Insurance

www.fitchratings.com 19 July 2016

Composite Insurers / France

AXA S.A. And Insurance Subsidiaries

Full Rating Report

Key Rating Drivers

Global Scale and Diversification: AXA S.A. has considerable geographical and business

diversification, which benefits its risk profile. AXA’s management is pursuing a consistent

strategy, relying on its strong presence in major insurance markets worldwide and expanding

operations in high-growth emerging markets. AXA’s integration of acquired operations has

historically been successfully managed and has delivered material cost and revenue synergies.

‘Very Strong’ Capital: Fitch Ratings considers AXA’s capitalisation supportive of its ratings.

AXA scores ‘Very Strong’ under Fitch's Prism factor-based model (Prism FBM) on end-2015

data. AXA’s capital adequacy is strengthened by its disciplined asset-liability management

(ALM) policy. The group's Solvency II ratio, under AXA's internal model approved by the ACPR

(the French insurance regulator) was 200% at end-March 2016, in line with highly rated peers

and with limited sensitivity to changes in interest rates or equity markets (single shocks).

High Level of Intangibles: At end-2015, AXA had EUR17bn (2014: EUR15bn) of goodwill on

its consolidated balance sheet, mostly relating to insurance and asset management operations

acquired in the US, Switzerland and Japan. The goodwill to shareholder’s equity ratio of 23%

(2014: 23%) detracts from the quality of capital.

Moderate Financial Leverage: AXA’s consolidated financial leverage, as calculated by Fitch,

was 24% in 2015 (2014: 25%), as increased shareholder funds more than offset an increase in

financial debt (in particular, commercial paper). Financial leverage is consistent with the rating

category median, even excluding the cash available at the holding company level (EUR2.8bn at

end-2015). AXA’s debt-service capability is strong, with fixed-charge coverage 8x on average

over 2011-2015.

Strong Financial Performance: AXA group's operating profitability has steadily improved in

recent years, as reflected by a steady rise in underlying earnings to EUR5.6bn in 2015 from

EUR3.9bn in 2010. Return on equity, as calculated by Fitch, was 8.4% in 2015 (2014: 8.5%).

Fitch expects AXA to improve its earnings profile through cost efficiencies, tariff adjustment and

optimisation of its business and geographical mix, despite headwinds from persistent low

interest rates.

New Plan Ratings-Neutral: AXA has released a new five-year plan where it targets selective

growth, cost efficiencies, enhanced business mix with a strong focus on protection business

and capital-light products, and higher earnings. The plan is consistent with Fitch’s expectations

and therefore neutral to AXA’s ratings.

Rating Sensitivities

Weakened Financial Profile or Profitability: Factors that could lead to a downgrade include a

sustained deterioration in AXA’s Prism FBM score to ‘Strong’ or a decline in the return on

equity to below 8%. There could also be a downgrade if financial leverage increases above

30%.

Strengthened Profitability: Factors that could lead to an upgrade of AXA include a sustained

improvement in profitability with a return on equity above 12%, with the Prism FBM score

remaining at least ‘Very Strong’ and the financial leverage ratio below 25%.

Ratings

AXA S.A.

Long-Term Foreign-Currency IDR A Short-Term Foreign-Currency IDR F1 Subordinated Debt BBB Junior Subordinated Debt BBB Commercial Paper F1

AXA Main Insurance Companies (See full list on pages 19-20)

Insurer Financial Strength Ratings AA−

Outlooks

Long-Term Foreign-Currency IDR Stable Insurer Financial Strength Ratings Stable

Financial Data

(EURbn) 2015 2014

Gross written premiums 91.9 86.3 Total assets 887 840 Shareholders’ equity 68.5 65.2 Net income 5.6 5.0

Combined ratioa (%) 97.3 97.6

Return on equityb (%) 8.4 8.5

a Current-year

b Fitch-calculated

Source: AXA

Related Research

2016 Outlook: French Life Insurance (January 2016)

2016 Outlook: French Non-life Insurance (December 2015)

Analysts

Federico Faccio +44 20 3530 1394 federico.faccio@fitchratings.com Dr Stephan Kalb +49 69 768 076 118 stephan.kalb@fitchratings.com

Insurance

AXA S.A.

July 2016 2

Market Position and Size/Scale

A Leading, Well-Diversified Financial Services Provider Worldwide

Strong global franchise

Leading positions in many European countries

Focus on retail clients via various distribution channels

Focus on fast growing markets

Ratings Range Based on Market Position and Size/Scale IFS Rating Category Senior Debt Rating Category

AAA AA

AA A

A BBB

BBB BB

<BBB <BB

Large market position and size/scale

Medium market position and size/scale

Small market position and size/scale

Source: Fitch

Strong Global Franchise

AXA offers an extensive range of financial services to over 103 million individual customers and

corporations of all sizes. The group uses well-diversified distribution channels.

