to digest the communication around changes of the foreign exchange regime towards a more fl exible
(Latin America, Middle East). Expectations around US monetary policy also triggered volatility that hit emerging markets through capital outfl ows. Finally, political instability in Brazil, Turkey and in the Middle East added to these worries.
FTSE 100 index in London decreased by 4.9% in 2015. The
The MSCI G7 index remained stable and the MSCI Emerging index decreased by 8.0%. The S&P 500 implied volatility index
Eurozone peripheral countries decreased steeply: -28 bps to 1.60% in Italy, -121 bps to 8.39% in Greece, -15 bps to 2.54% in Portugal and -10 bps to 1.15% in Ireland. The Swiss 10-year government bond yield also decreased by 44 bps to -0.07% following the SNB’s decisions announced early 2015.
In Europe, the iTRAXX Main spreads increased by 14 bps to 77 bps compared to December 31, 2014 while the iTRAXX
Crossover decreased by 31 bps to 315 bps. In the United
(“Africa Re”), the leading reinsurance company in Africa (1), for a total consideration of USD 61 million (or €54 million (2)).
Africa Re is the #1 reinsurer in Africa, operating across the continent. It was founded in 1976 by the member states of the African Union and the African Development Bank (ADB).
This transaction allows AXA to increase its exposure to the fast growing reinsurance and insurance markets in Africa, in line with its Ambition AXA strategy, by participating in the successful and profi table development of Africa Re. Moreover,
AXA completed the acquisition of BRE Insurance, mBank’s Property & Casualty subsidiary in Poland
BRE Insurance is mBank’s Property & Casualty captive insurance subsidiary which underwrites mainly Motor, Payment
Protection and Household Insurance. It is a fast-growing company with 15% annual premium growth from 2010 to 2013. With most of its Motor policies sold online, it allows
AXA to strengthen materially its presence in the Direct Motor channel in Poland.
AXA completed the acquisition of the private medical insurance business of Simplyhealth
AXA accelerates its development in the Philippines by extending its successful partnership with Metrobank to Property & Casualty
Trust Company (“Metrobank”) to cover Property & Casualty insurance. As part of the transaction, AXA Philippines would acquire 100% of Charter Ping An Insurance Corporation
(“CPA”) from GT Capital. The total cash consideration to be paid by AXA Philippines would amount to PHP 2.3 billion
CPA is the #5 Property & Casualty insurance player in the
(4) Africa Re’s 2013 Property & Casualty reinsurance market shares: Nigeria, 28.5%; Egypt, 9.1%. Source: Africa Re Information Memorandum, based on 2013 gross written premiums.
(7) EUR 1 = PHP 51.3309 as of November 3, 2015.
GDP in 2014 (2)), expected to increase over the next years.
On November 30, 2015, AXA announced that it had completed the acquisition of 100% of Commercial International Life
CIB is the #1 private-sector bank in Egypt (4) with ca.
CIL is the #3 Life & Savings insurance player in Egypt with a 15% market share (5) and offers both Unit-Linked and Protection products. It is a fast-growing company with 23% annual premium growth from 2012 to 2014, and a strong business performance over the fi scal year 2015 (6).
Middle East and Africa. It will also support the shift in business mix towards more Unit-Linked and Protection & Health products, in line with the Ambition AXA strategy.
Insurance Co. Ltd (“Bharti AXA GI”). This operation further strengthens the existing partnership between Bharti and AXA
In fi scal year 2014-2015 (7), Bharti AXA Life recorded INR
INR 14.6 billion (or €214 million (8)) of gross direct premiums, achieving a growth of 18% on average over the past 3 years.
(3) EUR 1 = EGP 8.31 as of November 26, 2015.
(7) April 1, 2014 – March 31, 2015: Premiums are expressed in Indian GAAP (source: companies’ public disclosure).
The combined operations rank #3 within the creditor insurance market in Europe, with a 9% market share (1), and will be a
Genworth LPI is the #7 creditor insurance player in Europe (with 4% market share (1)), providing credit and lifestyle protection insurance. The company benefi ts from a broad distribution network based on well-established relationships with a wide range of leading fi nancial institutions. Over the past years, it has built a strong competitive advantage with its proprietary IT
Southern Europe. It will also support the Group’s acceleration in high growth markets such as China, Latin America, Turkey and Poland. Moreover, with Genworth LPI’s strong and lasting relationships with major banks, insurance companies and auto fi nance providers, AXA credit and lifestyle protection activities will be able to double the portfolio of strategic partners in
On December 18, 2015, AXA announced that it would acquire Liberty Ubezpieczenia, the Polish Property & Casualty operations of Liberty Mutual Insurance Group for a total consideration of PLN 92.3 million (or €21 million (2)) plus the net asset value outstanding as of the date of closing.
This transaction would allow AXA to further strengthen its presence in Poland, which is one of the most attractive insurance markets in Central and Eastern Europe. AXA would reach 4.4% market share in Property & Casualty, up from 3.2%
Completion of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to take place before the end of the third quarter of 2016.
AXA completed the acquisition of the P&C large commercial risks insurance subsidiary of SulAmérica in Brazil
SulAmérica’s Large Industrial and Commercial risks insurance operations have a successful growth track record in the
Brazilian market, achieving a 12% average annual growth in terms of revenues over the past two years.
and Ageas signed on October 16, 2015, the disposal of AXA’s
Portuguese operations, including in particular AXA’s entire stake in AXA Portugal Companhia de Seguros SA (“P&C
SA (“Life & Savings business”) as well as AXA Global Direct
(1) Source: Finaccord Creditor Insurance in Europe PartnerBASE and market model (2014). Market shares and rankings based on the weighted share of non-captive partnerships across the creditor insurance market related to consumer fi nance and credit cards in Europe.
(2) EUR 1 = PLN 4.2953 as of December 17, 2015. Source: Bloomberg.
(4) Based on 2014 GWP. Source: KNF, companies reports, AXA estimates.
(5) EUR 1 = BRL 4.3276 as of December 25, 2015. Source: Bloomberg.
for the distribution of the relevant MPF and ORSO schemes through AXA’s proprietary distribution networks in Hong Kong for 15 years. The total cash consideration amounted to HKD
AXA recorded €0.2 billion exceptional capital gain at the closing date, which is accounted for in Net Income.
On August 25, 2015 AXA announced the launch of its 2015 employee share offering (“SharePlan 2015”), a capital increase reserved to its employees worldwide.
The aggregate proceeds from the offering amounted to approximately €375 million, for a total of approximately 19 million newly-issued shares, subscribed at a price of €17.74 for the classic plan and €20.27 for the leveraged plan. The new shares were created with full rights as of January 1st, 2015.
As at December 31, 2015, AXA’s employees held 6.15% of the share capital and 8.11% of the voting rights.
In order to eliminate the dilutive effect of the Shareplan 2015 offering and as announced in its press release published on
Strategic Ventures (AXA SV), a €230 million venture capital fund dedicated to investing AXA Group money in budding strategic innovations in the insurance, asset management, fi nancial technology and healthcare service industries. With a presence in San Francisco, New York, London, Paris, Zurich and Berlin, and some plans to launch a presence in Asia in the near future, AXA SV will have on-the-ground coverage of investment opportunities across the globe on behalf of AXA
AXA is launching AXA SV in order to harness technological disruption for the benefi t of AXA Group companies. The
Group will aim to provide these start-up companies with funding expertise and market access, bringing together their entrepreneurial agility and the experience of a global leader in fi nancial services.
They will all benefi t from both the agility of the incubator and
AXA Global Life announced the successful placement of €285 million of bonds to protect the Group against extreme events in Life
(Benu Capital) of €285 million of excess mortality notes to institutional investors. There are two different classes of notes with a scheduled maturity in January 2020: the Class A notes, for an amount of €135 million, and the Class B notes, for an amount of €150 million, each class providing protection at different risk levels.
(1) AXA owns 99.7% of the P&C business, 95.1% of the Life business and 100.0% of the Direct business.
(2) EUR 1 = HKD 8.7080 as of August 27, 2015. Source: Bloomberg.
This transaction provides AXA Global Life with two fully collateralized, 5-year protections against extreme mortality risk in France, Japan, and the United States.
(which represents an increase from the prior indicative range of 40% to 50% that had guided AXA’s dividend policy over the past several years). The dividend proposed by the Board of Directors in any particular year may vary considerably depending on a variety of factors.
On January 20, 2016, Moody’s Investors Services reaffi rmed the ‘Aa3’ insurance fi nancial strength ratings of AXA’s main operating subsidiaries with a stable outlook.
has repurchased 52.5 million of its own shares for a total amount of €1,186 million principally to neutralize the dilutive impact of shares issued in connection with equity compensation arrangements and employee share plan offerings. The Board of Directors cancelled 10.8 million shares on June 19, 2015 and 40.3 million on December 17, 2015. The remaining shares were held as treasury shares as of December 31, 2015.
(1) Approved by the ACPR (Autorité de contrôle prudentiel et de résolution) which is AXA’s lead supervisor.
In order to meet its obligation to deliver shares and to eliminate the dilutive effect of certain share-based compensation schemes (1), AXA bought on February 2nd, 2016, 20,100,000 shares for €460 million. These shares will either be delivered to the benefi ciaries of share-based compensation schemes or cancelled, all in accordance with the share repurchase program (2).
On February 3, 2016, AXA announced that it has entered into an agreement with OTP Bank Plc to sell its Hungarian banking operations.
Africa Internet Group and AXA P artner to provide insurance products and services to African customers
Henri de Castries, Chairman and Chief Executive Offi cer of AXA, will retire on September 1st, 2016 - Thomas Buberl will be appointed Chief Executive Offi cer of AXA - Denis Duverne will be appointed Non-Executive Chairman of the Board of Directors
Chairman and Chief Executive Offi cer of AXA, announced his intention to retire and to step down from the Board of Directors on September 1st, 2016.
Consolidated gross revenues amounted to €98,534 million as of December 31, 2015, up 7% compared to December 31, 2014 on a reported basis or up 1% on a comparable basis.
The comparable basis mainly consisted in the adjustment of: (i) the foreign exchange rate movements (€-5.1 billion or -5.5 points) mainly due to € depreciation against USD, CHF
East Asia, India & China as well as higher sales in the Corporate
Pension Investment business in the United Kingdom, partly offset by the impact of unfavorable regulatory changes in
Hong Kong. The growth in Protection & Health products was primarily due to higher sales in France and South-East Asia,
Swiss Group Life product mix. Funds & Other increased mainly following an exceptional sale of a large contract in France. This was partly offset by a signifi cant decrease in General Account
In high growth markets, APE grew by 1% mainly driven by South-East Asia, India & China (+21% or €+99 million), partly offset by Hong Kong (-12% or €-57 million). In mature markets, APE grew by 6% mainly driven by France (+12% or €+183 million), the United Kingdom (+20% or €+142 million)
Unit-Linked Protection sales refl ecting client appetite and increased commercial efforts, (iv) AXA MPS (€+24 million)
(v) Germany (€+23 million) mainly due to new business from Unit-Linked hybrid savings products (2 ), partly offset by (vi) Hong Kong (€-99 million) due to the implementation of regulatory changes impacting products features and commission levels starting from January 1st, 2015.
International Employee Benefi ts and traditional French businesses and (ii) China (€+55 million) from both single premium term and New Whole Life products, partly offset by (iii) Switzerland (€-58 million) refl ecting the strategic shift from full protection schemes to semi-autonomous employee benefi ts solutions.
■ G/A Savings APE (€943 million, 13% of total) down 7%
(or €-74 million) driven by (i) France (€-56 million), (ii) Belgium
(or €+55 million) notably from France (€+31 million) mainly stemming from the exceptional sale of a large contract.
Property & Casualty gross revenues were up 6% on a reported basis and up 1% on a comparable basis to €31,265 million. Personal lines revenues increased by 2%, primarily in Direct, Germany, United Kingdom & Ireland and
France. Commercial lines revenues were stable with growth in the United Kingdom & Ireland, Asia and Germany, offset by the
Non-Motor revenues increased by 1% (or €+76 million) mainly driven by tariff increases across the board, partly offset by lower volumes in mature markets: ■ Mediterranean & Latin American Region (+4%) driven by tariff increases in Health in Mexico; ■ France (+2%) mainly driven by tariff increases in Household and Other Property; ■ Asia (+10%) refl ecting growth in Personal Accident policies in Malaysia and campaign for Travel insurance in Singapore and Hong Kong; Partly offset by: ■ United Kingdom & Ireland (-2%) mainly due to the loss of a partnership agreement in Travel.
Motor revenues decreased by 2% (or €-57 million): ■ Mediterranean & Latin American Region (-12%) from lower volumes refl ecting selective underwriting in Spain and Mexico, the loss of large accounts in Mexico and tariff increases in Turkey; Partly offset by: ■ UK & Ireland (+11%) principally due to increased new business volumes and higher retention rates; ■ Asia (+15%) from new large accounts in Singapore and volume increases in Malaysia.
refl ecting tariff increases across the board: ■ United Kingdom & Ireland (+3%) refl ecting growth in Health and in Property; ■ Mediterranean & Latin American Region (+2%) mainly driven by Health refl ecting tariff increases in Mexico and in the Gulf Region, as well as higher volumes in Turkey; ■ Asia (+6%) driven by higher volumes in Health; ■ Germany (+2%) mainly driven by Property; Partly offset by: ■ France (-2%) from lower volumes notably in Construction in a context of selective underwriting; ■ Belgium (-3%) mainly due to less favorable premium adjustments principally in Workers’ Compensation.
International Insurance revenues up 10% on a reported basis and 7% on a constant exchange rate basis (or €+215 million)
Corporate Solutions Assurance up 2% (or €+43 million) to €2,255 million mainly driven by positive portfolio development in Property as well as positive volume impacts and new business in Liability.
Asset Management revenues increased by 15% on a reported basis or by 1% (or €+45 million) on a comparable basis to €3,822 million mainly from AXA IM driven by higher management fees as a result of higher average Asset Under
Management (AUM), partly offset by AB mainly driven by lower performance and distribution fees.
AB revenues were up 19% (or €+405 million) on a reported basis or stable (or €-6 million) on a comparable basis to €2,580 million mainly driven by lower performance fees and lower distribution fees due to outfl ows in retail Mutual funds.
(-0.5 bp) and higher real estate transaction fees (€+4 million or +14%), partly offset by lower performance fees (€-8 million or -14%).
I Consolidated underlying earnings, adjusted earnings and net income Group share
Net income from investments in affi liates and associates 174 164
Group underlying earnings amounted to €5,574 million, up 10% versus 2014 on a reported basis. On a constant exchange rate basis, underlying earnings increased by 2% mainly driven by Life & Savings, Asset Management and Holdings segments.
Japan (€+34 million) and Hong Kong (€+15 million), partly offset by the United States (€-42 million), the Mediterranean & Latin
American Region (€-20 million) and Switzerland (€-16 million), mainly resulting from: ■ higher investment margin (€+52 million or +2%) with
■ higher fees and revenues (€+276 million or +4%): • loadings on premiums and Mutual funds were up €187 million mainly in (i) France (€+197 million) mainly due to a €134 million opening adjustment in Unearned
(€+46 million) mainly as consequence of a reclassifi cation from net technical margin in Mexico, partly offset by
(iii) Germany (€-38 million) mainly due to higher policyholder participation and lower new business in Health,
and the United Kingdom (€+10 million) as a result of higher average separate account balances,
Mexico (partly due to the above-mentioned reclassifi cation), partly offset by (iii) France (€+128 million) mainly due to higher positive prior year reserve developments in Group
Mediterranean & Latin American Region (€-183 million) were partly offset by higher underlying earnings across mature entities.
in Europe and Odile hurricane (€256 million) in Mexico, both impacting most entities through the Group Nat Cat risks pool program. This was partly offset by deteriorated claims experience (+1.0 point) notably in Germany mainly due to higher natural events, including Niklas storm
mainly refl ecting higher expenses related to its development, partly offset by (iv) AXA Global P&C (€+32 million) mainly driven by an improved technical result.
Asset Management underlying earnings amounted to €458 million. On a constant exchange rate basis, underlying earnings increased by €6 million (or +1%) attributable to AXA
Investment Managers (€+10 million) due to higher management fees mainly refl ecting higher average AUM, partly offset by AB
(€-4 million) as higher management fees were more than offset by lower performance fees.
Banking underlying earnings amounted to €97 million. On a constant exchange rate basis, underlying earnings decreased by €9 million (or -9%) mainly attributable to Belgium (€-9 million)
Holdings and other companies underlying earnings amounted to €-906 million. On a constant exchange rate basis, underlying earnings increased by €43 million (or +5%) mainly driven by higher investment income and lower expenses.
• €-158 million from the change in fair value of hedging derivatives not eligible for hedge accounting under IAS 39, mainly attributable to interest rates increases,
December 31, 2014 are presented in the table below: Shareholders’ Equity
Net income (Euro per Ordinary Share) 2.19 2.18 1.95 1.94 12% 12%
Net capital gains or losses attributable to shareholders net of income tax 259 292
Net capital gains or losses attributable to shareholders net of income tax 114 108
Profi t or loss on fi nancial assets (under FV option) & derivatives 67 6
On December 2nd, 2015, AXA announced the completion of the acquisition of Genworth Life Style Protection Insurance. There was no income statement contribution for this company for 2015 as it was not deemed material at Group level.
