OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1999 or ■■ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
25, avenue Matignon - 75008 Paris - France (Address of registrant’s principal executive offices)
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ITEM 13 Interest of Management in Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
Statements for a description of the significant differences between French GAAP and US GAAP, a reconciliation of net income and shareholders’ equity from
C a u t i o n a r y s t a t e m e n t s o n f o r w a r d l o o k i n g s t a t e m e n t s
The development of the internet, and information technology in general, is a phenomenon whose impact, although difficult to quantify today, will undoubtedly be profound. Given the largely intangible nature of the services AXA delivers, the Company is particularly interested in this new means of communications, and has already begun using the
In the area of management, AXA Université has developed three major programs: – AXA Manager is designed to help managers put
A$ 1.1billion (€ 0.6 billion) for a 51% controlling interest in AXA Asia Pacific Holdings, which acquired
The more significant divestitures undertaken by AXA, as they were deemed non-strategic investments, are summarized below: Equitable Real Estate (United States). In 1997,
Other Real Estate Transactions. Real estate in the amount of € 0.4 billion and € 0.7 billion was sold in 1998 and 1997, respectively.
AXA China Region. Subsequent to its September 30, 1999 year-end, AXA Asia Pacific Holdings acquired the minority interest holdings in AXA China Region for approximately € 519 million (HK$4,100 million). At the end of February 2000, AXA Asia Pacific Holdings had 100% interest in AXA China Region and is now in the process of delisting this company from the
War II “baby boom” generation ages over the next decade, there will be a corresponding growth in the number of individuals in the target market for the US
recent enactment of the Gramm-Leach-Bliley Act may increase competition by permitting new entrants into the insurance business.
Distribution. In 1999, gross premiums were generated as follows: 17% by general agents, 35% by brokers, 36% by specialized networks and 12% by other networks including direct marketing, partnerships with retail organizations and bank networks.
Investor’s Compensation Scheme levies will depend upon the quantification of the IFA sector’s need for financial support from the industry in meeting its ultimate cost of redress and related expenditure.
Insurance Group, IFAs accounted for 75% of such business while exclusive agents accounted for 10%, direct marketing for 8%, direct sales force and other for 7%.
This strategic acquisition will enable AXA to become a significant player in the Japanese life insurance market.
German Life Insurance Group has moved from being the sixth largest to the fifth largest life insurer in
Belgium that took place following the acquisition of the minority interests in Royale Belge in 1998. Refer to “Significant Acquisitions and Investments” in this section of the Annual Report.
AXA’s Property and Casualty Insurance Segment offers a range of property and casualty insurance products principally in France, Germany, the United Kingdom and Belgium, and to a lesser extent in other countries in Western Europe, North America and the Asia Pacific region. During 1999, AXA increased significantly its presence in the UK property and casualty market, and to a lesser extent in Ireland, due to its acquisition of
(a) See ‘’Glossary’’ for a description of the method by which claims and combined ratios are calculated. (b) Claims reserves are before reduction of reinsurance ceded and exclude catastrophe equalization reserves. (c) Excludes exceptional charges of €187 million recorded in 1998 (further information is provided in “Item 9 - Management’s Discussion and Analysis”.
Insurance UK has become one of the leading property and casualty insurers in the United Kingdom.
Consolidation amongst the largest insurance carriers has helped to increase premium rates generally. The main premium rate increases in 1999 have been in the automobile insurance market. Household premium rates have remained relatively flat. Although the commercial property and liability markets have remained competitive, there are some signs that rate increases are beginning to be accepted.
(10%). The arrangements with corporate partners cover a wide range of businesses and associations.