Life insurance services include savings- and risk-type policies, allowing customers to invest

money, prepare for their retirement and/or cover risks such as mortality and disability. In 2015,

the life insurance business contributed 60% to the group’s total revenues.

In non-life, AXA provides insurance policies covering individual and corporate risks such as

motor, property, liability and health. Asset-management units offer mutual funds and dedicated

asset-management services to either internal or external professional investors and, to a lesser

extent, to high-net-worth individuals. AXA also runs retail banking activities in selected

European markets. There is significant diversification between life and non-life underwriting

risks.

Since 1996, AXA has become a leading provider of variable annuity products in the US and

has exported its expertise to several European markets and Japan, although this business has

so far had limited success in non-US markets.

AXA has been included in the globally systemically important insurers (G-SII) list since 2013;

the inclusion on the list means having to hold more capital, face closer regulatory scrutiny and

develop recovery and resolution plans. However, the impact of evolving international insurance

regulation on the industry's operating and capital management strategies is still unknown.

Leading Positions in Many European Countries

AXA is the largest European insurance group. It holds leading business positions in a large

number of countries in which it operates, which allows the group to generate economies of

scale and be viewed as a price-setter in several business lines. This is particularly true in

France, Belgium, Switzerland and, to a lesser extent, Germany.

A direct consequence of the group’s size and geographical diversification is its ability to share

best practice between various operations and start large group projects to develop specific

businesses (such as the expansion of direct insurance activities in several European and Asian

markets) and improve efficiency.

Related Criteria

Insurance Rating Methodology (May 2016)

Insurance

AXA S.A.

July 2016 3

Focus on Retail Clients via Various Distribution Channels

Most of the group’s business is with individual clients. Depending on the country in which it

operates, AXA deals with its clients either through non-exclusive insurance intermediaries such

as brokers or independent advisors, or directly via its own salaried sales force, exclusive

agents, partnerships or direct platforms. The exclusive sales force is mostly used in continental

Europe, the US and Japan, while non-exclusive intermediaries are popular in the UK and, to a

lesser extent, Germany. Worldwide, proprietary distribution accounts for around half of AXA’s

revenues. Fitch views positively the group’s ability to manage a wide range of distributors

according to the specifics of each local market and business line.

Focus on Fast Growing Markets

AXA’s growth has historically been supported by acquisitions all over the world. Integration of

acquired operations has been well managed, including multi-national businesses such as the

Winterthur acquisition, where there were competing operations to merge in a number of

markets.

AXA focuses on high-growth markets where the group had previously only limited operations.

In particular, AXA has recently expanded its geographical footprint in countries such as the

Philippines, Brazil, Poland and India through small-to medium-size acquisitions. In addition,

AXA has announced a partnership with Africa Internet Group (AIG) to become the exclusive

provider of insurance products and services through mobile platforms in Africa; AXA also

became a shareholder of AIG.

In 2Q16, AXA announced the completion of the sale of its Portuguese operations. AXA also

announced in 2Q16 the disposal of some UK life operations, namely Elevate, AXA Isle of Man

and Sunlife, following a strategic review conducted by AXA UK of the UK life and savings

market.

Life & Savings60.1%

Property &

Casualty31.7%

Banking0.6%

2015 Revenues By Segment

Source: AXA

International business

3.7%

Asset management

3.9%

France24%

United States14%

Germany11%

Asia9%

Direct & Other7%

UK & Ireland

6%

2015 Revenues By Geography

Source: AXA

Mediterranean & Latin America

18%

Switzerland11%

Insurance

AXA S.A.

July 2016 4

Ownership Neutral to Rating

AXA is a listed company and its shares are traded on the Paris stock exchange. Most of its

shares are freely traded on the market. At end-2015, major shareholders were Mutuelles AXA,

a group of French mutual insurance companies (14% ownership). Employees and insurance

agents collectively own a material 6% of AXA’s shares, which indicates important alignment of

interests.

AXA Group Simplified Organisation Chart

Source : AXA

AXA S . A .

AXA France Assurance AXA UK

AXA France Vie , AXA France IARDAXA , Corporate Solutions Assurance

AXA Insurance UK AXA PPP Healthcare

AXA Konzern AXA America Holdings

AXA Versicherung AXA Lebenversicherung AXA Krankenversicherung DBV Holding DBV Deutsche Beamtenversicherung

AXA Financial AXA Equitable Life Insurance AXA Equitable Life and Annuity MONY Life Insurance Company of America US Financial Life Insurance AXA Insurance

AXA Holdings Belgium AXA Versicherungen ( Switzerland )

AXA Belgium AXA Leben ( Switzerland )

AXA Mediterranean Holding AXA Japan Holding

AXA Italia AXA China Region

AXA Investment Managers AXA China Region Insurance

Corporate Governance and

Management Corporate governance and

management are adequate and neutral to the rating.