Gross revenues increased by €929 million (+6%) to €16,077 million: ■ Unit-Linked revenues (20% of gross revenues) increased by €674 million (+27%), mainly as a result of increased commercial efforts and the success of both hybrid products (1)
and the new structured funds offers. The Unit-Linked share in Individual Savings premiums increased by 6 points to 37%, above the market average of 21% (2); ■ G/A Protection & Health revenues (42% of gross revenues)
Individual Health decreased by €22 million, following the termination of an assumed business with a French mutual insurer (€-10 million) and negative portfolio developments
(€-12 million), ahead of a change in regulation resulting in the implementation of the Accord National Interprofessionel
Unit-Linked products, and as a result of the non-repeat of large contracts underwritten in 2014 on Group Retirement
(-19%); ■ Other revenues (2% of gross revenues) increased by €313 million, mainly following an exceptional sale of a large contract.
(+26%), driven by Individual Savings as a result of the commercial success of both hybrid (1) and the new structured funds products; ■ G/A Protection & Health sales (47% of APE) increased by €134 million (+19%), mainly driven by €124 million increase
January 1st, 2016; (1) Hybrid products: savings products allowing clients to invest in both Unit-Linked and General Account funds.
■ G/A Savings sales (31% of APE) decreased by €56 million
(-9%), in line with the strategy to focus on Unit-Linked products and as a result of the non-repeat of large contracts underwritten in 2014 in Group Retirement; ■ Other sales (2% of APE) increased by €31 million, mainly stemming from the exceptional sale of a large contract.
Investment margin decreased by €4 million to €1,191 million as the decrease in investment income driven by lower reinvestment yields was partly offset by the decrease in interests credited to policyholders.
Costs) as well as €53 million increase in loadings on premiums driven by higher volumes mostly in Protection and Unit-Linked.
Adjusted earnings increased by €63 million (+7%) to €939 million, driven by higher underlying earnings and higher net realized capital gains mostly on equities.
Net income increased by €110 million (+12%) to €988 million, mainly driven by higher adjusted earnings and a positive change in the fair value of foreign exchange derivatives not eligible to hedge accounting (€+48 million).
Profi t or loss on fi nancial assets (under FV option) & derivatives (29) 19
(a) Before intercompany eliminations. Gross Revenues amounted to €13,620 million net of intercompany eliminations as of December 31, 2015.
Protection products; ■ Asset Management fees (7% of gross revenues) increased by €10 million (+1%), refl ecting improved market conditions and higher asset balances; ■ Mutual funds revenues (2% of gross revenues) increased by €7 million (+3%), refl ecting higher average asset balances throughout the year.
APE increased by €301 million (+22%) to €1,656 million. On a comparable basis, APE increased by €37 million (+3%): ■ Variable Annuity sales (57% of APE) increased by €34 million
Fees & revenues increased by €387 million (+18%) to €2,572 million. On a constant exchange rate basis, fees & revenues decreased by €23 million (-1%) due to an acceleration of the amortization of deferred premiums loadings, partly offset by higher Unit-Linked management fees refl ecting higher average balances.
Net technical margin decreased by €300 million (+71%) to €-725 million. On a constant exchange rate basis, net technical margin decreased by €185 million (+43%) mainly due to a reserve strengthening on Variable Annuity GMxB products for lapses and other policyholder behavior assumption changes.
On a constant exchange rate basis, expenses decreased by €138 million (-10%): ■ expenses excluding Deferred Acquisition Costs amortization increased by €34 million as a result of investment in Employee
Amortization of VBI decreased by €7 million (-79%) to €-2 million. On a constant exchange rate basis, amortization of
On a constant exchange rate basis, net income decreased by €94 million (-12%) due to lower adjusted earnings as well as the non-repeat of the 2014 gain related to the closed MONY
(a) Before intercompany eliminations. Gross Revenues amounted to €700 million net of intercompany eliminations as of December 31, 2015.
APE increased by €232 million (+33%) to €935 million. On a comparable basis, APE increased by €142 million (+20%) mainly driven by higher sales in the Corporate Pension Investment business (€+177 million) due to a large scheme implemented in the third quarter of 2015, and higher volumes on the Elevate platform (€+13 million), partly offset by a decrease in offshore sales.
On a constant exchange rate basis, fees & revenues decreased by €12 million (-4%) mainly due to a reclassifi cation of SunLife revenues to technical margin and the above-mentioned removal of advisor charges from gross revenues, partly offset by the growth of regular fees from the Elevate and Architas businesses.
On a constant exchange rate basis, net technical margin increased by €13 million mainly due to the above-mentioned reclassifi cation of SunLife revenues from fees & revenues to technical margin.
Adjusted earnings increased by €46 million to €75 million. On a constant exchange rate basis, adjusted earnings increased by €39 million mainly due to higher underlying earnings.
Net capital gains or losses attributable to shareholders net of income tax (0) (5)
Gross revenues increased by €393 million (+10%) to €4,194 million. On a comparable basis, gross revenues increased by €239 million (+6%): ■ Protection revenues (43% of gross revenues) increased by €33 million (+2%) mainly refl ecting higher revenues from the in-force of Term, Term Rider and Whole Life products, and new business sales in Unit-Linked Protection products
launched in the second half of 2015, partly offset by lower sales of Variable Annuity products (€-47 million) in line with the strategy of curtailing sales and a decrease in both the inforce portfolio of Group Annuity products (€-13 million) and the run-off portfolio of Fixed Annuity products (€-10 million).
APE increased by €58 million (+16%) to €418 million. On a comparable basis, APE increased by €43 million (+12%): ■ Protection sales (56% of APE) increased by €32 million
Investment margin increased by €35 million to €35 million. On a constant exchange rate basis, investment margin increased by €34 million mainly due to exceptional dividends from private equity funds refl ecting the good performance of the Japanese stock market.
Fees & revenues increased by €54 million (+4%) to €1,319 million. On a constant exchange rate basis, fees & revenues increased by €6 million mainly driven by higher account value and increased new business in Unit-Linked products.
Net technical margin decreased by €22 million (-31%) to €48 million. On a constant exchange rate basis, net technical margin decreased by €23 million (-34%) mainly due to the nonrepeat of positive assumption changes related to longevity in 2014 as well as negative assumption changes in 2015 mainly related to annuitization, partly offset by improved hedging results in Variable Annuity refl ecting lower equity market volatility.
Underlying earnings increased by €49 million (+13%) to €412 million. On a constant exchange rate basis, underlying earnings increased by €34 million (+9%).
Profi t or loss on fi nancial assets (under FV option) & derivatives (10) 51
Pure Protection products; ■ Health revenues (42% of gross revenues) increased by €70 million (+3%) to €2,787 million due to tariff increases in full benefi t insurance and volume growth in supplementary benefi t insurance.
Net technical margin decreased by €6 million (-14%) to €37 million mainly due to a lower mortality margin in Health, partly offset by an improved mortality margin in Life and an improved hedging result from Variable Annuity GMxB products.
Expenses decreased by €27 million (-13%) to €-184 million mainly driven by lower administrative expenses due to the effects of the cost savings programs and to a lesser extent from a higher allocation of policyholder participation, partly offset by accelerated Deferred Acquisition Costs amortization as a result of lower interest rate assumptions.
Amortization of VBI increased by €30 million (+141%) to €-50 million due to a one-off impact from updated lower interest rate assumptions.
Net income decreased by €58 million (-24%) to €184 million as the increase in adjusted earnings was more than compensated by an unfavorable change in the fair value of fi xed income securities and economic hedge derivatives not eligible for hedge accounting as a result of higher interest rates and wider credit spreads.
Net capital gains or losses attributable to shareholders net of income tax 42 43
(-18%) driven by the strategic shift from full protection schemes to semi-autonomous employee benefi t solutions;
(-11%) driven by lower sales of single premium products mainly due to repricing measures.
Fees & revenues increased by €43 million (+14%) to €348 million. On a constant exchange rate basis, fees & revenues increased by €4 million (+1%) mainly resulting from higher loadings on premiums in Individual Life.
Net technical margin increased by €63 million (+39%) to €225 million. On a constant exchange rate basis, net technical margin increased by €38 million (+23%) mainly due to a favorable development of the disability and mortality claims experience as well as higher surrender margin.
On a constant exchange rate basis, expenses increased by €19 million (+7%) mainly due to accelerated Deferred
Acquisition Costs amortization as a result of lower interest rate assumptions.
Amortization of VBI increased by €37 million to €-44 million. On a constant exchange rate basis, amortization of VBI increased by €32 million mainly driven by updated model assumptions in
Individual and Group Life attributable to the above-mentioned decrease in interest rates.
As a result, the underlying cost income ratio increased by 5.1 points to 47.6%.
Income tax expenses increased by €11 million (+16%) to €-80 million. On a constant exchange rate basis, income tax expenses increased by €2 million (+3%) driven by the nonrepeat of a 2014 tax one-off, partly offset by lower pre-tax underlying earnings.
Adjusted earnings increased by €19 million (+5%) to €370 million. On a constant exchange rate basis, adjusted earnings decreased by €22 million (-6%) mainly driven by lower underlying earnings and lower net realized capital gains.
On a constant exchange rate basis, net income decreased by €77 million (-19%) mainly driven by lower adjusted earnings as well as unfavorable changes in the fair value of interest rate and foreign exchange hedging derivatives not eligible for hedge accounting.
increased by €38 million (+5%) mainly driven by higher renewals in Group Life Protection; ■ Unit-Linked revenues (27% of gross revenues) increased by €6 million (+1%) mainly driven by higher sales of the Oxylife
■ G/A Protection & Health sales (24% of APE) decreased by €1 million (-5%) mainly due to lower new business in Group
(-1%); ■ G/A Savings sales (30% of APE) decreased by €23 million
Profi t or loss on fi nancial assets (under FV option) & derivatives (39) 27
Net technical margin increased by €16 million (+104%) to €32 million due to lower reserve strengthening.
Expenses decreased by €25 million (-9%) to €-243 million: ■ acquisition expenses decreased by €9 million (-8%) to €-111 million mainly due to lower Deferred Acquisition Costs amortization; ■ administrative expenses decreased by €15 million (-10%)
to €-133 million driven by lower overhead costs as a consequence of cost savings programs as well as lower commissions.
Income tax expenses increased by €14 million (+22%) to €-78 million due to higher pre-tax underlying earnings as well as the increase in the effective tax rate.
Adjusted earnings decreased by €42 million (-16%) to €225 million mainly due to lower net realized capital gains and losses (€-51 million) principally on fi xed income assets partly offset by higher underlying earnings.
(a) Before intercompany eliminations. Gross Revenues amounted to €298 million net of intercompany eliminations as of December 31, 2015.
On a comparable basis, gross revenues decreased by €23 million (-7%) mainly driven by lower Unit-Linked single premium sales in the Czech Republic (€-20 million) and Poland
Linked sales (€-6 million), partly offset by higher sales in G/A
Underlying earnings decreased by €7 million (-18%) to €33 million. On a constant exchange rate basis, underlying earnings decreased by €7 million mainly driven by the nonrepeat of the one-off partial release of the guaranteed fund following a change of regulation in the pension funds in Poland, partly offset by higher fees & revenues in the Czech Republic.
On a constant exchange rate basis, net income decreased by €11 million (-28%) mainly due to lower adjusted earnings.
Net capital gains or losses attributable to shareholders net of income tax 3 29
(ii) G/A Savings (€-342 million) driven by lower sales at AXA
(€+94 million) driven by the launch of a new product in Spain and higher sales at AXA MPS; ■ high growth markets increased by €28 million (+4%) mainly due to higher sales in G/A Savings (€+23 million) in Morocco and Colombia.
APE decreased by €10 million (-2%) to €560 million. On a comparable basis, APE decreased by €10 million (-2%): ■ mature markets sales were up €11 million (+2%) to €507 million driven by Unit-Linked (€+35 million) mainly driven by AXA MPS with higher sales of Pure Unit-Linked, partly offset by lower “Protected Unit” sales, partly offset by lower G/A Savings (€-28 million) due to lower sales of
(-42%) mainly due lower mortality margin in Mexico (partly due to the above-mentioned reclassifi cation) and in Spain.
Colombia and on a constant exchange rate basis, amortization of VBI remained stable.
As a result, the underlying cost income ratio increased by 2.8 points to 64.9%. Excluding Colombia and on a constant exchange rate basis, the underlying cost income ratio increased by 3.2 points.
Income tax expenses decreased by €11 million (-13%) to €-74 million. Excluding Colombia and on a constant exchange rate basis, income tax expenses decreased by €3 million (-3%)
Underlying earnings decreased by €20 million (-10%) to €173 million. Excluding Colombia and on a constant exchange rate basis, underlying earnings decreased by €26 million
Adjusted earnings decreased by €46 million (-21%) to €176 million. Excluding Colombia and on a constant exchange rate basis, adjusted earnings decreased by €53 million (-21%)
Excluding Colombia and on a constant exchange rate basis, net income decreased by €19 million (-10%) mainly driven by lower adjusted earnings, partly offset by the non-repeat of unfavorable change in fair value of interest rate derivatives not eligible for hedge accounting mainly at AXA MPS and in Spain.
Profi t or loss on fi nancial assets (under FV option) & derivatives 2 (10)
Average exchange rate : €1.00 = Hong Kong Dollar 8.679 10.328
Gross revenues increased by €568 million (+29%) to €2,540 million. On a comparable basis, gross revenues increased by €194 million (+10%) mainly due to higher revenues from G/A Protection & Health products (€+111 million)
APE increased by €10 million (+2%) to €525 million. On a comparable basis, APE decreased by €57 million (-12%): ■ Unit-Linked sales (24% of APE) decreased by €99 million
Fees & revenues increased by €137 million (+25%) to €678 million. On a constant exchange rate basis, fees & revenues increased by €29 million (+5%) mainly driven by an increase in loadings on premiums stemming from both new business and in-force growth, as well as higher Unearned
Acquisition Costs amortization driven by volume growth and temporary reactivity to market experience (offset in Unearned
Net income increased by €320 million (+118%) to €591 million. On a constant exchange rate basis, net income increased by €226 million (+84%) driven by higher adjusted earnings (€+15 million) and the exceptional capital gain on the disposal of the retirement schemes business completed on
Protection & Health products were up by €32 million due to higher renewals in Singapore and Indonesia.
APE increased by €180 million (+39%) to €646 million. On a comparable basis, APE increased by €99 million (+21%) mainly driven by: ■ strong sales in China (€+55 million), particularly from G/A
Adjusted earnings increased by €41 million (+35%) to €159 million. On a comparable basis, adjusted earnings increased by €25 million (+21%) mainly driven by higher underlying earnings and higher net realized capital gains in China
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (1) 1
Net income increased by €6 million to €-28 million mainly driven by higher adjusted earnings, partly offset by restructuring costs in line with the above-mentioned strategic decision.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share attributable to AXA’s Property & Casualty segment for the periods indicated.
Net income from investments in affi liates and associates 30 47
(a) Excluding RESO – RESO combined ratio amounted to 94.1% for 2015.
(b) Mediterranean & Latin American Region includes other than Direct operations in Italy, Spain, Portugal, Greece, Turkey, Morocco, Gulf Region, Mexico, Lebanon and Colombia.
(d) Asia includes India, Hong Kong, China, Malaysia, Singapore and Thailand.
Gross revenues decreased by €24 million to €6,077 million. On a comparable basis, gross revenues increased by €20 million: ■ Personal lines (57% of gross revenues) were up 1% to €3,460 million as tariff increases in all segments were partly offset by lower volumes driven by a strong market competition in the context of the implementation of a new regulation
Net technical result increased by €141 million (+9%) to €1,699 million: ■ the current accident year loss ratio decreased by 1.9 points to 72.2% mainly driven by lower Nat Cat charge (€141 million in 2014, including participation to the Group pool related to
ELA hailstorm and Odile hurricane in Mexico, compared to €33 million in 2015 related to fl oods in the French Riviera), partly offset by an increase in average cost in Motor and major claims in industrial risks; ■ the all accident year loss ratio decreased by 2.5 points to 71.7% due to less unfavorable prior year reserve developments in Construction and favorable developments in other businesses.
Income tax expenses decreased by €5 million (-2%) to €-279 million mainly due to higher pre-tax underlying earnings
Adjusted earnings increased by €23 million (+4%) to €551 million driven by higher underlying earnings, partly offset by lower net realized capital gains mostly on equities (€-21 million).
to €2,652 million. (i) Motor was up 11% to €539 million principally due to increased new business volumes and higher retention rates. (ii) Non-Motor was up 3%. (a) Health was up 4% to €1,092 million due to growth in Great Britain and internationally. (b) Property was up 4% to €616 million due to an increase in new business and improved retention.
Commercial Motor (+1.7 points), while higher Nat Cat charges and other weather-related claims following severe storm activity in December 2015 (€69 million) were more than offset by lower charges from the Group pool (-1.3 points together); ■ the all accident year loss ratio increased by 0.4 point to 69.4%
mainly driven by the increase in current year loss ratio partly offset by higher positive prior year reserve developments.
Expense ratio decreased by 1.2 points to 28.3% mainly driven by a decrease in the acquisition expense ratio (-0.9 point)
refl ecting a decrease in commissions (-0.6 point) and a decrease in the administrative expense ratio (-0.3 point) as a consequence of lower pension costs as well as the effects of the cost savings programs.
Net investment result increased by €4 million (+2%) to €227 million. On a constant exchange rate basis, net investment result decreased by €15 million (-7%) mainly due to lower income from alternative assets.