Currently, the top ten insurers account for 65% of the market, while the top three brokers control just over 50% of the commercial market. This merger and acquisition activity has not, however, significantly reduced the over capacity in the market, nor has it led to the dominance of one company in any area. Technology and relatively low entry costs have enabled the recent entry of a number of non-insurance players with strong brands (such as supermarket retail chains that have entered the personal automobile and travel insurance markets). In the United Kingdom, the UK Property and
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• Japan. In 1998, AXA initiated direct-selling insurance operations in Japan under the name AXA Direct
Group’s reinsurance facilitators, AXA Cessions. In addition, facultative reinsurance is arranged for certain exposures where the underwriting guidelines indicate that the size and type of an exposure makes it appropriate. This can be on a proportional or an excess of loss basis, as is considered appropriate for the individual case. For the year ended December 31, 1999 5.6% of gross premiums were ceded to third party reinsurers.
(iii) continued tough market conditions: this market is highly competitive due to overcapacity arising from strong investment performance and on average a low level of large claims over the past few years before 1999 and, consequently, reduced premium rates.
AXA to benefit from the expected growth in savingsrelated products in the markets in which it operates in future years.
The overseas mutual fund activities were led by sales through Alliance Capital’s Italian partner reaching € 4.0 a03-338 • Item 1 (US) ok 23/05/00 12:01 Page 47 PHILIPPE PHILIPPE 2:JOBS:AXA:03-338 • AXA COB 1999 (US):
At December 31, 1999, Equitable Life subsidiaries held 2.14% of the Alliance Holding Units and 55.3% of the units of Alliance Capital.
funds to enable them to achieve their savings and wealth creation objectives. The products and services of NMFM include superannuation, unit trusts, insurance savings, annuities and common funds for retail clients, and a full range of funds management options for institutional clients.
Modernization Bill it is anticipated that competition in some markets currently dominated by investment banks may increase in the future. The principal competitive factors influencing DLJ’s business are its professional staff, its reputation in the marketplace and its existing client relationships. DLJ’s ability to compete effectively in securities brokerage and investment banking activities will also be influenced by the adequacy of its capital levels (further details are provided in
For additional information on the type of assets in which AXA invests and the related net investment results for the three years ended December 31, 1999, refer to “Item 9: Management’s Discussion and
AXA is required by applicable insurance laws and regulations and generally accepted accounting principles in France and in the United States to establish reserves for outstanding claims (claims which have not yet been settled) and associated claim expenses that arise from its property and casualty insurance operations. AXA establishes its claims reserves by product, by type of insurance cover and by year, and charges them to income as incurred. Claims reserves
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Item 1) for further details. The catastrophe and equalization reserves are included with the consolidated balance sheet caption “Insurance Claims and Claims
United States are subject to both federal and state regulatory requirements. For example, Equitable Life is domiciled in New York and is primarily regulated by the New York Superintendent of Insurance. The extent of state regulation varies but most jurisdictions have laws and regulations governing standards of solvency, levels of reserves, permitted types and concentrations of investments, business conduct to be maintained by insurance companies as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or filing of rates.
Assurance Mutuelle. The Mutuelles AXA do not have shares outstanding and the business of each Mutuelle is supervised by a board of directors elected by delegates representing policyholders. As of March 1, 2000, the Mutuelles AXA, acting as a group, owned, directly and indirectly through intermediate holding companies (including Finaxa), approximately 23.2% of the issued Shares representing approximately 36.7%
The insurance businesses of the Mutuelles AXA and the insurance businesses of AXA’s French insurance subsidiaries use similar distribution channels and are managed as single businesses subject to legal and management arrangements established to maintain the legal distinctions between their respective businesses.
Share in euros and French francs and average monthly trading volume for the Shares on the Paris
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French Ministry of the Economy with notice upon completion of the transaction.
‘’Code’’), US owners of ADRs will be treated as owners of the Shares underlying the ADS’s represented by such ADRs.