AXA reports its consolidated accounts under IFRS.

Insurance

AXA S.A.

July 2016 5

Industry Profile and Operating Environment

Financial Markets Volatility Has Manageable Impact on Performance

Fitch views current low interest rates and the volatility of capital markets as major challenges

for AXA’s insurance and asset-management operations. In particular, in the life savings

business, the group’s ability to earn a satisfactory return on investments faces growing

pressure, although this is partly offset by the decreasing average minimum guaranteed rate

granted to policyholders.

Tariff developments in the European non-life and protection insurance markets are satisfactory

and should support the profitability of these businesses.

Ratings Range Based on Industry Profile/Operating Environment IFS Rating Debt

AAA AA

AA A

A BBB

BBB BB

<BBB <BB

Non-Life

Life insurance

Composite

Source: Fitch

Sovereign and Country-Related

Constraints

Fitch rates the Local-Currency

sovereign obligations of France at ‘AA’

with a Stable Outlook, and the Country

Ceiling is ‘AAA’. At current levels, the

ratings of French insurance

organisations are not constrained by

sovereign or macroeconomic risks.

Insurance

AXA S.A.

July 2016 6

Peer Analysis

Relative Performance In Line With Current Rating

AXA’s peer group consists of a small number of large international insurance groups operating

in several continents and benefiting from leading market positions in the world’s largest

insurance markets (the US, Japan, the UK, France and Germany) and a number of emerging

markets.

All of AXA’s peers are rated in the ‘AA’ category, except Generali, whose rating is limited by

Italy’s sovereign rating and its high financial leverage. AXA is the largest insurance group

among its peers by premiums and balance sheet size and has the highest Solvency II ratio, but

return on equity is in the lower range of the peer group.

Peer Comparison - 2015

IFS Rating/ Outlook

a Total equity

b

Return on equity

c (%)

Gross written premium

Total assets

Return on assets

d (%)

Net income

Solvency II ratio

e

(%)

Reported combined

ratio (%)

Financial leverage

(%)

Allianz AA/Stable 66,099 11 76,834 833,066 1.3 6,616 200 94.6 20 Prudential AA/Stable 17,839 21 50,499 521,947 0.7 3,552 193 - 16 AXA AA−/Stable 72,641 8 91,938 887,070 0.9 5,617 205 96.2 24 Zurich AA−/Stable 29,187 6 41,673 334,882 0.5 1,675 203 103.6 23 Generali A−/Stable 24,708 9 70,323 496,455 0.7 2,030 175 93.1 35

Foreign exchange rates used: Period average: GBP1 = EUR1.37738, USD1 = EUR0.901238; Period end: GBP1= EUR1.37687; USD1 = EUR0.917816

a IFS ratings of primary operating companies of each group

b Includes minorities

c Group net income/2014,2015 shareholders' equity; includes minorities

d Group pre-tax income/2014,2015 average total assets; includes minorities

e For Zurich, Swiss Solvency Test as of 31 December 2015

Source: Companies’ accounts, Fitch

Insurance

AXA S.A.

July 2016 7

Strong Capital, Moderate Leverage

‘Very Strong’ Prism Score

Goodwill a material portion of shareholders’ equity

Focus on developing businesses with low capital requirements

Variable annuities risk reduced

Financial leverage in line with the rating

‘Very Strong’ Prism Score

AXA scored ‘Very Strong’ under Fitch's Prism FBM based on end-2015 results. The Prism FBM

score is the ratio of total available capital (TAC) divided by target capital (TC) at various stress

levels, with the Prism score itself equal to the highest category where TAC exceeds TC. AXA’s

investment portfolio risks are the biggest drivers of TC.

The group's Solvency II ratio, under AXA's internal model approved by the ACPR (the French

insurance regulator) in November 2015, was 200% at end-March 2016. The ratio is in line with

highly rated peers and has limited sensitivity to changes in interest rates or equity markets.

AXA targets a group Solvency II ratio between 170% and 230%, which gives a strong capital

buffer to absorb the volatility inherent in the ratio.

Goodwill a Material Portion of Shareholders’ Equity

At end-2015, AXA had EUR17bn (2014: EUR16bn) of goodwill on its consolidated balance

sheet, mostly relating to insurance and asset-management operations acquired in the US,

Switzerland and Japan. Despite the increase in shareholder’s equity in 2015, goodwill in

relation to shareholder’s equity still represented 23% (2014: 23%), detracting from the quality of

capital.

Focus on Developing Businesses With Low Capital Requirements

Based on the group’s strategic plan, the management focuses on developing activities where

required capital is low, such as in protection and unit-linked business. In 2015, these two

businesses accounted for 74% of the group’s life annual premium equivalent.