Underlying earnings increased by €39 million (+17%) to €273 million. On a constant exchange rate basis, underlying earnings increased by €15 million (+6%).
Adjusted earnings increased by €52 million (+23%) to €283 million. On a constant exchange rate basis, adjusted earnings increased by €28 million (+12%) reflecting higher underlying earnings as well as higher net realized capital gains, mainly from equities.
Net i ncome increased by €9 million (+4%) to €219 million.
On a constant exchange rate basis, net income decreased by €10 million (-5%) due to higher adjusted earnings more than offset by the unfavorable change in the fair value of interest rates derivatives not eligible for hedge accounting (€-21 million) and an increase in restructuring costs (€-17 million).
Net capital gains or losses attributable to shareholders net of income tax (13) 8
(a) Before intercompany eliminations. Gross Revenues amounted to €3,909 million net of intercompany eliminations as of December 31, 2015.
Gross revenues increased by €121 mill ion (+3%) to €3,945 million. On a comparable basis, gross revenues increased by €117 million (+3%): ■ Personal lines (57% of gross revenues) were up 3% to €2,249 million driven by higher volumes in Motor and tariff increases in both Motor and Non-Motor; ■ Commercial lines (34% of gross revenues) were up 2% to €1,327 million, mainly in Property; ■ Other lines (9% of gross revenues) were up 7% to €369 million mainly driven by Art insurance.
Net technical result increased by €90 million (+7%) to €1,364 million: ■ the current accident year loss ratio increased by 0.7 point to 67.4% mainly due to higher attritional claims driven by natural events, notably Niklas storm (€36 million, not qualifying as Nat
Expense ratio decreased by 0.8 point to 28.2% mainly due to the effects of the cost savings programs.
Enlarged expense ratio increased by 0.5 point to 32.7% due to higher claims handling costs.
Net capital gains or losses attributable to shareholders net of income tax 45 43
(a) Before intercompany eliminations. Gross Revenues amounted to €3,100 million net of intercompany eliminations as of December 31, 2015.
Motor and Household as well as the loss of a large assistance contract; ■ Commercial lines (45% of gross revenues) were down 1% to €1,410 million due to a highly competitive market.
The administrative expense ratio and the acquisition expense ratio both increased by 0.1 point as the effects of cost savings programs were more than offset by a negative impact from changes in the valuation of employee pension liabilities as a result of lower interest rate assumptions.
Net investment result decreased by €1 million (-1%) to €194 million. On a constant exchange rate basis, net investment result decreased by €23 million (-12%) mainly driven by the appreciation of the Swiss Franc and lower reinvestment yields on fi xed income assets.
Underlying earnings increased by €106 million (+27%) to €503 million. On a constant exchange rate basis, underlying earnings increased by €49 million (+12%).
Adjusted earnings increased by €107 million (+24%) to €548 million. On a constant exchange rate basis, adjusted earnings increased by €46 million (+10%) mainly driven by higher underlying earnings.
Expense ratio improved by 0.1 point to 30.6% driven by lower administrative expenses.
As a result, the combined ratio improved by 2.7 points to 91.0%.
Income tax expenses increased by €14 million (+13%) to €-120 million as a result of higher pre-tax underlying earnings.
Net income increased by €98 million (+60%) to €261 million mainly due to higher adjusted earnings and a favorable change in the fair value of infl ation derivatives not eligible for hedge accounting (€+73 million).
PROPERTY & CASUALTY O PERATIONS – CENTRAL & EASTERN EUROPE AND LUXEMBOURG
Net realized capital gains or losses attributable to shareholders (6) 5
(a) Reso accounted for using the equity method. AXA’s share of profi t is recognized in the income statement.
Net income from investments in affi liates and associates 7 3
Profi t or loss on fi nancial assets (under FV option) & derivatives 34 14
Gross revenues increased by €47 mil l ion (+1%) to €7,533 million. On a comparable basis, gross revenues decreased by €108 million (-1%) due to a decline in mature markets (-5% or €-183 million) especially in Spain (€-182 million), partly offset by high growth markets (+2% or €+75 million): ■ Personal lines (53% of gross revenues) were down 1% to €4,034 million mainly due to lower volumes in mature markets, mainly in Spain, partly offset by high growth markets especially in Mexico mainly from tariff increases in Health and Motor; ■ Commercial lines (46% of gross revenues) were down 2%
Colombia and on a constant exchange rate basis, expense ratio increased by 0.8 point driven by both a higher acquisition expense ratio (+0.7 point) and a higher administrative expense ratio (+0.2 point). Mature markets increased by 0.9 point as the
effects of the cost savings programs were more than offset by negative volume effects. High growth markets increased by 0.9 point mainly due to higher commissions.
Underlying earnings decreased by €176 million (-63%) to €103 million. On a constant exchange rate basis, underlying earnings decreased by €183 million (-68%).
On a constant exchange rate basis, net income decreased by €148 million (-63%) mainly due to lower adjusted earnings, partly offset by a favorable foreign exchange impact.
Net income from investments in affi liates and associates 8 8
Net capital gains or losses attributable to shareholders net of income tax (2) (3)
Profi t or loss on fi nancial assets (under FV option) & derivatives (5) 6
Gross revenues increased by €373 million (+16%) to €2,735 million. On a comparable basis, gross revenues increased by €179 million (+7%): ■ Personal Motor (86% of gross revenues) was up €177 million
(-0.8 point together) mainly due to a strong improvement in frequency in Non-Motor in France (-1.0 point) and in Motor in
As a result, the combined ratio improved by 0.2 point to 98.0%.
Income tax expenses increased by €9 million (+22%) to €-50 million. On a constant exchange rate basis, income tax expenses increased by €7 million (+18%) mainly refl ecting higher pre-tax underlying earnings.
Net income from investments in affi liates and associates (16) 10
Net capital gains or losses attributable to shareholders net of income tax 6 2
Profi t or loss on fi nancial assets (under FV option) & derivatives 0 (1)
Malaysia, Singapore and Thailand, on a 100% share basis; (ii) for underlying earnings, adjusted earnings and net income: China,
In the comments below, the comparable basis includes (i) the 12-month results (January-December) in 2014 for Thailand following a change in consolidation methodology, (ii) the restated 12-month results in 2014 for China and (iii) the one month restatement in 2015 refl ecting the change of the Group share in Bharti from 26% to 49% in December 2015.
due to growth in Health and Travel in Hong Kong and
(+7%) to €569 million mainly driven by (i) Health (€+19 million)
On a comparable basis, net technical result increased by €31 million (+10%): ■ the current accident year loss ratio improved by 1.5 points to 67.0% thanks to the non-repeat of a Nat Cat charge in
Hong Kong and Singapore driven by Odile hurricane in Mexico and ELA hailstorm in 2014 (participation to Group pool); improvement in large losses mainly driven by Commercial
Property in Thailand and Singapore, partly offset by a deterioration of the attritional loss ratio in Personal Health driven by higher frequency in Hong Kong;
■ the all accident year loss ratio improved by 1.0 point to 64.6%
despite lower positive prior year reserve developments arising from fl oods in Thailand.
Singapore, Hong Kong and Thailand and higher administrative expenses (+0.4 point) mainly refl ecting digital investments in
On a comparable basis, net investment result increased by €8 million mainly benefi tting from a higher asset base in Malaysia as well as a higher yield following a change in asset mix in
On a comparable basis, income tax expenses increased by €3 million due to higher pre-tax underlying earnings.
Net income increased by €19 million to €44 million. On a comparable basis, net income increased by €21 million driven by lower integration costs in Hong Kong and China, partly offset by a decrease in adjusted earnings.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income Group share for the International Insurance segment for the periods indicated: CONSOLIDATED GROSS REVENUES
Net realized capital gains or losses attributable to shareholders 34 35
Profi t or loss on fi nancial assets (under FV option) & derivatives 7 24
Net technical result increased by €4 million (+1%) to €391 million. On a constant exchange rate basis, net technical result increased by €4 million (+1%): ■ the current accident year loss ratio decreased by 0.3 point to 85.8% driven by lower large losses in Construction and
Enlarged expense ratio decreased by 1.7 points to 19.2% due to release of claims handling reserve.
As a result, the combined ratio increased by 0.7 point to 98.6%.
As a consequence, underlying earnings decreased by €13 million (-9%) to €134 million. On a constant exchange rate basis, underlying earnings decreased by €13 million (-9%).
Net income decreased by €45 million (-23%) to €156 million mainly driven by lower adjusted earnings as well as unfavorable foreign exchange impacts driven by the depreciation of the Euro against major currencies.
Adjusted earnings increased by €21 million to €21 million driven by higher underlying earnings.
Adjusted earnings increased by €2 million (+8%) to €26 million mainly driven by higher underlying earnings.
Adjusted earnings decreased by €17 million to €26 million. On a constant exchange rate basis, adjusted earnings decreased by €16 million driven by lower underlying earnings, partly offset by higher net realized capital gains.
Net realized capital gains or losses attributable to shareholders - -
Assets under Management (“AUM”) increased by €42 billion from year-end 2014 to €455 billion at December 31, 2015 as a result of €47 billion favorable foreign exchange rate impact and €3 billion net infl ows from Institutional clients, partly offset by €7 billion market depreciation.
Gross revenues increased by €405 million (+19%) to €2,580 million. On a comparable basis, gross revenues decreased by €6 million as (i) higher investment management fees (+2%) resulting from a 3% increase in average AUM and
(ii) higher Institutional Research Services fees (+2%) were more than offset by (iii) lower distribution fees (-4%) due to outfl ows in retail Mutual funds.
Net investment result decreased by €5 million (-74%) to €-13 million. On a constant exchange rate basis, net investment result decreased by €3 million (-46%).
Income tax expenses increased by €22 million (+19%) to €-138 million. On a constant exchange rate basis, income tax expenses were stable.
AXA ownership of AB at December 31, 2015 was 62.8%, compared to 62.7% at December 31, 2014.
On a constant exchange rate basis, net income decreased by €9 million (-5%) due to lower adjusted earnings as well as higher restructuring costs.
Comparable basis in the comments below refers to constant foreign exchange rate restatement, excluding distribution fees retroceded.
Assets under Management (“AUM”) increased by €46 billion from year-end 2014 to €669 billion as of December 31, 2015, mainly as a result of €42 billion net infl ows mostly from Third party clients (€+41 billion) mainly from Asian Joint Ventures
General expenses increased by €103 million (+9%) to €-1,226 million. On a comparable basis, general expenses increased by €29 million (+4%) mainly due to higher non-staff costs.
Net income increased by €38 million (+17%) to €269 million. On a comparable basis, net income increased by €22 million (+10%)
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives 33 (19)
Net banking revenues increased by €46 million (+13%) to €402 million mainly driven by a positive change in fair value of interest rates derivatives and own debt.
Adjusted earnings decreased by €9 million (-9%) to €90 million driven by lower underlying earnings.
Net banking revenues increased by €32 million (+27%) to €152 million.
Assurance, AXA Financial, AXA United Kingdom Holdings, AXA Germany Holdings and AXA Belgian Holding.
Profi t or loss on fi nancial assets (under Fair Value option) & derivatives (115) 210
Underlying earnings decreased by €153 million to €-833 million mainly driven by (i) lower interest income following the renegotiation of entities’ fi nancing conditions (mainly the US
Net income decreased by €472 million to €-1,005 million mainly driven by lower adjusted earnings as well as an unfavorable change in the fair value of economic derivatives not eligible for hedge accounting under IAS 39 (€-339 million) of which €-188 million due to lower interest rates and €-151 million from foreign exchange movements.
Underlying earnings increased by €5 million to €-15 million due to lower tax expenses resulting from lower intercompany dividends received.
Underlying earnings increased by €13 million to €-1 million mainly due to lower fi nancial charges.
Underlying earnings increased by €126 million (+87%) to €-18 million. On a constant exchange rate basis, underlying earnings increased by €129 million (+89%) mainly driven by
On a constant exchange rate basis, net income increased by €115 million (+89%) refl ecting higher adjusted earnings and a favorable change in fair value of foreign exchange derivatives not eligible for hedge accounting.
On a constant exchange rate basis, underlying earnings increased by €17 million mainly driven by higher investment result attributable to more favorable asset allocation.
Net income increased by €16 million to €8 million. On a constant exchange rate basis, net income increased by €15 million due to higher adjusted earnings and a favorable change in fair value of foreign exchange hedging derivatives not eligible for hedge accounting.
Adjusted earnings increased by €38 million to €6 million driven by higher underlying earnings and higher net realized capital gains.
Adjusted earnings increased by €7 million (+18%) to €-33 million. On a constant exchange rate basis, adjusted earnings increased by €7 million (+18%), mainly driven by higher underlying earnings.
AXA is working actively on its new strategic plan, building the foundations of future growth. The company will continue to allocate capital effectively between markets and business lines, invest in its digital transformation and pursue expense effi ciency programs.
The split between high growth markets and mature markets is detailed below: The notion of high growth markets includes the following countries: Central & Eastern countries (Poland, Czech Republic,
The notion of mature markets includes the following countries: the United States, the United Kingdom, Ireland, Belgium,
■ DAC and VBI amortization or other reactivity to those elements if any (Life & Savings business) and net of hedging if any.
The calculation is prepared with the following principles: ■ for net income ROE: Calculation is based on consolidated financial statements, + shareholders’ equity including undated subordinated debt (“Super Subordinated Debts”
In the Margin Analysis, it is allocated to the related margin,
For investment contracts without DPF: ■ deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross consolidated revenues on a separate line, and in Margin analysis in the lines
Underlying Investment margin includes the following items: ■ net investment income; and
deposits received on all general account product lines; ■ deferral income such as capitalization net of amortization of
Underlying Expenses are: ■ acquisition expenses, including commissions and general expenses allocated to new business, related to insurance products as well as to other activities (e.g., mutual fund sales);
■ capitalization of acquisition expenses linked to new business: Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF; ■ amortization of acquisition expenses on current year and prior year new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF; ■ administrative expenses; ■ claims handling costs; and
Underlying net investment result includes the net investment income less the recurring interests credited to insurance annuity reserves.
The enlarged expense ratio is the sum of the expense ratio and claims handling cost ratio.
Assets Under Management (AUM) are defi ned as the assets whose management has been delegated by their owner to an asset management company such as AXA Investment Managers and AB. AUM only includes funds and mandates which generate fees and exclude double counting.
Net operating revenues are disclosed before intercompany eliminations and before realized capital gains/losses or changes in fair value of « fair-value-P&L » assets and of hedging derivatives.
Liquidity management is a core part of the Group financial planning including debt profi le schedule and, more broadly, the capital allocation process. Liquidity resources result principally from Life & Savings, Property & Casualty and Asset Management operations, as well as from capital raising activities, and committed bank credit lines.
Group, coordinates funding and liquidity management and, in this role, participates in fi nancing the operations of certain subsidiaries. Certain of AXA’s subsidiaries, including AXA France
The Group regularly reviews the quality of its assets to ensure adequate liquidity in stress scenarios.
The investment strategy of AXA’s Life & Savings subsidiaries is designed to match the investment returns and estimated maturities of their investments with expected payments on their insurance contracts. Entities regularly monitor the valuation and duration of their investments and the performance of their fi nancial assets. Financial market performance may affect the level of surrenders and withdrawals on life insurance policies, as well as immediate and projected long-term cash needs. As a result of close monitoring of surrender rates, Group subsidiaries are able to adjust their investment portfolios to refl ect such considerations and react in a targeted manner.
As of December 31, 2015, AXA’s consolidated statement of fi nancial position included cash and cash equivalents of €25.6 billion, net of bank overdrafts of €0.6 billion; ■ broad access to various markets via standardized debt programs: for example, at the end of 2015, this included a maximum capacity of €6.0 billion of French commercial paper, $2.0 billion of US commercial paper, €15.0 billion under a Euro Medium Term Note (“EMTN”) program (of which €12.4bn issued) and €1.5bn of French Bons à moyen terme négociables (“BMTN”); ■ a debt profile characterized by (i) a debt being mostly subordinated, with a long maturity profi le and partly fi nanced through the EMTN program. €3.4 billion of debt repayments (1)
(1) Estimated taking into account the fi rst date of step-up calls on subordinated debt.
On a consolidated basis, dated subordinated debt (including derivative instruments) totalled €7,465 million as of December 31, 2015 after taking into account all intra-group eliminations and excluding undated subordinated debt (TSS/TSDI, which are included in shareholders’ equity, as described in Note 1.13.2 of Part 4 – “Consolidated Financial Statements”), compared to €7,146 million at December 31, 2014. The increase was €319 million, or €320 million on a constant exchange rate basis.
AXA’s 2017 convertible bonds (6.6 million bonds at December 31, 2015 representing a carrying value of €1,701 million for its debt component, as described in Note 17 of Part 4 – “Consolidated
Movements in these items are described in Note 17 of Part 4 –
(€67.3 billion at December 31, 2014) of which: ■ consolidated shareholders’ equity after dividend proposal: €50.7 billion (€44.9 billion at December 31, 2014), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and undated subordinated debt; ■ gross unrealized capital gains and other: €34.1 billion
December 31, 2014); ■ locally admitted assets: €2.6 bil l ion (€2.5 bil l ion at
currently considers that AXA SA is not subject to requirements relating to fi nancial conglomerates. Consequently, in accordance with applicable regulations, as AXA is not subject to the additional supervision applicable to a fi nancial conglomerate, its solvency margin is reduced by the amount of its equity interests in credit institutions, investment companies or fi nancial institutions in which the Group holds more than 20% of the share capital.