Fitch views this strategic commitment positively for AXA’s ratings.

Variable Annuities Risk Reduced

Prior to the financial crisis, AXA was one of the top issuers of variable annuities (VAs), through

its US subsidiary. Fitch believes that VA products with embedded options and guarantees give

rise to risks that are complex, long-tailed, and difficult to price, hedge and reserve for.

However, Fitch believes AXA has substantially reduced much of the capital volatility related to

its VA book through management actions including repricing and substantially de-risking its

current variable annuity product offering, offering incentive buy-outs of specific legacy VA

policies, and through its VA risk hedging programme to minimise equity and interest rate

volatility.

Capitalisation and Leverage

2011 2012 2013 2014 2015 Fitch's expectation

Asset leverage (x) 10.2 9.6 9.1 8.5 8.8 Fitch expects AXA’s solvency to remain stable as additional capital requirements should be offset by retained earnings.

Financial leverage should slightly decrease, as planned by the group.

Operating leverage (x) 7.4 6.8 6.1 5.7 5.9

Regulatory solvency margin (%)a 188 233 221 201 205

Financial leverage ratio (%) 33 30 27 25 24

Total financing & commitments/shareholder’s equity (x) 1.6 1.3 1.3 1.0 1.1

Note: a Solvency I until 2013; Solvency II since 2014

Source: AXA, Fitch

Insurance

AXA S.A.

July 2016 8

Financial Leverage in Line with the Rating

AXA’s consolidated financial leverage, as calculated by Fitch, was 24% in 2015 (2014: 25%),

as improved shareholder funds more than offset a greater amount of financial debt (in particular,

commercial paper). Financial leverage is consistent with the rating category median, even

excluding cash available at holding company level (EUR2.8bn at end-2015).

The total financing and commitments ratio, which includes deposits related to repurchase

agreements transactions, was 1.1x total equity at end-2015, a level that Fitch views as

manageable.

Insurance

AXA S.A.

July 2016 9

Strong Coverage and Financial Flexibility Support Rating

Solid fixed-charge coverage

Financial flexibility supported by group access to financial markets

Solid Fixed-Charge Coverage

AXA’s debt servicing ability is solid, reflecting its moderate financial leverage. Fixed-charge

coverage, as calculated by Fitch, was 10x at end-2015 and 8x on average over 2011-2015,

commensurate with the ratings.

Management can rapidly move liquidity within the organisation if needed, as excess capital

sources are largely fungible across the group.

Financial Flexibility Supported by Group Access to Financial Markets

As a listed entity, AXA has permanent access to the equity markets and is not constrained by a

concentrated shareholding structure. Having frequently tapped the senior and hybrid debt

markets in the past, the group is a well-known issuer. AXA also benefits from EUR12.7bn

committed back-up credit lines (undrawn) provided by a pool of the world’s largest banks.

AXA maintains EUR2.8bn of unencumbered cash (2014: EUR4bn) at the holding company

level. The maturities of the outstanding dated debt are well spread over the next 25 years,

meaning that there is limited concentration of refinancing risk.

Debt Service Capabilities and Financial Flexibility

(x) 2011 2012 2013 2014 2015 Fitch's expectation

Fixed-charge coverage – including realised and unrealised gains (x)

7.6 6.8 7.6 9.2 10.1 Fitch expects interest coverage to remain commensurate with the ratings but volatile due to the impact of financial markets on profitability.

Payout ratio(%)a 38 41 44 46 47

a AXA’s dividend payout policy is based on adjusted earnings net of undated debt interest charges

Source: AXA, Fitch

Insurance

AXA S.A.

July 2016 10

Robust Financial Performance

Improved operating profitability

Life and savings earnings resilient to low rates

Strong profitability in property and casualty

Asset management business provides diversification

Improved Operating Profitability

AXA's operating profitability has improved steadily in recent years, reflected by a rise in

underlying earnings to EUR5.6bn in 2015 from EUR3.9bn in 2010. AXA’s diversified business

mix has supported the stability of earnings development during that period. AXA’s Fitch-

calculated return on equity was 8.4% in 2015 (A category).

Fitch expects AXA to improve its earnings profile through cost efficiencies, tariff adjustment and

optimisation of its business and geographical mix, despite headwinds from persistent low

interest rates.

AXA targets an adjusted return on equity between 12% and 14% over 2016-2020, which Fitch

considers to be a challenge, mostly due to persistent low interest rates. However, management

continues to increase tariffs, adjust the group’s business and geographical mix and exercise

strong asset-liability management discipline.

Life and Savings Earnings Resilient to Low Rates

Underlying earnings from life and savings business benefit from diversification by product

(savings, protection, unit-linked) and geography. In 2015, underlying earnings increased by 3%

on a constant exchange rate basis. The most important contributors to earnings are the French,

US and Japanese operations.

Net inflows and margins were particularly strong in protection, health and unit-linked business

in 2015 as the non-linked saving business was hurt by low interest rates. Fitch expects this

trend to continue in 2016, but with a more balanced business mix following equity market

volatility in 1Q16 that makes guaranteed business more appealing for policyholders.

Protection accounts for over 50% of the new business value (NBV); this contribution should

continue in 2016, supporting a diversified business mix and total NBV margins. The life and

savings business is also strengthened by a prudent ALM policy (see Asset/Liability and

Liquidity Management section below).

Strong Profitability in Property and Casualty

Fitch considers the profitability of the property and casualty (P&C) business to be strong

throughout the cycle. In recent years the P&C contribution to the group’s underlying earnings

has increased due to a stricter underwriting policy and supported by a more favourable

underwriting environment, reflected in combined ratios between 96% and 98%. Prior-year

reserve developments have contributed between 1% and 2% a year.

Fitch recognises AXA’s ability to adjust its risk selection, which is a competitive advantage.

Financial Performance and Earnings

(EURm) 2011 2012 2013 2014 2015 Fitch's expectation

Underlying earnings 3,901 4,251 4,728 5,060 5,574 Fitch considers the main challenge for the group’s profitability to be persisting low interest rates. Stiff competition in P&C exerts pressure on pricing. Improved business mix in life should support profitability despite pressure on margins from enhanced transparency, but this should be offset by lower costs.

Net income 4,324 4,152 4,482 5,024 5,617

Net income return on equity (%) 9.0 8.1 8.4 8.5 8.4

Pre-tax return on assets – including realised and unrealised gains and losses (%)

0.7 0.8 1.0 1.0 1.0

Combined ratio – reported (%) 97.7 97.3 96.6 96.9 96.2

Source: AXA, Fitch

Insurance

AXA S.A.

July 2016 11

Nevertheless, claims experience may not remain as favourable as in the recent past, and

increasing tariffs is difficult in the current competitive operating environment and contribution

from prior-year reserve development may moderately reduce as better years run off.

In 2015, the underlying earnings from P&C business were little changed compared with 2014

and the combined ratio (96.2%) was hit by reserve strengthening in Turkey (up 60 bp). Fitch

expects a combined ratio in 2016, in line with 2015, at below 98%.

Asset Management Business Provides Diversification

Asset management is the third largest contributor to group’s earnings and provides

diversification to AXA’s financial profile, which Fitch views favourably. Underlying earnings

increased by 1% at constant FX in 2015. However, net inflows are exposed to low interest rates

and equity market volatility; in addition, revenues may be pressured as customers shift from

higher-risk higher-return to lower-risk products.

Insurance

AXA S.A.

July 2016 12

Investment Risks Adequate

Conservative asset allocation

Good-quality bond portfolio

Conservative Asset Allocation

At end-2015, total invested assets for the group totalled EUR781bn, including on-balance-sheet

unrealised gains. Excluding unit-linked assets (25% of the total) and banking assets (5% of the

total), fixed-interest securities accounted for 83% of insurance invested assets, equities 4%,

cash 4%, real estate 5%, alternative investments 3% and policy loans 1%.

Fitch considers this asset allocation to be conservative and consistent with the group’s

business profile, especially as 84% of these invested assets relate to life and savings activities,

which typically have long-term maturity.

Good-Quality Bond Portfolio

The quality of the bond portfolio is good, with government and corporate bonds with at least an

‘A−’ rating accounting for 71% of the portfolio at end-2015, while non-investment-grade and

non-rated bonds represented 6%.

Fitch views the group’s exposure to fixed-income instruments that have experienced significant

volatility over the past five years (such as certain structured bonds and some European

government bonds) to be material but manageable.

At end-2015, AXA’s exposure to government bonds issued by Italy and Spain totalled

EUR38bn (including 100% of the AXA-MPS joint venture’s bond portfolio). This accounts for

52% of consolidated shareholders’ funds (or 5% of invested assets). However, the direct

investment risk to AXA is significantly less than this, as most of these government bond

holdings are backing unit-linked or participating liabilities in Italy and Spain, where AXA can

share much of the related investment risk with its policyholders.

Cash4%

Listed equities

4%Policy loans2%

Source: AXA

2015 General Account Invested Assets

Corporate bonds34%

Government bonds41%

Alternative Investments

3%

Other fixed income

7%

Real estate5%

AAA19%

AA30%A

22%

BBB23%

BB and lower3%

Not rated3%

Source: AXA

2015 Government and Corporate Bonds Split by Rating

Investment and Asset Risk

(EURm) 2011 2012 2013 2014 2015 Fitch's expectation

Unaffiliated shares/equity (%) 40.1 39.4 43.5 39.1 42.4 Fitch expects investment leverage and liquidity ratios to remain unchanged in the future due to stable asset allocation.