In addition, subordinated notes include mechanisms to defer or cancel interest payments either on a mandatory or an optional basis.
Some TSR include clauses which permit or force the Company to defer interest payments. In addition, redemption at maturity of some TSR is subject to approval by the ACPR and to the absence of any event having an adverse effect on the
Company may, at its option, in certain circumstances and shall, in other circumstances, defer interest payment upon the occurrence of certain events (e.g. absence of dividend payment voted in the preceding Annual Shareholders’ Meeting or receipt by the Company or by certain of its principal subsidiaries of a regulatory demand to restore their applicable minimum solvency margin level). Payment of deferred interest becomes due in certain specifi ed cases (e.g. payment of a dividend, notifi cation of the end of a regulatory demand to restore solvency, liquidation or redemption of the TSDI, etc.).
Finally, under its TSS, the Company has an option to cancel payments of interest upon the deterioration of its financial position, unless certain events have occurred in the preceding year (e.g. a dividend payment or interest payment on any TSS, any share buy-back outside the Company’s share buy-back program or a repurchase or redemption of any TSS). However, upon the occurrence of certain circumstances relating to the consolidated regulatory solvency margin of the Company, the
AXA in line with existing regulations, AXA’s consolidated solvency ratio under the current solvency I regime amounted to 246% at
Insurer (“GSII”). The framework policy measures for GSIIs include a number of requirements on GSIIs amongst which the notion of a specifi c capital regime for GSIIs, and the requirement to submit a Systemic Risk Management Plan, a Liquidity Risk Management
On January 20, 2016, Moody’s reaffirmed the Aa3 rating for financial strength on AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, maintaining a stable outlook.
On October 6, 2015, Fitch reaffirmed the AA- financial strength ratings of AXA’s principal insurance subsidiaries and the A rating for counterparty credit on the Company, maintaining a stable outlook.
Management closely monitors the Group’s ratings and currently expects that these ratings should remain at levels suffi cient for the Company and its insurance subsidiaries to compete effectively. However, given continuing high volatility and uncertainty in financial markets and general economic conditions, management cannot predict with any degree of certainty the timing and/or magnitude of future ratings actions.
Employees 114 2.2 FULL DISCLOSURE ON EXECUTIVE COMPENSATION AND SHARE OWNERSHIP
Special report of the Statutory Auditors on regulated agreements and commitments 149 2.4 THE OFFER AND LISTING 152
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 listed corporations (Code de gouvernement d’entreprise des sociétés cotées) published by the Afep (Association française des entreprises privées) and the Medef (Mouvement des entreprises de France) (hereinafter the “Afep-Medef Code”) as its Corporate
Directors with Mr. Henri de Castries acting as both Chairman and Chief Executive Offi cer.
Company’s current governance structure which had proved both the reactivity and effi ciency of the Group despite a diffi cult macroeconomic environment for fi nancial institutions.
Following the re-appointment of Messrs. Henri de Castries and Denis Duverne as directors by the 2014 Shareholders’
(1) Mr. Henri de Castries as Chairman of the Board of Directors and Chief Executive Officer and (2) Mr. Denis Duverne as
Deputy Chief Executive Offi cer. The Board considered these appointments to be in the best interest of AXA, its shareholders and other stakeholders. The Board also considered that having two executive offi cers on the Board is benefi cial to the effi ciency and overall quality of the Company’s governance and its operations because having a Deputy Chief Executive Offi cer focused primarily on management of the Group’s operational activities permits the Chairman & Chief Executive Offi cer to focus his time primarily on global strategic initiatives and representing the Group with the full spectrum of its stakeholders.
is specifi c to the circumstances of the Group at this stage of its evolution and to the unique qualities of Mr. Henri de Castries and that it will consequently continue to re-examine this question as circumstances evolve.
Director of AXA in April 2010. The Lead Independent Director has a number of specifi c powers, described more fully hereafter in this Section 2.1, and plays an important role in the preparation of the meetings of the Board and its Committees.
The Board of Directors determines the strategic orientations of the Company’s activities and ensures their implementation.
Subject to the powers specifi cally reserved to shareholders under French law and within the limit of the Company’s purpose, the Board is responsible for considering all material questions and taking all material decisions related to the Company and its business. It exercises the following powers in particular: ■ chooses between the two forms of Executive Management
Chief Executive Offi cer and the Deputy Chief Executive Offi cer; ■ appoints the Vice-Chairman – Lead Independent Director.
According to AXA’s Charter, this appointment is mandatory when the positions of Chairman of the Board of Directors and
Training sessions are provided to new and existing members of the Board of Directors to familiarize them with the Group’s principal activities and issues. These sessions mainly focus on the Group’s fi nancial structure, strategy, governance, main activities and the evolution of the insurance regulatory context.
The Company’s Charter and the Board of Directors’ Bylaws provide for the mandatory appointment of a Vice-Chairman acting as Lead Independent Director in the event that the positions of Chairman and Chief Executive Officer are held by a single individual. In April 2014, the Board of Directors reappointed Mr. Norbert Dentressangle as Vice-Chairman – Lead
The Lead Independent Director specifi cally has the power to attend and participate in all meetings of the Board Committees
Chairman & Chief Executive Offi cer to convene full meetings of the Board on a specifi c agenda at any time, to convene meetings of the Non-Executive Directors at his discretion at any time without the presence of the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer (executive sessions).
During the 2015 fi scal year, the Lead Independent Director attended all meetings of the Board of Directors (nine meetings)
Group; ■ was actively involved in the preparation of Board meetings, working closely with Executive Management and other Board members. In particular, he examined, during preliminary sessions, the frequency and the dates of the meetings, ensured the quality of the information delivered to the members of the Board and Committees before their meetings as well as the relevance of the agendas; and
■ was closely associated with the work of the Compensation &
Committees, the organization of the periodic self-assessment of the Board as well as the work of the Committee regarding corporate governance related matters such as the functioning of the Board, the succession plans for Executive Management and any communications made to shareholders on these subjects.
representative. This representative is appointed by shareholders every four years from a list of candidates selected by the Group’s employee shareholders, following an internal selection process
Board’s work by taking into account, in a more direct and concrete way, the point of view of the Group’s employees, in
Each year, the Board of Directors assesses the independence of each of its members on the basis of the recommendations contained in the Afep-Medef Code. On February 24, 2016, the
Board of Directors determined that, on December 31, 2015, ten of the fourteen Board members were independent after assessing the criteria of the Afep-Medef Code: Mmes Isabelle
Norbert Dentressangle (61) Chairman of Dentressangle Initiatives (SAS) 30 bis, rue Sainte-Hélène – 69287 Lyon Cedex 02 – France French nationality
Denis Duverne (62) Director, Deputy Chief Executive Offi cer of AXA in charge o Finance, Strategy and Operations 25, avenue Matignon – 75008 Paris – France French nationality
Jean-Martin Folz (68) Companies’ director AXA – 25, avenue Matignon – 75008 Paris – France French nationality
Mrs. Suet Fern Lee (57) Managing Partner of Morgan Lewis Stamford LLC (Singapore) 10 Collyer Quay #27-00 Ocean Financial Centre – Singapore 049315 – Singapore Singaporean nationality
Independent director Chairman of the Audit Committee Member of the Finance Committee
Independent director Chairman of the Finance Committee Member of the Audit Committee
Mrs. Deanna Oppenheimer (57) Founder of CameoWorks (United States) 1215 – 4th Avenue, Suite 935 – Seattle – WA 98161 – United States American and British nationalities
Mrs. Doina Palici-Chehab (58) Chief Executive Offi cer of AXA Insurance Singapore Pte Ltd (Singapore) 8, Shenton Way – #27-01 AXA Tower – Singapore 068811 – Singapore German and French nationalities
The Shareholders’ Meeting to be held on April 27, 2016 will be asked to vote on the re-appointment of three members of the Board of Directors whose terms of office will end
François Martineau) as well as on the appointment of two members of the Board of Directors. In this context, the Board of Directors has proposed, based on the recommendation of its Compensation & Governance Committee: ■ the re-appointment as director of Mrs. Doina Palici-Chehab, upon the recommendation of the employee shareholders of the AXA Group, for a four-year term (her biography is presented below in this Section 2.1); ■ the re-appointment as director of Messrs. Stefan Lippe and
François Martineau each for a four-year term (their respective biographies are presented below in this Section 2.1); ■ the appointment as director of Mrs. Irene Dorner for a fouryear term. Mrs. Irene Dorner’s candidacy was proposed by the
United States, holding several positions until 2014 including the position of President & Chief Executive Offi cer of HSBC
■ the appointment as director of Mrs. Angelien Kemna for a four-year term. Mrs. Angelien Kemna’s candidacy was proposed by the Board of Directors in particular because of her international experience and her expertise in the fi nancial fi eld and more precisely on asset management. Mrs. Angelien
European region before joining APG G roup N.V. where she currently holds the position of Chief Finance & Risk Offi cer.
Chehab and Messrs. Stefan Lippe and François Martineau as well as Mmes Irene Dorner and Angelien Kemna in light of the Afep-Medef Code and considered Mr. Stefan Lippe and
Within the framework of its principal assignments such as described above, the Board focused, in particular, on the following matters during 2015: review of the Group’s strategy, examination of the 2014 financial statements and the 2015 half-year fi nancial statements, review of the Board
Committees’ reports, review of proposed signifi cant acquisitions and disposals, review of the ORSA (Own Risk and Solvency
Since 2014, the Board of Directors holds each year a two-day off-site strategy session with presentations by members of the
Mr. Henri de Castries is a graduate of the École des hautes études commerciales (HEC) and obtained a law degree before completing preparatory studies at the École nationale d’administration (ENA). After graduating from ENA,
Vice-President for the Group’s asset management, fi nancial and real-estate businesses in 1993. In 1997, Mr. Henri de Castries was appointed Chairman of The Equitable Companies
April 2010, Mr. Henri de Castries was Chairman of the AXA
Dentressangle Initiatives, an investment holding company which, in addition to his majority stake in the company
Member and Chairman of the Superv isory Board: Norbert Dentressangle (SA)
Mr. Duverne was the Management Board member in charge of Finance, Control and Strategy. From January 2010 until
Finance, Strategy and Operations. In 2014, Mr. Denis Duverne became a member of the Private Sector Advisory Group (PSAG), which brings together international leaders of the private sector whose shared goal is to help developing countries improve their corporate governance and was co-founded in 1999 by the World Bank and the Organisation for Economic Co-operation and Development (OECD).
Mines. He began his career in various positions within the French
In 2003, he was appointed Chief Executive Offi cer of the Rhodia
Béghin-Say. Mr. Jean-Martin Folz joined PSA Peugeot Citroën in 1995 and became Chairman of the Management Board in 1997. He left PSA in February 2007. From June 2007 to
Offi cer of Cap Gemini France. In May 2000, following the merger between Cap Gemini and Ernst & Young Consulting (which he initiated), he became Deputy Chief Executive Offi cer of the Group and member of the Board of Directors. As of January 1st, 2002, he became Chief Executive Offi cer of the Capgemini G roup.
Offi ce (Lionel Jospin). In 2002, she joined the Suez group where she held various positions: from 2002 to 2005, at Strategy &
Development; from 2005 to 2007, director of Performance and Organisation; from 2007 to 2008, Deputy Chief Executive
Mrs. Isabelle Kocher was Chief Executive Offi cer of Lyonnaise des Eaux, also in charge of developing the activities in Europe.
SUEZ. Since November 2014, Mrs. Isabelle Kocher has been director, Deputy Chief Executive Offi cer and Chief Operating
Mrs. Suet Fern Lee graduated with a double fi rst in law from
Singapore Bar in 1982 and has practiced law in London and
Corporation, a major law fi rm in Singapore. She is a member of the Executive Committee of the Singapore Academy of
Studies, a member of the Advisory Board to the Law School at
Fellow of the Singapore Institute of Directors. She also sits on the Board of The World Justice Project, a global organization for the promotion of the rule of law.
Mr. Stefan Lippe is a graduate in mathematics and business administration from the University of Mannheim. He obtained his doctorate in 1982 being awarded the Kurt Hamann foundation prize for his thesis. In October 1983, he joined Bavarian Re (a former
Swiss Re subsidiary). From 1985, he was involved in the casualty department’s operations in the German-speaking area. In 1986, he became Head of the non-proportional 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 G roup. 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. Early 2005, he led
Swiss Re’s Property & Casualty and Life & Health Underwriting activities; and in September 2008, he took over as Chief Operating
Board of Directors, and Acqufi n AG. In May 2013, he co-founded
Paperless Inc. and currently serves as Chairman of the Board of
Since 1987, Mr. François Martineau has been a partner of the law firm Lussan/Société d’avocats, and Managing Partner since 1995.
Vice-Chairman and member of the Supervisory Board: Associations Mutuelles Le Conservateur**, Assurances Mutuelles
Mr. Ramon de Oliveira is a graduate of the University of Paris and of the Institut d’études politiques (Paris). Starting in 1977,
University. Mrs. Deanna Oppenheimer started her career in Banking at Washington Mutual (United States) in 1985, retiring in March 2005 as President, Consumer Banking. In
Retail and Business Banking. At the end of 2011, she left
Barclays. In 2012, Mrs. Deanna Oppenheimer founded the advisory fi rm CameoWorks (United States).
From 1980 to 1983, she was a teacher for foreign languages in
Romania. From 1983 to 1990, she was subject Matter Expert in
AGF (now Allianz) in Cologne (Germany). In 1990, she joined the
Mrs. Dominique Reiniche is a graduate of the Essec. In 1978, she joined Procter & Gamble and became Associate Advertising
According to the provisions of the Board of Directors’ Bylaws and the recommendations of the Afep-Medef Code, each member of the Board of Directors is required to inform the Company of any situation concerning her/him which may create a confl ict of interests with the Company or the companies of the AXA Group and to abstain from voting on the related resolution.
(for their own account or for third parties), underwriting of securities and/or furnishing of other types of services or goods.
These agreements or deals are generally fully negotiated and performed at arm’s length terms and conditions. Consequently,
director’s duties towards AXA and (ii) their private interests and/ or other duties of these individuals.
The Board of Directors conducts an annual self-assessment to review its composition, operating procedures and overall functioning. The conclusions of this self-assessment are reviewed by the Compensation & Governance Committee and discussed annually during one of the meetings of the Board of
In 2013, the Board of Directors decided that the annual assessment should be carried out by an external consultant on a regular basis. Consequently, in 2015, the Board evaluation was carried out by a consultant from SpencerStuart who collected each of the directors’ input, views and suggestions on the Board work and its functioning.
Compensation & Governance Committee were both actively involved in this assessment and, in particular, in examining the conclusions of the consultant’s report and in defi ning areas for improvement.
The Board of Directors has three specialized Committees that review specifi c matters : (1) the Audit Committee, (2) the Finance
Each Committee is empowered to undertake or commission specifi c studies or reviews within the scope of its responsibilities.
■ effectiveness, performance and independence of the internal and external auditors.
The Committee oversees the process for selecting the Statutory Auditors, making recommendations and controlling their appointment and replacement.
The Committee also examines the compliance with the risk appetite limits.
The Committee meets during specific sessions (1) the Statutory Auditors and the Group Head of Audit, (2) the Deputy Chief Executive Officer and the Group Chief Financial Offi cer and (3) the Group Chief Risk Offi cer.
The Audit Committee met seven times in 2015. The average attendance rate was 96.4%.
Référence); ■ the half-year fi nancial statements for 2015; ■ internal control and Risk Management
■ To issue proposals to the Board of Directors for the fi xing of: • the compensation of the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer and the preparation of their annual assessment,
• the number of Company stock options or performance shares to be granted to the Chairman & Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the other members of the Executive Committee; ■ To formulate an opinion on the proposals of the Chairman & Chief Executive Offi cer concerning: • the principles and conditions for the determination of the compensation of the executives of the AXA Group,
• the overall annual allocation of Company stock options or performance shares to be granted to employees of the AXA Group; ■ To issue proposals on the appointments of the Chief Executive Offi cer, the Deputy Chief Executive Offi cer and the members of the Board of Directors and its Committees. The Committee is also informed of the appointments of the main executives of the Group, and in particular of the members of the Management Committee and the Executive Committee. The Committee prepares, with the Chief Executive Offi cer, the succession of the Executive Management; ■ To examine in more depth certain Group human resources issues and to review each year the Company’s policy with respect to professional equality as well as equal pay; ■ To examine the Group’s strategy on corporate responsibility and related issues; ■ To examine in more depth certain governance matters relating to the operation and organization of the Board of Directors and the organization of the periodic selfassessment of the Board of Directors; and
The Group Head of Human Resources attends each Compensation & Gouvernance Committee meeting.
The Committee focused, in particular, on the following issues: ■ Compensation issues: • the compensat ion pa id to the
Chairman & Chief Executive Officer, the Deputy Chief Executive Offi cer and to the members of the Management Commi t tee and the Execut i ve Committee,
• the 2015 and 2016 equities’ allocations (stock options and performance shares) and their performance conditions,
• the “say-on-pay” (advisory vote on the aggregate compensation elements for the Chairman & Chief Executive Offi cer and the Deputy Chief Executive Offi cer), and
• the directors’ fees amount and allocation; ■ Governance issues: • the review of the governance structure of the Company and of the succession plan of the Chairman & Chief Executive Offi cer,
• the share ownership requirements for members of the Board of Directors,
Board of Directors provide for specifi c limitations of the powers of the Chairman & Chief Executive Offi cer and require prior Board approval for certain signifi cant transactions (sales or acquisitions over €500 million; signifi cant fi nancing operations and other types of transactions that are not in line with the Company’s announced strategy…).