Non-investment-grade bonds/equity (%) 61.2 50.4 66.6 44.1 37.8

Investment in affiliates/equity (%) 2.4 2.5 2.6 2.8 3.5

Risky assets/shareholder’s equity (%) 103.7 92.3 112.7 86.0 83.7

Source: Fitch

Insurance

AXA S.A.

July 2016 13

Liquidity Risks Low and Disciplined ALM Policy

Strong liquidity profile

Adequate management of ALM mismatch

Adequate capacity to cover minimum guaranteed returns

Strong Liquidity Profile

The liquidity profile of the AXA group is strong and was supported by a substantial EUR26bn of

cash on balance sheet at end-2015, far exceeding the amount of short-term debt. Fitch

considers the group’s liquidity management cautious, especially given the structurally positive

cash flow from its insurance activities and, in case of need, the significant potential for raising

liquidity provided by the group’s high-quality fixed-income investments.

Adequate Management of ALM Mismatch

Like many insurance companies operating a large, savings-type life insurance business, AXA

typically carries some ALM mismatch as the average duration of fixed-income invested assets

is shorter than the expected duration of liabilities.

In 2015, the weighted average asset duration was 8.0 years compared with a weighted

average liability duration of nine years. Fitch considers AXA’s management of its ALM

mismatch to be cautious as the group has established a maximum mismatch limit of one year

within its risk appetite framework. This limit has never been breached.

Adequate Capacity to Cover Minimum Guaranteed Returns

Fitch considers AXA’s capacity to cover minimum guaranteed returns as adequate.

Investment returns have gradually fallen in recent years, due to declining market interest rates.

However, in 2015 the investment yield was 3.6% (3.7% in 2014) in life and savings, supported

by long asset durations, in particular in Germany, well above the average minimum guaranteed

return of 2.0% (2.1% in 2014); thus the spread between yield on total life and saving assets

and average guaranteed rate was stable, at 160 bp. The spread over the guarantee rate for

new business was also 160 bp.

At end-2015, 20% of AXA’s life and savings technical reserves were related to savings

products offering one-year guaranteed rates that are updated every year and 31% were related

to protection and health with surrender guarantees. The remaining part of life and savings

technical reserves was made up by unit-linked products (23% of total life and savings reserves),

variable annuities (12%) and saving products without guarantees (14%).

Asset/Liability and Liquidity Management

(EURm) 2011 2012 2013 2014 2015 Fitch's expectation

Cash available on balance sheet 31,072 30,546 21,588 22,048 26,275 Fitch expects liquidity risk to remain low due to structurally positive cash flows and the substantial amount of cash available.

Short-term debt 6,272 4,510 3,713 3,595 2,803

Liquid assets/net technical reserves (%) 97.3 98.7 97.5 100.1 99.4

Source: AXA, Fitch

Insurance

AXA S.A.

July 2016 14

Reserves Adequate

Standardised reserving process

Cautious non-life reserves

Standardised Reserving Process

AXA’s non-life insurance entities have developed thorough reserving practices, which have led

to secure reserve levels. Local actuarial departments have responsibility for setting reserves

but they must apply the group methodology, which is defined by a central actuarial department.

Technical reporting has been standardised to streamline the monitoring process across the

group.

Cautious Non-Life Reserves

AXA sets its technical reserves cautiously. Fitch considers that non-life insurance reserves are

adequately set across the group. Reserve releases have been positive over the past five years,

although their impact on underlying earnings is no longer material.

In addition, non-life insurance reserves still appear solid. The level of net technical reserves to

net earned premiums is high and has been stable for a long time.

Reserve Adequacy

(%) 2011 2012 2013 2014 2015 Fitch's expectation

Net technical reserves/net written premiums 197.5 195.0 191.7 196.1 193.8 Non-life reserves are likely to remain adequate. Loss reserves/CY incurred losses 2.1 2.0 2.1 2.0 2.1

Loss reserves/equity 1.0 0.9 0.8 0.7 0.7

Change in ratio of loss reserves/earned premium -4.4 -2.6 -1.4 2.0 -1.2

One year reserve development/PY equity -1.0 -0.8 -0.7 -0.4 -0.5

One year reserve development/PY loss reserves -1.1 -0.8 -0.8 -0.4 -0.7

One year reserve development/net earned premiums

-1.7 -1.2 -1.2 -0.6 -1.0

Note: Negative numbers denote positive reserve developments. CY: current year. PHS: policyholders’ surplus. PY: prior years Source: Fitch

Insurance

AXA S.A.

July 2016 15

Reinsurance, Risk Management and Catastrophe Risk

Reinsurance Protection Designed to Cap Catastrophe Risk

Effective use of reinsurance through pooling at group level

Well-designed protection

High-quality reinsurers

Effective Use of Reinsurance Through Pooling at Group Level

Centralisation of the group’s placement of external reinsurance is organised through dedicated

entities, AXA Global P&C and AXA Global Life. This pooling enables more effective use of the

reinsurance and retrocession markets, especially as the group accounts for a large part of

some of its reinsurers’ revenues. The scope of activity of these entities allows the group to

keep a part of the identified risks for which it believes recurrent positive margins can be

generated. The system is expected to eventually cover all group cessions.

Well-Designed Protection

AXA’s most significant risk exposure is European windstorm. Fitch believes reinsurance

protections are well designed and limit the extent to which the group might be affected from a

significant event. Retention is EUR500m, which accounts for less than 1% of shareholders’

funds.

An important part of ceded premiums originates from the group’s French activities, especially

due to their substantial catastrophe exposure, which is ceded to reinsurers. Overall, AXA

makes use of non-proportional excess-of-loss reinsurance cover to limit the exposure of its

property and casualty portfolios to catastrophic events. For the life business, certain individual

mortality risks are also reinsured.

High-Quality Reinsurers

The average rating of the reinsurance providers is high, with 80% of the capacity placed with

reinsurers rated ‘A+’ or above. Only a fraction is placed with reinsurers rated below ‘A-‘.

Insurance

AXA S.A.

July 2016 16

Non-Insurance Operations Mainly Focused on Asset Management

Strong franchise in asset management

Banking business in selected countries

Strong Franchise in Asset Management

AXA is one of the world’s largest providers of asset management services through AXA

Investment Managers and Alliance Bernstein. At end-2015, assets under management totalled

EUR1,363bn, including AXA’s general account assets and unit-linked assets in AXA’s life

division. About EUR570bn of assets are managed on behalf of third parties.

The division has been an important contributor to group profit for each of the past five years.

Fitch believes the group’s asset management business faces challenges to maintain its current

profitability (31bp in 2015) in a business that, by its nature, is highly dependent on financial

markets. However, the majority of the asset management fees come from research activities as

opposed to performance fees, making the business somewhat resilient to low interest rates.

Banking Business in Selected Countries

This division includes AXA’s retail banking business, aiming to offer retail banking products to

insurance customers mostly in Belgium, France and Germany to increase loyalty and capture

potential outflow from savings-type life insurance policies.

Its limited relative size means the division’s revenues are only about EUR0.6bn and its

contribution to group underlying earnings is not significant. The banking business was

profitable in 2015, after posting a loss of EUR49m in 2014 due to an exceptional loss in the

Hungarian operations.

Key Non-Insurance Operations/Exposure

(EURm) 2011 2012 2013 2014 2015 Fitch's expectation

Assets under management (EURbn) 1,079 1,116 1,113 1.277 1,363 Profitability of the asset management business should flatten out, while banking business contribution should remain marginal.

Net income of asset management business 153 311 577 419 482

Total banking assets 33,672 33,816 34,783 37,713 36,123

Net income of banking business -237 -38 -8 -49 49

Source: AXA, Fitch

Insurance

AXA S.A.

July 2016 17

Appendix A: Other Ratings Considerations

Below is summary of additional ratings considerations of a “technical” nature, that are also part

of Fitch’s ratings criteria.

Group IFS Rating Approach

Fitch views all of the rated entities as core to the AXA group, reflecting their strategic

importance through their contribution to the group’s targets. Fitch expects group financial

support to be fully available to these entities in case of need. They carry the same IFS ratings

and/or IDRs, which are based on a consolidated group assessment.

Notching

For notching purposes, the French regulatory environment is assessed by Fitch as Effective,

and classified as following a Group Solvency approach.

Notching Summary

IFS ratings

A baseline recovery assumption of ‘Good’ applies to the IFS ratings, and standard notching was used from the IFS ‘anchor’ rating to the actual or implied IDR of the operating companies. The IFS rating of the operating companies is one notch higher than the actual or implied IDRs.

Operating company debt

Not applicable.

Holding company IDR

Notching between the implied insurance operating companies and AXA S.A. top holding company IDRs is expanded by one notch relative to standard notching for a group solvency regulatory environment due to earnings and capital in European Union regulatory jurisdictions being less than 70% of consolidated group totals. The IDR of AXA Financial, Inc. is aligned with that of AXA S.A. as it is as intermediate holding company likely to be supported not only by its subsidiaries but also by its ultimate parent company in case of need.

Holding company debt

Senior debt issued by holding companies (AXA S.A. and AXA Financial, Inc.) is rated using a baseline recovery assumption of ‘Below Average’, and based on standard notching it is rated one notch below the holding companies’ IDRs.