Officer by the Board of Directors of April 23, 2014, for the duration of his term of offi ce as director, i.e. four years.
His role is to second the Chairman & Chief Executive Offi cer. The
Committee to assist them in the operational management of the Group. The Management Committee has no formal decision making authority.
The Management Committee also holds meetings dedicated to the “Quarterly Business Reviews” (QBRs) during which its members welcome senior executives from the main entities of the Group. They present the performance of their operations and the progress status of their key projects using defi ned quantifi able standards of measurement which are common to all entities of the Group.
Peter Kraus Chairman & Chief Executive Offi cer of AB (United States)
Directors and Chief Executive Offi cer, and approved the following appointments effective upon Mr. Henri de Castries’ retirement on
Until September 1st, 2016, Mr. Thomas Buberl will be Deputy CEO of AXA (Directeur Général Adjoint ). He will work closely with
Management Committee as well as other key senior executives selected on the basis of their respective roles in the organization
On January 1st, 2016, the Executive Committee was comprised of the following seventeen members, including ten non-French nationals: Name Principal function within AXA
Thomas Buberl (1) Chief Executive Offi cer of AXA Konzern AG (Germany), Chief Executive Offi cer of the global business line for the Health business and Chief Executive Offi cer of the global business line Life & Savings
George Stansfi eld Group General Counsel and Head of Group H uman R esources
The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: S alaried employees (full time equivalent) At December 31, 2013 At December 31, 2014 At December 31, 2015
AXA Technology, AXA Group Solutions, AXA Business Services (l) 6,952 7,356 8,061
(a) A portion of the employees of AXA’s French affi liates is included in GIEs.
(b) In 2015, the decrease by 405 in France was driven by natural leaves.
(d) In 2015, the decrease by 229 in Germany refl ected effi ciency programs and early retirements.
(e) Some employees of AXA Bank Belgium provide services in common for both the insurance activities and the banking activities. Consequently, the split is not available. In 2015, the decrease by 124 in Belgium mainly refl ected effi ciency programs and operating model reorganization.
(f) In 2015, the increase by 269 in the Mediterranean & Latin American Region was mainly attributable to business growth notably in Colombia, the Gulf region and Mexico.
Committee of AXA’s Board of Directors is to formulate propositions to the Board regarding, in particular, (1) the Company’s compensation policy and principles, (2) the determination of the Chairman & Chief Executive Offi cer’s and the Deputy Chief
The AXA Group compensation policy is designed to: ■ attract, develop, retain and motivate critical skills and best talents; ■ drive superior performance; ■ align compensation levels with business performance; ■ ensure that employees are not incentivised to take inappropriate and/or excessive risks and that they operate within AXA’s overall risk framework; and
E quity which takes into account the capital required to deliver performance) and (iii) determines individual compensation amounts on the basis of both fi nancial results and demonstrated individual leadership and behaviours.
AXA Group’s global performance, on the benefi ciary’s local entity performance (company or business unit, depending on the case), and on the achievement of the executive’s individual objectives including demonstrated abilities for leadership.
The total target compensation is composed of a fi xed annual compensation and a target variable compensation.
The variable component of his compensation, unchanged since 2010, was €2,350,000 in 2015, i.e. 247% of his fi xed annual compensation.
The variable component of his compensation, unchanged since 2010, was €1,450,000 in 2015, i.e. 193% of his fi xed annual compensation.
Mr. Henri de Castries’ overall variable payout refl ects performance against two distinct components that are not fungible.
Castries’ individual performance on the execution of major strategic initiatives critical to the Group’s long-term success.
Group, are both fi nancial and operating criteria and rely on the budget and on predefi ned performance indicators.
In order to assess Mr. Henri de Castries’ individual performance in 2015, the Board of Directors in particular considered the following achievements: (i) the acceleration of the digital transformation of the Group through the implementation of various strategic partnerships with worldwide leading actors in the digital industry; (ii) the investment (through AXA Strategic Ventures) in innovative companies destined to bring new approaches to the insurance model and contribute to improving customer service (iii) the ranking, for the 7th consecutive year, of the AXA brand as the number one insurance brand worldwide according to Interbrand; (iv) the evolution of the Group’s organization to better address the needs of its clients with the launch of companies as Kamet
Insur Tech incubator for the benefi t of the clients in terms of protection and services, AXA Partners dedicated to developing the global partnership business; (v) the geographic expansion through external acquisitions (Genworth in the United Kingdom,
The variable compensation amounts actually paid to Mr. Henri de Castries since he was appointed Chairman of the Management Board in May 2000 are set forth below and demonstrate the demanding nature of his performance objectives and the Board’s performance assessments which have signifi cantly impacted his variable compensation payouts from year-to-year: Executive compensation and director’s fees Target Actual % Target
Variable compensation for the year 2006 paid in 2007 €2,500,000 €3,045,987 122%
Variable compensation for the year 2007 paid in 2008 €2,500,000 €2,644,366 106%
Variable compensation for the year 2009 paid in 2010 €2,700,000 €2,599,327 96%
Variable compensation for the year 2013 paid in 2014 €2,350,000 €2,549,750 (a) (b) 109%
The determination of the variable compensation to be paid to the Deputy Chief Executive Offi cer was based, in 2015, on the following two metrics: ■ Group performance for 50%. This metric is measured based on underlying earnings per share, return on equity (adjusted
Mr. Denis Duverne’s overall variable payout refl ects performance against two distinct components that are not fungible.
Since 2015, the proportion of the variable compensation, to be paid to Mr. Denis Duverne, allocated to the Group performance weights for 50% (vs 30% in 2014). This variable compensation is therefore no longer related to the achievement of operational targets assigned to entities delivering specific services as for example IT support and the operational excellence. This evolution refl ects the Board of Directors’ desire to place an equivalent weight on the Group’s operational results and on
Mr. Denis Duverne’s individual performance on the execution of major strategic initiatives critical to the Group’s long-term success and to align the compensation structure of the Deputy
The individual performance of the Deputy Chief Executive Offi cer is assessed on the basis of various indicators and qualitative objectives set by the Board of Directors through a written target letter established at the beginning of each calendar year before the performance measurement period. It includes detailed objectives with regards to the Group’s progress in the elaboration of its strategic plan as well as other performance indicators and objectives designed to assess the level of achievement of global strategic initiatives and/or relating to certain geographic areas, and the evolution of certain investments contributing to the development of the Group’s operations.
Executive Offi cer may not exceed 150% of his variable target compensation, i.e. 290% of his fi xed annual compensation.
■ their individual performance (representing 50%), evaluated considering predetermined objectives specifi cally deriving from strategic initiatives.
Performance indicators that measure the Group and/or the operational entities’ performance are defi ned at the beginning of the year with: ■ a predefi ned target, aligned with the strategic plan (budget), the attainment of which will result in 100% achievement; ■ a fl oor (which may vary between 50% and 90% of achievement against the target depending on the indicator), which defi nes the threshold below which no variable compensation for that component will be paid; ■ a cap (which may vary between 110% and 130% of achievement against the target depending on the indicator), which defines the threshold above which the variable compensation for that component is capped.
Individual performance is assessed both on (i) the achievement of results for each predetermined individual objective (the “what”)
Compensation & Governance Committee and the Board of Directors took into account the following measures: (i) an underlying earnings per share and (ii) a return on equity (adjusted
an amount of €458,955 for Mr. Henri de Castries and €282,141 for Mr. Denis Duverne and (ii) the fi rst tranche of their differed variable compensation with respect to the fi scal year 2014 i.e. an amount of €456,840 for Mr. Henri de Castries and €283,968 for
Mr. Denis Duverne, were paid to the Chairman & Chief Executive
Offi cer and the Deputy Chief Executive Offi cer. These amounts are based on the evolution of the AXA share price. Considering that the AXA share performed well in 2015, these amounts were capped at 120% of half of the differed variable compensation granted in respect of the 2013 and 2014 fi scal years.
Each year, LTIs (stock options and performance shares) are granted to the Group executives.
Committee and the Board of Directors however ensure that the stock options and the performance shares granted to the executives and valued in accordance with IFRS standards are not disproportionate compared to the aggregate compensation, options and shares granted to the said executives.
& Chief Executive Offi cer and the Deputy Chief Executive Offi cer.
On March 24, 2014, the fair value of one option was €1.78 for options with performance conditions, and the fair value of one performance share was €12.71 (€12.03 for the Chairman & Chief
Amounts paid in respect of the year Amounts paid during the year
(b) Director’s fees are deducted up to 70% from the variable compensation.
The only “benefi ts in kind” for Messrs. Henri de Castries and
Offi cer, received compensation from the Company, with the exception of directors’ fees (jetons de présence). The amount of directors’
Henri de Castries – Chairman & Chief Executive Offi cer 0 0
Meeting of April 30, 2015 at €1,650,000, compared to a previous amount of €1,500,000. The purpose of this increase is to take into account the accrued responsibilities and workload of the Board of Directors and its Audit Committee resulting from the designation of the AXA Group as a global systematically important insurer as well as the implementation of the obligations resulting from the Solvency II Directive. The new level of directors’
fees allocated by the Company will thus be closer to the amount of directors’ fees paid by other International Insurance groups comparable to AXA while remaining in line with French market practices.
No directors’ fees are paid by the Company to directors exercising executive functions at AXA (i.e. Chief Executive Offi cer and Deputy Chief Executive Offi cer).
Shareholders’ Meeting, in accordance with applicable laws, and apportioned by the Board of Directors to its members in accordance with its Bylaws (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
Mrs. Doina Palici-Chehab, member of the Board of Directors representing the employee shareholders of the AXA Group, received in 2015 an annual gross cash compensation of
(market competitiveness, adequacy with local practices, and support to Group development).
Benefi ciaries and individual grants are determined taking into account the (i) criticality of the job within the organization,
(ii) criticality of the individual in the current job and potential for future and (iii) sustainability of the individual contribution.
December 22, 2010 that the total number of options granted to the executive offi cers of the Company (Chairman & Chief
December 31, 2015 (disregarding the dilution related to the potential future exercise of these options). Given the nature of options and the evolution of market practices especially in
France, the Board of Directors decided to restrict the scope of option grants to Group S enior E xecutives, which reduces the number of benefi ciaries compared to prior years.
If the performance condition has not been met at the expiry date of the options, these options are automatically cancelled.
Grant date (Board of Directors or Management Board) 29/03/2005 29/03/2005 06/06/2005 27/06/2005 01/07/2005 21/09/2005 31/03/2006 31/03/2006 31/03/2006 25/09/2006
Subscription or purchase price of options (a) 19.70 19.95 19.02 19.32 19.91 20.97 27.75 27.93 27.93 28.03
Number of options exercised at 31/12/2015 6,514,496 2,688,910 5,496 158,108 0 55,457 2,877 0 0 0
or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 25/09/2010 13/11/2010 10/05/2009 10/05/2009 10/05/2009 24/09/2009 24/09/2011 19/11/2009 19/11/2011 01/04/2010
Number of options exercised at 31/12/2015 0 0 0 0 0 0 0 0 0 1,255,028
Date of the Shareholders’ Meeting 20/04/2005 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
Subscription or purchase price of options (a) 21.00 23.42 23.42 21.19 21.19 13.89 9.76 9.76 9.76 13.03
Grant date (Board of Directors or Management Board) 10/06/2009 21/09/2009 08/12/2009 08/12/2009 19/03/2010 19/03/2010 18/08/2010 18/08/2010 13/10/2010 13/10/2010
Total number of shares to be subscribed (a) 2,137,462 53,237 3,134 20,890 7,671,540 278,986 22,846 10,619 4,274 27,772 or purchased, from which to be subscribed or purchased by: Executive Directors: Start date of exercise 10/06/2011 21/09/2013 08/12/2011 08/12/2013 19/03/2012 19/03/2012 18/08/2012 18/08/2014 13/10/2012 13/10/2014
Expiry date of options 10/06/2019 21/09/2019 08/12/2019 08/12/2019 19/03/2020 19/03/2020 18/08/2020 18/08/2020 13/10/2020 13/10/2020
Subscription or purchase price of options (a) 15. 47 15. 88 16. 60 16. 60 15. 43 15. 43 13. 89 13. 89 13. 01 13. 01
Number of options exercised at 31/12/2015 1,007,396 38,424 0 3,656 2,218,081 62,560 14,000 6,458 0 7,121
Date of the Shareholders’ Meeting 22/04/2008 22/04/2008 22/04/2008 22/04/2008 27/04/2011 27/04/2011 27/04/2011 27/04/2011 23/04/2014
Grant date (Board of Directors or Management Board) 22/12/2010 18/03/2011 18/03/2011 04/04/2011 16/03/2012 13/06/2012 22/03/2013 24/03/2014 19/06/2015
Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations 19/06/2015 subscription or purchase 100% of options: SXIP
Representative of employee shareholders to the Board of Directors 19/06/2015 subscription or purchase
Part 4 of this Annual Report. This value does not represent a current market value, a current valuation of these options, nor the actual proceeds if and when the options are exercised.
are prohibited from engaging in any transaction designed to hedge the value of equity based compensation awards (including stock options, performance shares, possible restricted shares, or similar instruments) granted under any plan or arrangement maintained by AXA or any of its subsidiaries. This restriction applies from the date of grant until such time as the benefi ciary receives the securities underlying the award upon, for example, the exercise of a stock option, the lapse of restrictions on performance shares, restricted shares or similar events. In accordance with the recommendations of the Afep-Medef
Code, the executive offi cers of the Company make a formal commitment to not resort to such hedging transactions.
Representative of employee shareholders to the Board of Directors 22/03/2013 subscription or purchase 4,667 13. 81 22/03/2023 Last third of options: SXIP
Stock options on AXA or any eligible AXA Group subsidiaries, exercised during the year by the ten employees, outside management bodies’ members of the Company or of eligible AXA Group subsidiaries, who exercised the highest number of stock options (aggregate information)
Denis Duverne Deputy Chief Executive Offi cer in charge of Finance, Strategy and Operations -
Doina Palici-Chehab Representative of employee shareholders to the Board of Directors 81,840 -
Performance Shares are usually granted to benefi ciaries residing in France while International Performance Shares are generally granted to benefi ciaries residing outside of France.
Within the global cap authorized by the shareholders, the Board of Directors approves all Performance Share programs prior to their implementation.
Offi cer, the Deputy Chief Executive Offi cer and other members of the Executive Committee are preceded by a proposal of the
The nature of these criteria as well as the associated targets are defi ned and reviewed on a regular basis by the Board of
Directors, depending on the evolution of the Group’s strategic objectives and after consideration of market practices as well as changes in regulations. Thus, during the last few years, the performance criteria used for this purpose have been linked to (i) the underlying earnings and the net income or adjusted earnings to measure the operational entities’ performance, and
(ii) the net income per share or the adjusted earnings per share to measure the AXA Group performance.
Group support functions (including AXA executive offi cers), the considered operational entity is the AXA Group.
Until 2015, a global performance rate was calculated as follows: 1/3 performance rate (Adjusted Earnings Per Share) + 2/3 performance rate [average (Adjusted Earnings + Underlying
As from the 2016 plan, the weight of the Group performance will be increased to reach 40% and the weight of the entity or business unit will be decreased to 50%. Two new relative performance criteria shall be also introduced in the calculation of the global performance: ■ one criterion linked to Corporate Social Responsibility – “CSR”
according to the DJSI during the acquisition period shall be compared to the average of the scores achieved by the other companies included in the DJSI over the same period.
Between these minimal and maximal performance levels, the number of shares defi nitely granted shall be calculated on a linear basis depending on the performance achieved.
■ one financial criterion of relative performance 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) in order to adjust upwards or downwards within the limit of 5 points the global performance rate. Thus, AXA’s outperformance (150%
or more) compared to the SXIP index shall trigger a maximum increase of the global performance rate of 5 points (subject however to the upper limit of 130% of the global performance rate) and AXA’s under-performance (75% or less) compared to the SXIP index shall trigger a maximum decrease of 5 points of the global performance rate. B etween these minimal and maximal performance levels, the number of shares defi nitely granted shall be calculated on a linear basis depending on the performance achieved.
The global performance rate shall therefore be calculated as follows: [10% CSR (DJSI) + 40% Group performance (Adjusted
A performance achievement of 100% (“target”) is achieved only in the event of a global performance corresponding to a 5% (2)
weighted-compound annual growth rate of the diverse criteria of the Group performance and the entity performance. In this case, the number of shares defi nitively granted at the end of the acquisition period shall be equal to the number of Performance
Per Share) reach 80%, the Adjusted ROE would amount to 11.2%, i.e. a level above the cost of capital, which would justify a delivery of 50% of the shares initially granted. This reinforced stringency shall also apply to two thirds of the shares subject to the Adjusted Earnings Per Share of the Group performance condition (i.e. two thirds of 40% of the total grant) granted to the members of the Executive Committee.
Group performance condition (i.e. one third of 40% of the total grant) will be directly linked to the evolution of the weightedcompound annual growth rate of the Adjusted Earnings Per
Share. Thus: ■ a 5% weighted-compound annual growth rate of this indicator would allow the defi nitive grant of 100% of the shares initially granted; ■ a 10% weighted-compound annual growth rate of this indicator would allow the defi nitive grant of 200% of the shares initially granted; ■ in the absence of growth, no share would be granted under this performance condition. Thus, no potential under performance will be rewarded.