Hybrids

The subordinated debt of AXA S.A. (including junior subordinated debt) is rated using a baseline recovery assumption of ‘Poor’. In addition, all but two subordinated debt issues are considered by Fitch as having ‘Moderate’ non-performance risk (such as ability to defer coupons). Based on the combination of these two characteristics, the ratings of the respective subordinated issues are three notches below the IDR of AXA S.A.; two for recovery and one for non-performance risk. For US registered subordinated debt issues XS01222028904 and US054536AA57 a non-performance risk of ‘Minimal’ is assumed. These issues are rated two notches below the IDR of AXA S.A.; two for recovery, and none for non-performance risk.

Source: Fitch

Senior Debt

Senior debt issued by operating companies is rated using a baseline recovery assumption of

‘Average’, and based on standard notching it is rated at the same level as the operating

companies’ IDRs.

Short-Term Ratings

The AXA S.A. and AXA Financial, Inc. holding companies’ Short-Term Issuer Default Rating is

‘F1’, which is standard when the Long-Term IDR is ‘A’.

Insurance

AXA S.A.

July 2016 18

Hybrids – Equity/Debt Treatment

Hybrids Treatment

Hybrid Amount (EURm) FBM

a Fitch (%) FBM

a reg. override (%) FLR

b debt (%)

AXA S.A.

Undated subordinated debt 6,734 0 100 100

Subordinated debt 9,187 0 100 100

AXA Bank Europe

Subordinated debt 116 0 100 100

AXA –MPS Vita and Danni

Subordinated debt 71 0 100 100

a FBM: Prism factor-based capital model

b FLR: Financial Leverage Ratio. For FLR, % tells portion of hybrid value included as debt in numerator of leverage ratio

Source: Fitch, AXA

Exceptions to Criteria/Ratings Limitations

None.

Insurance

AXA S.A.

July 2016 19

Appendix B: Complete Rating List

AXA S.A.

Long-Term IDR ‘A’; Outlook Stable

Short-Term IDR ‘F1’

Senior unsecured debt ‘A−’

Subordinated debt ‘BBB’

Junior subordinated debt ‘BBB’

Commercial paper ‘F1’

US-registered Subordinated Debt debentures ‘BBB+’

AXA Financial, Inc.

Long-Term IDR ‘A’; Outlook Stable

Senior unsecured debt ‘A−’

Commercial paper ‘F1’

AXA Equitable Life Insurance Company

IFS Rating ‘AA−’; Outlook Stable

Long-Term IDR ‘A+’; Outlook Stable

AXA Versicherung (Switzerland) AG

IFS Rating ‘AA−’; Outlook Stable

Long-Term IDR ‘A+’; Outlook Stable

AXA Art Versicherung AG

IFS Rating ‘AA−’; Outlook Stable

AXA Art Insurance Limited

IFS Rating ‘AA−’; Outlook Stable

AXA France IARD

IFS Rating ‘AA−’; Outlook Stable

AXA France Vie SA

IFS Rating ‘AA−’; Outlook Stable

AXA Global P&C

IFS Rating ‘AA-’; Outlook Stable

AXA Corporate Solutions Assurance

IFS Rating ‘AA−’; Outlook Stable

AXA Insurance Company (US)

IFS Rating ‘AA−’; Outlook Stable

AXA Leben (Switzerland) AG

IFS Rating ‘AA−’; Outlook Stable

AXA Belgium

IFS Rating ‘AA−’; Outlook Stable

AXA Versicherung (Germany) AG

IFS Rating ‘AA−’; Outlook Stable

AXA Lebensversicherung AG

IFS Rating ‘AA−’; Outlook Stable

AXA Krankenversicherung AG

IFS Rating ‘AA−’; Outlook Stable

DBV Deutsche Beamten Versicherung AG

IFS Rating ‘AA−’; Outlook Stable

Insurance

AXA S.A.

July 2016 20

Deutsche Ärzteversicherung Aktiengesellschaft (DAV)

IFS rating ‘AA−’; Outlook Stable

AXA Insurance UK Plc

IFS Rating ‘AA−’; Outlook Stable

AXA PPP Healthcare Limited

IFS Rating ‘AA−’; Outlook Stable

AXA Insurance Singapore Pte Ltd

IFS Rating ‘AA−’; Outlook Stable

AXA General Insurance Hong Kong Limited

IFS Rating ‘AA−’; Outlook Stable

AXA China Region Insurance Company (Bermuda) Ltd

IFS Rating ‘AA−’; Outlook Stable

AXA Equitable Life and Annuity Company

IFS Rating ‘AA−’; Outlook Stable

MONY Life Insurance Company of America

IFS Rating ‘AA−’; Outlook Stable

U.S. Financial Life Insurance Company

IFS Rating ‘AA−’; Outlook Stable

Insurance

AXA S.A.

July 2016 21

The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

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