It should be noted that, between the different levels of performance listed above, the number of shares defi nitively granted shall be calculated on a linear basis depending on the achieved performance.
The total shares defi nitively acquired with respect to the Group performance condition are capped at 130%.
As far as International Performance Shares are concerned: ■ the International Performance Shares are subject to a 3-year performance period followed by a 1-year deferred acquisition period. 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; ■ the amounts corresponding to International Performance
Total number of International Performance Shares granted from which granted to Executive Directors: Acquisition date of the International Performance Shares 18/03/2014 04/04/2014 16/03/2015 13/06/2013 22/03/2016 24/03/2017 (e) 19/06/2019
Number of International Performance Shares cancelled 888,396 101,756 1,135,757 0 960,132 516,166 70,603
(a) The 3,429,914 units acquired of the March 18, 2011 plan have been settled as €64.6 million.
(c) The 6,197,399 units of the March 16, 2012 plan have been settled as €136.4 million.
(d) 5,354 units of the March 22, 2013 plan acquired by anticipation.
(e) 50% of shares to be acquired at March 24, 2017 and 50% at March 24, 2018.
(f) 2,600 units of the March 24, 2014 plan acquired by anticipation.
(h) For plans before 2013, the payment at maturity has been made in cash.
Number of shares acquired at 31/12/2015 2,063,689 2,853,303 2,905,776 16,056 (b) 0
Chairman & Chief Executive Offi cer 19/06/2015 105,332 0.004% 1,511,514 19/06/2018 19/06/2020 ajusted earnings per share ajusted earnings underlying earnings
(a) The performance rate of 104% is composed of : 1/3 x 99% (Net income per share) + 2/3 x 107% (Underlying earnings and Net income).
Henri de Castries Chairman & Chief Executive Offi cer 18/03/2011 106,004 18/03/2015
Representative of employee shareholders to the Board of Directors 19/06/2015 7,692 110,380 19/06/2019 19/06/2019 ajusted earnings per share ajusted earnings underlying earnings
shares (the “Minimum Shareholding Requirement”) representing a multiple of the annual total cash compensation (fi xed salary plus annual variable compensation) received for his/her functions within the Group: ■ the Chairman & Chief Executive Offi cer is required to hold the equivalent of his total annual cash compensation multiplied by 3; ■ the Deputy Chief Executive Officer is required to hold the equivalent of his total annual cash compensation multiplied by 2; ■ Management Committee members are required to hold the equivalent of their total annual cash compensation multiplied by 1.5; ■ Executive Committee members are required to hold the equivalent of their total annual cash compensation multiplied by 1.
AXA shares, ADS or shares of listed Group subsidiaries, held directly or indirectly through m utual funds or similar investment vehicles, are taken into account for the purposes of calculating this Minimum Shareholding Requirement.
Commercial Code, the Supervisory Board and later the Board of Directors have decided that, as long as an executive offi cer
January 1, 2007, the executive offi cers must continue to hold in registered form a number of shares obtained upon exercise equal in value to at least 25% of the pre-tax capital gain realized upon exercise (i.e. in France, this equals approximately 50% of the post-tax capital gain). These shares shall be held during the entire term of offi ce of the executive offi cer; ■ for Performance Shares granted after January 1, 2007, the executive offi cers must, at every share acquisition date, hold in registered form at least 25% of the Performance Shares acquired during the entire term of offi ce of the executive offi cer.
These restrictions do not apply if an executive offi cer complies with his/her Minimum Shareholding Requirement.
On December 31, 2015, based on the AXA share value (€25.23) and on the AllianceBernstein share value (€21.30) on that date, the
Alliance Bernstein shares * This amount includes the part of the variable compensation with respect to 2014 which has been deferred in accordance with the mechanism described on page 120 . The total amount paid will depend on performance conditions and may then vary.
March 31, 2010 with Banque Degroof a discretionary mandate to manage a portion of the AXA securities they personally own.
The principal features of this mandate are as follows: ■ the mandate is signed for an indefi nite term; ■ each instruction agreed between the executive and the bank, within the framework of the mandate, is valid for a determined duration determines and starts after the expiry of a 3-month abstention period; ■ the mandate and the instructions are signed when the executive is not in possession of any inside information and outside blackout periods. During a 3-month abstention period following the signing of each instruction, the bank is prohibited from engaging in any transaction on behalf of the executive; ■ the executive may not intervene in management by the bank who exercises discretion in application of the instructions. The executive generally commits to proscribe all communications with the bank and not to exercise any infl uence on it prior to the expiry of a standing instruction.
I Transactions involving Company securities completed in 2015 by the members of the Board of Directors
Directors made the following disclosures in the course of 2015 concerning their transactions involving Company securities.
Company Savings Plan of dividends attached to shares held in the Company
** AXA shares locked in under the AXA employer-sponsored savings plan (Plan d’Épargne d’Entreprise du Groupe).
Group in accordance with the provisions of Article L.137-11 of the French Social Security Code. This scheme is outsourced to an insurer.
Group, of which at least 5 years as a senior executive. Senior executives whose employment is terminated by the Company
The amount of the supplementary pension is designed, for a minimum executive seniority of 20 years within the AXA Group, to achieve a global pension (including the amounts paid with respect to compulsory schemes) equivalent to 40% of the average gross compensation of the past 5 years preceding the
Mr. Henri de Castries decided in 2010, on an individual and voluntary basis and in consultation with the Board of Directors, to limit the compensation to be taken into account in order to calculate his global pension. For information purposes, as of today considering his length of service within the Group (over 26 years on the date of this Annual Report), the estimated annuities that would be paid to him according to the collective defi ned benefi t pension scheme would represent an estimated amount of one million euros per year, before taxes and social security charges.
For Mr. Denis Duverne, as of today and considering his length of service within the Group (20 years on the date of this Annual
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). Contributions are subject to 8% social charges (7.5% for CSG and 0.5% for CRDS).
Henri de Castries Chairman & CEO Beginning of current mandate: 04/29/2010 Term of offi ce: 2018 – X X – X – – X
(health insurance, life insurance, disability insurance, retirement, etc.) to which Messrs. Henri de Castries and Denis Duverne were entitled as employees of AXA. In this context, the
Group (for 26 years and 20 years, respectively on the date of this Annual Report) and had the same social benefi ts as all other director-level employees of AXA in France (with no special benefi ts or arrangement designed specifi cally for them), and (ii)
Company’s control or strategy that has not been initiated by the benefi ciary. The payment of the severance benefi t would be subject to the three following performance conditions as determined by the Board of Directors during its February 20, 2014 meeting: (1) achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target,
The initial amount of the severance benefi t was equal to 19 months of the average compensation (fi xed and variable) paid during the 24-month period preceding termination for Mr. Henri de Castries, and equal to 12 months of this average for Mr. Denis
Duverne. For each benefi ciary, one month should then be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
Meeting of April 29, 2010, and will continue so long as they remain executive officers of AXA (including under renewed mandates).
On December 31, 2015, AXA’s fully paid up and issued share capital amounted to €5,556,589,374.18 divided into 2,426,458,242 ordinary shares, each with a par value of €2.29 and eligible for dividends as of January 1, 2015.
Treasury shares held directly by the Company 1,491,713 0.06% [0.05%] (c)
de Coordination Stratégique) composed of certain directors from their respective Boards. The Strategy Committee elects a
BlackRock Inc., acting on behalf of its clients and funds that it manages, held more than 5% of the Company’s share capital or voting rights on December 31, 2015.
Certain of the Company’s shares are entitled to double voting rights as described in Part 5 – “Certain additional information” – “Voting rights” Section of this Annual Report. Of the Company’s 2,426,458,242 outstanding ordinary shares on
December 31, 2015, 451,416,537 shares entitled their holders to double voting rights as of that date.
On December 31, 2015, to the best of the Company’s knowledge based on the information available to it, the Company had 10,775 total registered holders of its ordinary shares (i.e.
Code, (i) 55,436,055 AXA shares were repurchased (for purposes of (a) hedging free grants of shares to employees of the
Group and (b) cancelling them in order to neutralize the dilutive impact of shares issued in connection with equity compensation arrangements and employee share plan offerings) for an average weighted gross unit price per share of €22.42, and (ii) no AXA
treasury shares to Group employees during 2015 in the context of performance share plans, and the cancellation of AXA treasury shares, the total number of AXA treasury shares, all allocated for hedging or cancellation purposes, was 1,491,713 (or 0.06 % of
Maturity of the bonds Total redemption on January 1, 2017 at €269.16 per bond, i.e. 162.63% of the nominal amount
For information concerning related party transactions, please see Part 4 – “Consolidated Financial Statements” – Note 28
Meeting of April 30, 2015, the Board of Directors increased the
Company’s share capital through the issue of shares reserved to the Group employees under the SharePlan 2015 program.
The shareholders waived their preferential subscription rights so that this offering could be made exclusively to Group employees
In countries that met the legal, regulatory and tax requirements to participate in SharePlan, two investment options were offered to the Group employees in 2015: ■ the traditional plan, offered in 34 countries; ■ the leveraged plan, offered in 33 countries.
shares (either through Mutual funds (FCPE) or through direct share ownership, depending on their country of residence)
with a 8.57% discount. The shares are held within the Group
In order to associate all AXA Group employees with the AXA
(“AXA Miles”) were freely granted on March 16, 2012 to all AXA
We hereby inform you that we have not been advised of any agreements nor commitments authorized during the past fi scal year to submit for approval to the Shareholders’ Meeting in accordance with Article L.225-38 of the French Commercial Code.
The Supervisory Board was concerned that the decision of Mr. Henri de Castries to renounce his employment contract, in accordance with the Afep -Medef recommendations, would not jeopardize the continuity of his accrued and future social benefi ts.
The payment of the severance benefi t should be also subject to performance conditions. During its meeting held on February 20, 2014, upon the proposal of the Compensation & Governance Committee, the Board of Directors authorized the execution of a new agreement between the Company and Mr. Henri de Castries in order for the payment of the severance benefi ts to be subject, from now on, to the three following performance conditions: 1. Achievement, for at least 2 of the 3 preceding fi scal years, of the objectives set for the benefi ciary’s variable compensation and corresponding to the payment of at least 75% of his variable compensation target; 2. Evolution of the AXA share price at least equal to the stock reference index of the insurance sector (SXIP) (in percentage) over a 3-year period preceding the termination of the term of offi ce; 3. Average adjusted Return On Equity (adjusted ROE) over the three preceding consolidated fi scal years higher than or equal to 5%.
These commitments are in force upon the effective renunciation by Mr. Henri de Castries of his employment contract. They shall last for the duration of his current position as an executive offi cer of AXA (i.e. since April 23, 2014), including under renewed mandates.
On February 17, 2010, the Supervisory Board acknowledged the effective renunciation by Mr. Denis Duverne of his employment contract as of the Shareholders’ Meeting of April 29, 2010 during which the former dual structure consisting of a Management Board and a Supervisory Board was replaced by a unitary Board of Directors structure in which Mr. Denis Duverne holds the position Deputy
Consequently, the Supervisory Board took the following decisions: ■ the Supervisory Board authorized the Company to take all appropriate commitments to ensure that Mr. Denis Duverne would continue to have social benefi ts (health insurance, life insurance, disability insurance, retirement…) identical or on terms equivalent to those applicable to AXA Group director-level employees in France, including by amending Group benefi t plans in terms of health, life and disability insurance; ■ the Supervisory Board authorized that Mr. Denis Duverne would be granted a contractual severance benefi t upon termination of his term of offi ce as executive offi cer. This severance benefi t, subject to performance conditions in conformity with the Afep -Medef recommendations, would be equivalent to that provided for in the collective agreement relative to director-level employees of insurance companies dated 1993 and which was previously applicable to Mr. Denis Duverne as employee.
The initial amount of the severance benefi t would be equal to 12 months of the average compensation (fi xed and variable) paid during the 24-month period preceding termination for Mr. Denis Duverne. One month will be added to the initial amount of the severance benefi t for each additional year of future service up to a maximum cap of 24 months.
These commitments are in force upon the effective renunciation by Mr. Denis Duverne of his employment contract. They shall last for the duration of his current position as an executive offi cer of AXA (i.e. since April 23, 2014), including under renewed mandates.
The amount of the supplementary pension allows, for a minimum executive seniority of 20 years, the grant of a global pension equivalent to 40% of the average gross compensation over the past 5 years preceding the retirement date, if this average is superior to 12 annual Social Security ceilings.
During 2015, these commitments applied to Messrs. Henri de Castries and Denis Duverne (respectively Chairman & Chief Executive
STOXX 50, the blue chip index comprised of the 50 most highly capitalized and most actively traded equities within the
Governance of investment strategy and asset & liability management (ALM) 194
AXA is engaged in regulated business activities on a global basis through numerous operating subsidiaries and the Group’s principal business activities of insurance and asset management are subject to comprehensive regulation and supervision in each of the various jurisdictions where the Group operates.
operations and accounts and request additional information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. This holding company legislation typically requires periodic disclosure, reporting concerning the corporation that controls the licensed insurer and other affi liated companies, including prior approval (or notice) of transactions between the insurer and other affi liates such as inter-corporate transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory schemes are designed to protect the interests of policyholders rather than shareholders.
The Company’s insurance subsidiaries are subject to regulatory capital requirements in the jurisdictions where they do business, which are designed to monitor capital adequacy and to protect policyholders. While the specific regulatory capital requirements
In recent years, the European Union has developed a new regulatory regime for European insurers which fi nally became effective on January 1, 2016, following the adoption of the 2009 Solvency II Directive on the taking-up and pursuit of the business of insurance and reinsurance, as amended in 2014 by the 2014/51/EU Directive (“Omnibus II”) and implemented into
framework is based on three main pillars: (1) Pillar 1 consists of the quantitative requirements around own funds, valuation rules for assets and liabilities and capital requirements, (2) Pillar 2 sets out qualitative requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers including the requirement for insurers to submit an
(ii) the Solvency Capital Requirement (SCR), which corresponds to a level of eligible own funds that enables insurance and reinsurance companies to absorb signifi cant losses and that gives reasonable assurance to policy holders and benefi ciaries that payments will be made.
capital ratio at 205% as of December 31, 2015 and has set its target range at 170-230%.
The ACPR continues to review regularly the underlying methodologies and assumptions of AXA’s model for adequacy and such review may lead to adjustments to the level of capital required by the ACPR. The European Insurance and
For further information on the risks related to regulatory capital requirement, please see the paragraph “Our consolidated solvency margin and the regulatory capital requirements of our insurance subsidiaries may be negatively impacted by adverse capital market conditions, evolving regulatory interpretations and other factors, which could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position” in Section 3.2 “Risk Factors” of this Annual
AB and AXA Investment Managers are subject to extensive regulation in the various jurisdictions in which they operate. These regulations are generally designed to safeguard client assets and insure adequacy of disclosures concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity and qualifications of the investment manager. These regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specifi c periods, the revocation of the registration as an investment adviser, censures and/or fi nes.
Group’s fi nancial risk framework, including credit and liquidity risk procedures, has been adjusted to refl ect these requirements. In addition, the Market Financial Instruments Directive II (“MiFID II”)
was fi rst proposed by the European Commission in 2011 and is expected to come into force by January 3, 2017. MiFID II, which is designed to better integrate the European Union’s financial markets and increase cross-border investments, market transparency and investor protection, imposes a wide variety of new requirements including with respect to trading/
Supervisors (“IAIS”) published an initial assessment methodology for designating GSIIs, as part of the global initiative launched by the G20 with the assistance of the FSB to identify global systemically important fi nancial institutions. The assessment methodology, which is endorsed by the FSB, is intended to
Loss Absorbency” (“HLA”) required from GSIIs in relation to their systemic activities, (2) greater regulatory oversight over holding companies, (3) various measures to promote the structural and fi nancial “self-suffi ciency” of Group companies and reduce
For additional information see “Designation of the AXA Group as a Global Systemically Important Insurer (“GSII”) and other regulatory developments may adversely impact our capital requirements, profi tability, the fungibility of our capital, our ability to grow through acquisition and our overall competitive position”
Management expects the regulatory landscape with respect to insurance and fi nancial markets will continue to evolve in 2016 and beyond with further legislative and regulatory initiatives.
Data Protection Reform to update the principles of processing of personal data in the European Union contained in the 1995
Data Protection Directive (1995/46/EC). The main principles of the Data Protection Reform include (i) the strengthening of citizens’ fundamental rights, giving them more control over their personal data and making it easier for them to access it, (ii) an increased harmonization of the applicable law across the EU
December 2015, the European Parliament and Council reached an agreement on such reform, and it is currently expected that the fi nal texts be formally adopted by the European Parliament and Council in 2016 and become applicable two years thereafter as an EU regulation.
EU to companies in the United States which have agreed to the
The results of the negotiations between the EU Member States and EU institutions on one side and the U S authorities on the other regarding a new Safe Harbour, referred to as the “EU-
The necessary steps to put in place the EU-US Privacy Shield remain to be taken, but are being pursued by both EU and US
Contractual Clauses with U.S. companies, which specify data protection obligations and are approved by the Commission, and
effective risk management and does not encourage risk-taking that exceeds the risk tolerance limits of the Company. In this context, AXA has reviewed and formalized its existing Group remuneration policy, identifi ed the individuals responsible for managing and having an impact on the Group’s overall risk profi le and defi ned a consistent approach to manage remuneration of individuals in charge of control functions. AXA’s Compensation
Certain of these proposals have been embodied in regulation or legislation while others remain best practice recommendations.
banks, insurers, asset managers, private equity funds, hedge funds, etc.) and across the various jurisdictions where the Group does business raises certain competitive issues for the Group, including our ability to attract and retain top-rate talents.
The regulatory and litigation environment in which the Group operates continues to evolve. In continental Europe, the introduction of class actions including in France through a law dated March 17, 2014 is likely to increase litigation risks and costs for insurers, asset managers and other financial institutions.
is operating. In addition to the Group Tax Department based in France, all key operational entities/countries/regions have a tax team in charge of ensuring that tax regulations are well understood and satisfi ed by the entities and in the appropriate geographic zones. In this respect, a bi-annual tax review process of each key entity or business line is formalized within the internal
“Finance Professional Family Policies Manual” and performed by the Group Tax Department in connection with each local team.
AXA Group is subject to various tax regimes and regulations and takes into account any changes in tax law. AXA is specifi cally vigilant about the changes that could result in higher tax expenses and payments, higher compliance costs or that may affect AXA Group’s tax liability, return on investments and business operations.
“Policy on business relationships involving sanctioned countries and countries identifi ed as having high levels of corruption or political risk”).
AXA has no licensed insurance or operating business activities in the countries specifically identified as non-cooperative jurisdictions by the French tax authorities in accordance with the provisions of Article 238-0 A of the French Tax Code.
Accounting for income taxes recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of the entity’s assets and liabilities, as required by IAS 12 (see Note 1.17.1 of the same S ection).
In addition to the details reported around the Group effective tax rate, AXA reports substantial information on the impacts of any change in local tax regulations on its business, as well as details of the tax burden per line of business and per country. AXA’s income tax expenses/benefi ts are extensively disclosed in the present report and are broken down by business segment and country. For each, a dedicated paragraph provides a comment about the line related to Tax Income (see “Consolidated underlying earnings, adjusted earnings and net income” in
The local decision to launch a new product must result from a documented approval process that complies with the AXA
Group Standard”, according to which any new cross-border offer must be presented to the Group Tax Department for its validation.
Report and this Section 3.2 should be read in conjunction with
In presenting the risks set forth in this Section 3.2, management has prioritized the four categories of risks presented and the individual risks within each of these categories in a manner that corresponds to management’s current view as to the potential impact (from higher to lower) of the risk for the AXA Group.
While management devotes very substantial resources to risk management on an on-going basis as described in Section 3.3 of this Annual Report, the Group’s risk management activities, like all control systems, are subject to inherent limitations and cannot provide absolute assurance or render the Group immune in any respect from the risks described in this Section 3.2 or the losses that may be incurred in connection with these risks.
Our results of operations are materially affected by conditions in the global fi nancial markets and the economy generally. We have been affected by the fi nancial crisis and its aftermath since 2008. While fi nancial markets generally stabilized and performed well in 2015, a wide variety of factors continue to negatively impact economic conditions and consumer confidence in certain jurisdictions where we do business and/or contribute to continuing volatility in fi nancial markets (including in foreign exchange and interest rates). These factors include, among others, continuing concerns over the creditworthiness of certain sovereign issuers, particularly in Europe, the strengthening or weakening of foreign currencies against the Euro, the availability and cost of credit, the stability and solvency of certain fi nancial institutions and other companies, the risk of future infl ation as well as defl ation in certain markets, central bank intervention in the fi nancial markets through “quantitative easing” or similar programs, volatile energy costs, the risk of a possible exit from the Eurozone of one or more European states, and geopolitical issues. Furthermore, certain initiatives from governments and support of central banks in order to stabilize fi nancial markets could be suspended or interrupted which could, in an uncertain economic context, have an adverse effect on the global fi nancial industry. In addition, the world economy is currently facing a number of new challenges and geopolitical risks, including recent turmoil and/or hostilities in various regions, including
are dependent upon fi nancial market performance, customer behavior and confi dence as well as other related factors.
Adverse capital and credit market conditions may signifi cantly affect our ability to meet liquidity needs, access to capital and increase cost of capital
We need liquidity to pay our operating expenses (including claims and surrenders), interest on our debt, dividends on our capital stock and to refi nance certain maturing debts and other liabilities. In addition, we need liquidity in connection with certain derivatives transactions to which we are party which require us to post cash collateral and/or subject us to margin calls in certain circumstances. A lack of sufficient liquidity and/ or access to fi nancing over a prolonged period may have a material adverse effect on our business, results of operations and consolidated fi nancial position. Our principal sources of liquidity are insurance premiums, annuity considerations, deposit funds, asset management fees, maturing bonds, cash fl ows from our investment assets and cash/cash-equivalents on our balance sheet. Sources of liquidity in normal markets also include a variety of short and long-term instruments, including repurchase agreements, commercial paper, committed credit facilities, medium and long-term debt, subordinated debt securities, capital securities and shareholders’ equity.
decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. While management has put in place a liquidity risk management framework that includes active monitoring of the Group’s liquidity position and contingency plans for accessing liquidity, if our internal sources of liquidity prove to be insuffi cient or if our liquidity requirements change so as to require a need for additional funding, we may not be able to successfully obtain additional fi nancing (whether on favorable terms or otherwise).
regulations, a consolidated solvency margin ratio which represents the Company’s total available capital as compared to its required regulatory capital. Under applicable French regulations, 100% is the minimum required consolidated solvency margin for the Company. On December 31, 2015 the
Solvency II ratio at 205% as of December 31, 2015 and has set its target range at 170-230%. AXA continues to review regularly the scope, underlying methodologies and assumptions of its model and will adjust its Solvency II capital accordingly. Any signifi cant changes to the model will have to be approved by the ACPR who may require further adjustments to the level of regulatory capital. In addition, EIOPA is currently reviewing the necessity to adjust the ultimate forward rate (“UFR”) which may ultimately lead to additional capital requirements or a decrease in available capital. EIOPA is also expected to carry out a review shortly of the consistency of European insurers’ models and any such review may lead to further regulatory changes to increase convergence and leading to further capital adjustments as well as strengthening oversight of cross-border groups.
It is diffi cult to predict the ultimate outcome of these matters and how they could affect our results of operations, fi nancial condition and liquidity and the insurance industry more generally.
The Group’s capital ratio is also sensitive to capital market conditions (including the level of interest rates, the level of equity markets and foreign exchange impacts) as well as a variety of other factors.
Management monitors the Company’s consolidated solvency margin and the regulatory capital requirements of its insurance subsidiaries on an on-going basis both for regulatory compliance purposes and to ensure that the Company and its subsidiaries are appropriately positioned from a competitive point of view. Insurance regulators generally have broad discretion in interpreting, applying and enforcing their rules and regulations with respect to solvency, regulatory capital requirements and internal models. D uring periods of extreme fi nancial market turmoil of the type we have experienced over the recent years, regulators may become more conservative in the interpretation, application and enforcement of these rules which may involve them, for example, imposing increased reserving requirements for certain types of risks, greater liquidity requirements, higher discounts/“haircuts” on certain assets or asset classes, more conservative calculation methodologies or taking other similar measures which may signifi cantly increase regulatory capital requirements.
Regulatory restrictions that inhibit the Company’s ability to freely move excess capital among its subsidiaries or which otherwise restrict fungibility of the Group’s capital resources may, depending on the nature and extent of the restrictions, adversely affect the capital position of the Company’s operating insurance subsidiaries which may have a consequent negative impact on the Company and the perception of its financial strength. Additional regulatory developments regarding solvency
(2) For this purpose, available capital represents (i) tangible net asset value, + consolidated shareholders equity less intangible assets (including DAC), perpetual debt and certain other items, plus (ii) subordinated debt, unrealized capital gains, minority interests and certain other items.
requirements, including changes to the “Solvency II” regime, may adversely affect the insurance industry’s solvency framework and prudential regime as well as associated costs. For further information on the implementation of Solvency II, please refer to the “Regulatory capital and solvency requirements” paragraph of Section 3.1 “Regulation” of this Annual Report.
Management has developed various contingency plans designed to ensure that the Company’s consolidated solvency margin and the regulatory capital levels of its insurance subsidiaries remain well in excess of regulatory minimum requirements and at levels that leave the Company and its subsidiaries well positioned from a competitive point of view. These plans may involve use of reinsurance, sales of investment portfolio and/or other assets, measures to reduce capital strain of new business or other measures. There can be no assurance, however, that these plans will be effective to achieve their objectives and any failure by the Company and/or its insurance subsidiaries to meet minimum regulatory capital requirements and to maintain regulatory capital at competitive levels could have a material adverse effect on our business, liquidity, credit ratings, results of operations and fi nancial position.
Claims paying ability and credit strength ratings are important factors in establishing the competitive position of insurance companies. Rating agencies review their ratings and rating methodologies on a recurring basis and may change their ratings at any time. Consequently, our current ratings may not be maintained in the future. On January 20, 2016, Moody’s reaffi rmed the Aa3 rating for financial strength on AXA’s principal insurance subsidiaries and the A2 rating for counterparty credit on the Company, maintaining a stable outlook. On October 29, 2015, Standard & Poor’s reaffi rmed the A+ financial strength rating on the core operating entities of the AXA Group and the
Financial, Inc., maintaining a positive outlook. On October 6, 2015, Fitch reaffirmed the AA- financial strength ratings of AXA’s principal insurance subsidiaries and the A rating for counterparty credit on the Company, maintaining a stable outlook.
(i) damaging our competitive position, (ii) negatively impacting our ability to underwrite new insurance policies, (iii) increasing the levels of surrenders and termination rates of our in-force policies,
Report. Business and market conditions may impact the amount of goodwill we carry in our consolidated balance sheet as well as our pattern of Deferred Acquisition Costs (DAC), Value of
(including mortgage-backed, asset-backed, government bonds and other types of securities), borrowers under mortgages and other loans that we extend, reinsurers to which we have assigned insurance risks, customers, trading counterparties, counterparties under swap and other derivative contracts, other counterparties including brokers and dealers, commercial and investment banks, hedge funds, other investment funds, clearing agents, market exchanges, clearing houses and other fi nancial institutions. Many of our transactions with these third parties expose us to credit risk in the event of default of our counterparty.
Under the reinsurance arrangements, other insurers or reinsurers assume a portion of the losses and related expenses under policies we issue; however, we remain liable as the direct insurer on all risks reinsured. Consequently, assigned reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. While we evaluate periodically the fi nancial condition of our reinsurers to minimize our exposure to signifi cant losses from reinsurer insolvencies, our reinsurers may become fi nancially unsound by the time their fi nancial obligation becomes due. The reinsurance market has become increasingly concentrated following recent mergers and acquisitions, which have reduced the number of major reinsurance providers. The inability of any reinsurer to meet its fi nancial obligations to us could negatively impact our results of operations. In addition, the availability, amount and cost of reinsurance depend on general market conditions and may fl uctuate signifi cantly. Reinsurance may not be available to us in the future at commercially reasonable rates and any decrease in the amount of our reinsurance will increase our risk of loss.
Value” in the 2015 Consolidated Financial Statements included in this Annual Report. The determination of fair values in the absence of quoted market prices is based on a variety of factors including those described in Note 9.10. Certain of our investment 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 signifi cant management judgment. During periods of market disruption of the type we have experienced over the past several years, 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 the price for which a security may ultimately be sold or for which it could be sold at any specifi c point in time. Use of different models, methodologies and/or assumptions may have a material impact on the estimated fair value amounts and could have a material adverse effect on our results of operations and fi nancial condition.
Annual Report. The determination of the amount of allowances and impairments vary 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, management considers a wide range of factors including those described in Note 1.8.2 and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and the prospects for near-term recovery. For certain asset classes, particularly debt instruments, management’s
evaluation involves a variety of assumptions and estimates about the operations of the issuer and its future earnings potential.
Credit spread and interest rate volatility may adversely affect our profi tability
Our exposure to credit spreads primarily relates to market price and cash flow variability associated with changes in credit spreads. A widening of credit spreads will generally reduce the value of fi xed income securities we hold (including credit derivatives where we assume credit exposure) and increase our investment income associated with purchases of new fi xed income securities in our investment portfolios. Conversely, credit spread tightening will generally increase the value of fi xed income securities we hold and reduce our investment income associated with new purchases of fi xed income securities in our investment portfolios.
During periods of declining interest rates: ■ our investment earnings may decrease due to a decline in interest earnings on our fi xed income investments; ■ life insurance and annuity products may be relatively more attractive to consumers due to minimum guarantees in these products, resulting in increased premium payments on products with fl exible premium features, and a higher percentage of insurance policies and annuity contracts remaining in force from year-to-year, creating asset-liability duration mismatches; and
■ we may be required to increase provisions for guarantees included in life insurance and annuity contracts, as the guarantees become more valuable to policy holders and surrender and lapse assumptions require updating.
Conversely, in periods of increasing interest rates: ■ surrenders of life insurance policies and fi xed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns; ■ obtaining cash to satisfy these obligations following such surrenders may require us to liquidate fixed maturity investments at a time when market prices for those assets are depressed because of increases in interest rates which may result in realized investment losses and decrease our net income; ■ accelerated surrenders may also cause us to accelerate amortization of deferred policy acquisition costs, which would reduce our net income; ■ our fee income may decrease due to a decline in the value of
Russian Ruble. AXA’s obligations are denominated either in Euro or other currencies, the value of which is subject to foreign currency exchange rate fl uctuations.
Regulatory and other legal restrictions may limit our ability to transfer funds freely, either to or from all our subsidiaries. In particular, our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affiliates. Moreover, our designation as a Global Systemically Important Insurer (“GSII”)
or Withdrawal for Life Benefi ts (“GMWB”), available in particular under certain of our Variable Annuity products (the “Accumulator
AXA US to the extent that AXA RE Arizona maintains suffi cient assets in an irrevocable trust (or letters of credit) to back the liabilities assumed under these reinsurance arrangements. The level of assets required to be held in trust (and/or the amount of required letters of credit) fl uctuates depending on market and interest rate movements, mortality experience and policyholder behaviors and may increase in certain circumstances which may
impact AXA RE Arizona’s liquidity. In addition, pursuant to its hedging programs, AXA RE Arizona may be required to post collateral and/or cash settle hedges when there is a decline in fair value of specifi ed instruments (which would occur, for example, in the event of a rise in interest rates or equity markets)
Commissioners (the “NAIC”) and certain state regulators, including the New York State Department of Financial Services
NAIC’s efforts to study and address regulatory issues resulting in Variable Annuity captive reinsurance transactions. As part of its charge, the Working Group is reviewing a variety of factors relevant to the assessment of captives utilized in connection with cessions of variable annuities business, including why
Variable Annuity captives are established, the Risk Based Capital and statutory accounting treatment of variable annuities, and the use of hedging in connection with variable annuities. The
Like many life insurance companies, AXA US utilizes a captive reinsurer, AXA RE Arizona, as part of its capital management strategy.
We use numerous assumptions to determine the appropriate level of insurance reserves, Deferred Acquisition Costs (DAC), employee benefi ts reserves and to calculate certain widely used industry measures of value such as Life & Savings New Business Value (NBV) and European Embedded Value (EEV), which involve a signifi cant degree of management judgment and predictions about the future that are inherently uncertain; if these assumptions are not correct, they may have an adverse impact on our results of operations and/or performance indicators, such as NBV, that may adversely affect the price of our securities
EEV and NBV may be signifi cantly impacted by the state of the fi nancial markets and signifi cant declines could have a material adverse effect on our consolidated results of operations and fi nancial position. Furthermore, certain of these assumptions can be volatile. While AXA’s NBV and EEV calculations are done on a market consistent basis, which is more conservative in many respects than traditional NBV and EEV calculations, changes in assumptions used in calculating these measures may have a material adverse effect on the level of our NBV and/or EEV. For example, our NBV is sensitive to interest rate movements and, consequently, an adverse evolution of interest rates may have a signifi cant impact on our NBV and a corresponding impact on the trading price of our securities.
International Insurance businesses. With the exception of disability annuities and workers compensation liabilities that are deemed structured settlements, the claims reserves are not discounted. Reserves do not represent an exact calculation of liability, but instead represent estimates, generally using actuarial projection techniques at a given accounting date. These reserve estimates are expectations of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity, frequency, legal theories of liability and other factors.
We continually review the adequacy of the established claims reserves, including emerging claims development, and actual claims compared to the original assumptions used to estimate gross claims reserves. Based on the current information available, we believe that our claims reserves are suffi cient; however, because the establishment of claims reserves is an inherently uncertain process involving numerous estimates including the impacts of any regulatory and legislative changes and changes in economic conditions, there can be no assurance that ultimate losses will not materially exceed our claims reserves and have a material adverse effect on our results of operations.
For additional information regarding the reserves with respect to asbestos claims, see “Asbestos” in Note 14.7 to AXA’s
The occurrence of natural or man-made disasters, including those resulting from changing weather patterns and climatic conditions, could adversely affect our fi nancial condition, profi tability, and cash fl ows
Catastrophic events such as hurricanes, windstorms, hailstorms, earthquakes, freezes, floods, explosions, fires, pandemic diseases, terrorist attacks, cyber-crimes, military actions, and power grid and other core infrastructure failures could adversely affect our operations, results or fi nancial condition, including as a result of claims occurring at higher levels and/or materially earlier than anticipated; losses resulting from disruptions in our operations or failures of our counterparties to perform; and/ or declines in value of our investment portfolio. We follow the evolution of these risks closely and generally seek to manage our exposure to them through individual risk selection, monitoring risk accumulation, purchase of reinsurance and use of available data in estimating potential catastrophic risks. However, there can be no assurance that we will be able to adequately anticipate such evolution, and we have experienced in the past and could experience in the future material losses from these types of risks.
Over the past several years, changing weather patterns and climatic conditions, including as a result of global warming, have added to the unpredictability, frequency and severity of natural disasters and created additional uncertainty as to future trends and exposures. In particular, the consequences of climate change are expected to significantly impact the insurance industry, including with respect to risk perception, pricing and modeling assumptions, and need for new insurance products, all of which may create unforeseen risks not currently known to us.
In addition, legislative initiatives regarding climate change may affect our operations and those of our counterparties, and potentially limit our investments or affect their value. Such regulations may include (i) new investment requirements, similar to the recent request by California insurance authorities that insurers and reinsurers voluntarily divest from investments in thermal coal, and/or (ii) new disclosure requirements, similar to the ones imposed by the recent French law on “energy transition for green growth” (transition énergétique pour la croissance verte); such disclosure requirements, which are applicable to the fi nancial year 2016, include requirements for insurance and reinsurance companies to include in their Annual
Operational risk is inherent in our business and can manifest itself in various ways, including business interruption, poor vendor performance or default (including under significant outsourcing arrangements), systems malfunctions or failures, computer viruses, hacking incidents and/or other unauthorized access to our websites and/or systems, misappropriation of sensitive information, corruption of data or operational disruption, regulatory breaches, human errors, employee misconduct, external fraud, natural or man-made disasters and terrorist attacks. We also face the risk of operational failure or termination of any of the clearing agents, exchanges, clearing houses or other fi nancial intermediaries we use to facilitate our securities transactions.
Data collection, transfer and protection is critical to the operation of our business. Regulations in this area are quickly evolving in the European Union, which could adversely affect our business if we do not manage to timely adapt our rules and strategy to the new emerging regulatory environment.
EU to companies in the United States which have signed up to the Department of Commerce of the United States “Safe
United States until the EU-US Privacy Shield is fi nalized, there is no guarantee that such mechanisms will not be subject to challenge, 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 image, brand and/or reputation.
control over their personal data and make it easier for them to access it, and would give the data protection authorities the possibility to fi ne companies which do not comply with EU
rules up to 4% of their global annual turnover. To manage risks in connection with data protection, we have adopted a global
Data Privacy Organization/Governance with (i) a data privacy governance model approved by the Management Committee,
(ii) a Group data privacy offi cer, (iii) a Group data privacy steering committee, (iv) a worldwide network of data privacy offi cers coordinated by the Group data privacy offi cer and (v) a Group data privacy standard. However, there is no assurance that our existing or planned data protection rules and governance organization will not need to be updated or replaced to comply
with the new laws and regulations of the EU or of member states where we operate or may operate in the future. Further, there can be no assurance that we will not unintentionally violate such laws or that such laws will not be modifi ed, or that new laws will not be enacted in the future, which would cause us to be in violation of such laws. Any failure to comply with such laws could result in fi nes, penalties, injunctions or other similar restrictions, any of which could negatively impact our earnings and reputation.
On July 18, 2013, the IAIS published an initial assessment methodology for designating GSIIs. Since 2013, AXA has been designated annually as one of the nine global systemically important insurer groups.
July 18, 2013 for implementation by the GSIIs include (1) the introduction of new capital requirements; a “basic” capital requirement (“BCR”) applicable to all GSIIs activities which serves as a basis for an additional level of capital, called “Higher
The manner in which the IAIS policy measures (and any other initiatives launched by the IAIS such as the draft Common
GSIIs. The multiplicity of different regulatory regimes, capital standards and reporting requirements could increase operational complexity and costs.
The U.S. Department of Labor issued a proposed rule in April 2015 that could, if adopted, substantially expand the range of activities that would be considered to be fi duciary investment advice under the Employee Retirement Income Security Act (ERISA)
Management believes that the DOL is likely to adopt a fi nal rule in early 2016 with an effective date in the second half of 2016.
Our business success and profi tability may be adversely affected by various emerging technological changes
In addition, the rapid increase in the nature, volume and availability of data in recent years, whether resulting from connected consumers, so-called “big data”, cloud computing, personalization of genetic data, or otherwise, may have unanticipated and adverse impacts on our business, for example by changing the nature of insurance underwriting and pricing; by allowing customers and competitors to tailor coverage in ways that we do not currently offer; and by potentially exposing us to increased “moral hazard” in business lines where we are unable for regulatory or other reasons to adjust pricing or coverage to refl ect individual risk profi les. While data-driven changes in the industry are at an early stage and diffi cult to predict, they could adversely impact our business going forward, including through the expense and effort that we will need to incur in order to ensure that our employees, systems and processes are able to effi ciently adapt to and manage such changes as they arise.
Further, if we are unable to effectively use and update or replace our key technology systems as they become obsolete or as emerging technology renders them competitively ineffi cient, or if we fail to develop the talent and skills of our human resources to meet the new technological challenges, attract and assimilate new talents into our Group consistently with our business goals, our business, prospects, competitive position and fi nancial condition could be adversely affected.
The AXA Group operates in approximately 60 countries around the world and our operations are subject to a wide variety of insurance and other laws and regulations. We are faced with significant compliance challenges due to the fact that our regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and aggressive role in interpreting and enforcing regulations in the jurisdictions where we do business. The fi nancial turmoil over the past several years gave rise to numerous legislative and regulatory initiatives (many of which focus on the fi nancial services industry) across many of the principal jurisdictions where the Group does business. While management cannot predict whether or when future legislative or regulatory proposals may ultimately be enacted and the fi nal form they will take, certain of these proposals, if enacted, could have a material adverse impact on our business activities, results of operations and fi nancial conditions. We expect that the multitude of new laws and regulations will increase our legal and compliance costs. In recent years there has been an increase in the number of legislative/regulatory initiatives and enforcement actions in the areas of fi nancial crime compliance (+ anti-money laundering, international trade sanctions and anti-bribery, including the US
or legislation in the future) may have on the business, fi nancial condition or results of operations of our various businesses.
Furthermore, our international operations expose the Group to different local political and regulatory, business, and fi nancial risks and challenges which may affect the demand for our products and services, the value of our investment portfolios, the required levels of capital and surplus, and the credit quality of local counterparties. These risks include, for example, political, social or economic instability in the countries in which we operate, including the risk of nationalization, expropriation, price controls, capital controls, fl uctuations in foreign currency exchange rates, credit risks of our local borrowers and counterparties, lack of local business experience in certain markets, risks associated with exposure to insurance industry insolvencies through policyholder guarantee funds or similar mechanisms set up in foreign markets and, in certain cases, risks associated with the potential incompatibility with foreign partners, especially in countries in which we are conducting business through joint ventures or other entities we do not control.
Interpretations Committee interpretations that were defi nitive and effective as of December 31, 2015 according to the adoption measures of the European Union (the “Standards”).
CERTAIN RISKS RELATED TO THE OWNERSHIP OF ORDINARY SHARES OR AXA ADS
In order to raise capital to fund future growth or for solvency purposes, we may, in the future, offer rights, warrants or similar securities at prices below the then-current market price which may adversely affect the market price of our ordinary shares, and our ADS, and dilute the positions of existing shareholders.
Company’s outstanding shares and 23.82% of its voting rights on December 31, 2015. 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 power in AXA, efforts by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may find attractive, may prevent other shareholders from realizing a premium for their AXA ordinary shares or ADS. The Mutuelles AXA may decide to increase their interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.
In addition, the trading price of AXA ADS and dividends paid on
While the US OTC markets have become more sophisticated and liquid in recent years, no assurance can be given as to the liquidity of the OTC market for AXA ADS or that persons wanting to buy or sell AXA ADS will at all times be able to fi nd a willing seller or buyer at an acceptable price and volume.
Further, the holders of AXA ADS will have limited recourse if AXA
The holders of AXA ADS in the United States may not be able to participate in offerings of rights, warrants or similar securities to holders of our ordinary shares or to receive dividends paid
in shares on the same terms and conditions as holders of our ordinary shares. For example, they are likely to be offered cash rather than securities, in light of the registration requirements under the US securities laws in case of payment in securities.
Officers ensure a systematic and independent second opinion on AXA material decision processes, like L&S and
P&C new product characteristics (risk-adjusted pricing and profi tability), P&C and life economic reserves, Asset and
Model is designed as a consistent and comprehensive risk management tool, which also forms an important element in the capital management and planning process.
The Risk Management function at Group level is also reinforced by AXA Global P&C and AXA Global L&S, which advise and support local entities in their reinsurance strategy (Property &
Casualty, Health and Life & Savings), and centralize the Group’s purchasing of reinsurance.
P&C reserves, ALM studies & asset allocation and reinsurance strategies; ■ on the internal capital model, local Risk Management is responsible for checking the adequacy of the risk profi le, implement, test and validate the internal model.
Local Chief Risk Officers head the local Risk Management teams within each operational entity and report both to their local Chief Executive Offi cer (CEO) and to the Group CRO. Chief
Risk Appetite is endorsed by the Board of Directors upon review by its Finance Committee with the Audit Committee considering the effectiveness of the Group’s internal control and risk management frameworks supporting it. A report on the Company’s performance against the key fi nancial indicators is presented on a regular basis to the Group Audit
Directors; 2. Group Risk Committees aim at covering main risk categories: For Financial risks: • the Group Asset-Liability Management Supervisory
GRM. This committee determines the Group ALM policies and ensures that the Group exposures are within the Group risks limits,
CFO and the Group COO, and where GRM is in charge of its secretariat; For internal model: • Internal model Governance Committee which gathers the Group CFO, business lines and investments under the Group CRO chairmanship. It validates any signifi cant change linked to the internal model at both group and local level.
Management; ■ hedging of fi nancial risks when they exceed the tolerance levels set by the Group. Operational management of derivatives is based on stringent rules and is mainly performed by AXA SA
Description of market risks for Life & Savings and Property & Casualty
foreign exchange exposure and debt; ■ credit risk, please refer to the next part “Credit risk” included in the Part 3 – Section 3.3 – “Quantitative and Qualitative
The AXA Group analyzes sensitivities to movements in interest rates and equity markets looking at three different measures: ■ sensitivities of European Embedded Value (EEV) in the Life &
Savings business, as described below; ■ sensitivities of the adjusted net asset value for other-than-life businesses; ■ sensitivities of Solvency II ratio.
Japan. At December 31, 2015, these subsidiaries represented 99% of AXA’s consolidated invested assets within its insurance operations.
AXA publishes EEV only for its Life & Savings business. In the context of the implementation of Solvency II, the required capital of Life & Savings entities in the European Economic Area (EEA
entities) was transitioned from Solvency I basis in 2014 closing to Solvency II basis in 2015 closing.
In addition to Life & Savings EEV, AXA calculates a “Group EV”.
& Savings segment, such as hedging strategies executed at the Group level and also the impact of leverage on the Group.
Net unrealized capital gains/losses, not included in IFRS shareholders’ equity 1,775 3,476 5,251 1,085 3,114 4,199
Life & Savings Value of Inforce (VIF) 27,983 - 27,983 25,261 - 25,261
The Life & Savings Value of Inforce (VIF) calculation by nature involves many assumptions about the future. For Life & Savings
Future earnings available to shareholders are assessed across this range of stochastic scenarios, with the present value being the Life & Savings VIF. Our major assumptions include the fact that: ■ actuarial assumptions refl ect best estimates based on recent experience; ■ no productivity gains in the future are assumed, while a 2.1%
(28.6% in 2014); ■ AXA’s reference yield curves were aligned in 2015 to Solvency
As described above, the Life & Savings VIF valuation under AXA’s market-consistent framework does not depend on assumed future asset returns, but rather on the reference rate described above. The Life & Savings VIF valuation depends on stochastic projections of multiple scenarios, rather than a single scenario.
The sensitivities of the Group EV to changes in major economic assumptions were calculated as follows for the 2014 and 2015 values: ■ upward shift of 100 basis points (bps) in reference interest rates which simulates a sudden shock to the initial conditions. This means changes to: 1) the current market values of fi xed-interest assets, with related possible changes to projected capital gains/losses and/or fee revenues, 2) future reinvestment rates for all asset classes, and 3) risk-discount rates. Infl ation rates are not changed.
10% higher value of equity markets at start of projection 1,842 4% 390 1% 2,232 4% 1,606 3% 366 1% 1,972 4%
The majority of other-than-life reserves in the fi nancial statements and therefore in TNAV is generally not sensitive to interest rate changes as not discounted in most cases.
lower value (2014: 3% and -4%) show limited asymmetries mainly driven by the impact of guarantees and profi t-sharing rules, along with some hedging programs to limit potential losses.
Group assets at December 31, 2015 (89% in 2014), assets and liabilities with foreign currency exposure are generally naturally matched or hedged.
■ Life & Savings business: 79% of Group assets at the end of 2015 (78% in 2014): In France, AXA was exposed to exchange-rate risk for a global amount of €15,041 million at the end of 2015 (€13,546 million in 2014) held both directly and indirectly through investment funds partly invested in foreign currencies (particularly US Dollar: €10,916 million versus €10,717 million in 2014, Pound Sterling: €2,526 million versus €2,057 million in 2014 and Japanese Yen: €216 million versus €204 million in 2014). This exposure allows
In Japan, AXA entities may invest when relevant outside the Japanese market in order to diversify and optimize investments and enhance returns. At the end of 2015, the total assets denominated in foreign currencies held both directly and indirectly through investment funds (mainly US Dollar)
In Germany, AXA entities held €8,299 million investments denominated in foreign currencies at the end of 2015
High Yield Fund (€1,395 million versus €1,188 million in 2014 restated) and in Pound Sterling (€735 million versus €214 million in 2014). Exchange-rate risk exposure is hedged using foreign exchange forwards for a notional amount of €5,472 million
(notional amount of €5,466 million in 2014), currency swaps for a notional amount of €383 million (notional amount of €375 million in 2014) and foreign exchange collars notional €987 million
In Switzerland, AXA entities are exposed to exchange-rate risk through their investments in foreign currencies (mainly Euro and
AXA Hong Kong holds investments denominated in foreign currencies €10,057 million (€8,197 million in 2014), both directly and indirectly through investment funds. These investments are mainly in US Dollar €9,592 million (€7,864 million in 2014), in order to take advantage of the US bond market which is more developed than the HK bond one notably in terms of liquidity and available maturities. Exchange-rate risk exposure is hedged using foreign exchange forwards and cross currency swap for a notional amount of €4,104 million, the remaining portion being mainly under congruent coverage (matching assets and liabilities denominated in the same currency).
In the Mediterranean and Latin American Region, AXA entities held investments denominated in foreign currencies for €2,132 million in 2015 (€1,904 million in 2014) both directly and indirectly through investment funds and mainly denominated in
US Dollar €2,054 million (€1,842 million in 2014). Exchange-rate risk exposure is hedged for a notional amount of €1,002 million using mainly foreign exchange forwards and currency swaps.
Group’s Life & Savings companies do not have any signifi cant exposure to exchange-rate risk.
■ Property & Casualty business: 9% of Group assets at the end of 2015 (9% at the end of 2014): In France, AXA was exposed to exchange-rate risk for a global amount of €3,263 million at the end of 2015 (€2,870 million in 2014) held both directly and indirectly through investment funds partly invested in foreign currencies in order to diversify its investments (mainly US Dollar: €2,171 million versus €2,445 million in 2014 and Pound Sterling: €627 million versus €384 million in 2014). France offsets its exposure to exchangerate risk by using foreign exchange forwards in these currencies
AXA Germany held €2,437 million investments denominated in foreign currencies at the end of 2015 (€1,675 million in 2014)
(€455 million versus €289 million in 2014 restated). Remaining exchange-rate risk exposure, mainly concerning the pound sterling for €193 million (€148 million in 2014), is incurred for the purpose of diversifying investments. AXA Germany controls and limits its exchange-rate risk by using foreign exchange forwards for a notional amount of €1,865 million (notional €1,425 million in 2014), currency swaps for a notional amount of €145 million
In the United Kingdom, AXA is exposed to exchange-rate risk through its AXA Insurance and AXA PPP Healthcare Limited subsidiaries, which operate in Pound Sterling and has diversifi ed its investment portfolios in line with asset liability management objectives. AXA UK held investments denominated in foreign currencies for €3,141 million (€2,734 million in 2014 restated)
In Mediterranean and Latin American Region, AXA entities held investments denominated in foreign currencies for €1,290 million in 2015 (€1,145 million in 2014) both directly and indirectly through investment funds and mainly denominated in US Dollar for €1,057 million (€1,000 million in 2014). Exchange-rate risk exposure is hedged for a notional amount of €382 million using mainly foreign exchange forwards. The remaining portion corresponds notably to investments in countries having their currency pegged to US Dollar .
These countries accounted for 91% at the end of 2015 (93% in 2014) of the Group’s Property & Casualty companies’ assets.
■ Holding companies (5% of Group assets at the end of 2015 versus 6% in 2014): Since 2001, AXA SA has adopted a hedging policy on net investments denominated in foreign currencies, which aims at protecting the Group’s consolidated shareholders’ equity against currency fl uctuations, using derivatives instruments and foreign currency debt.