America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Internal Revenue Service (‘’IRS’’) that he or she has failed to properly report payments of interest and dividends and the IRS has notified the Company that he or she is subject to backup withholding, or (iv) fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the
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(f) Under French GAAP, in accounting for UK with-profit contracts, revenue and expense are matched in net income by including both changes in the estimated fair values of assets allocated to UK with-profit contracts and corresponding increases or reductions in the liability for UK with-profit contractholder benefits. US GAAP, which has developed in an environment that differs from the one in which the UK with-profit contract was developed, requires that the change in unrealized investment gains or assets allocated to UK with-profit contracts be excluded from net income,while requiring recognition of the corresponding change in the liability for with-profit contractholder benefits in net income. Accordingly, AXA believes this exclusion results in amounts that do not full reflect the economic effect of the UK with-profit contracts. A rise in the estimated fair value of these assets results in an increase in the liability for contractholder benefits and a reduction in AXA’s consolidated US GAAP net income or shareholders’ equity and, conversely, a decline in the estimated fair value of these assets results in a decrease in the liability for contractholder benefits and an increase in AXA’ s consolidated US GAAP net income. Set forth below is AXA’s consolidated net income in accordance with US GAAP except for adjustment for the change in unrealized investment gains on assets allocated to UK with-profit contracts, which presentation AXA believes is more meaningful under the circumstances. See notes 28 and 29 to the Consolidated Financial Statements and, see “Item 1 – Description of Business-Life Insurance Segment-UK Life Insurance Group Products” for a description of UK with-profit contracts.
(a) Net income divided by average shareholders’ equity in the year, after excluding the current year net income. (b) Shareholders’ equity adjusted to reflect the exchange listed market price for AXA’s investment in Alliance Capital and DLJ at December 31, 1999 (US$ 29.94 and 48.38, respectively, at December 31, 1998 (US$ 25.75 and 41.00, respectively) and at December 31, 1997 (US$ 39.81 and 79.50, respectively).
Zealand continued to expand in 1999. The level of premiums written in connection with traditional life insurance products increased by 14%, while funds under management in connection with pensions increased by 18%. However, competition intensified in these expanding markets with the entry of banks and other asset managers.
SLPH acquired GRE on May 1, 1999 for a total consideration of £3,417 million (€ 5,110 million).
In connection with this transaction, SLPH disposed of certain GRE operations not deemed strategic specifically in the United Kingdom and Ireland: b03-338 • Item 9 (US) ok 23/05/00 12:11 Page 94 PHILIPPE PHILIPPE 2:JOBS:AXA:03-338 • AXA COB 1999 (US):
Finance (based in Luxembourg for € 156 million); and; • the Company sold, under the condition that approval is obtained from the local regulators, GRE’s equity interest in the South African company,
Guaranteed Value (“CGV”) issued by the Company in connection with the buyout of Royale Belge’s minority interests in 1998 were cancelled in 1999 with no cash payment in accordance with the terms and conditions of the CGVs1.
– to re-engineer human resources management as a driver of organizational change through reorganizing internal business processes and shifting the focus to individual skills development and accountability.
• a change in operating strategies or objectives to improve AXA reporting and analysis, to more closely align the business segments with the basis used by management to evaluate performance and to allocate resources (such as the change from the former Reinsurance Segment to the International
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on a constant exchange rate and structural basis compared to 1997). At € 143.3 billion at December 31, 1998, total assets under management, including assets managed for third parties, an increased by 18.1% compared to 1997 on a constant exchange rate basis.
share price increased by 34.1 %. Over the same five year period, average annual growth of the CAC 40 was 25.9%, while the Standard & Poor’ Insurance 500 increased by 20.9%, the Dow Jones STOXX 50 by 29.6%, and the Dow Jones STOXX Insurance by 26.1%.
■ Goss premiums increased by 12.3% primarily due to higher sales of annuities sold by both the retail and wholesale distribution channels. These products accounted for approximately 66.1% of total earned premiums in the 1999 period as compared with 63%
Reinsurance ceded increased € 8 million due to an increase in premiums ceded. However, this increase was more than offset by higher reserves and claims ceded and higher commissions and expense allowances received from reinsurers.
This success is notably due to distribution agreements signed at the end of 1997 with several securities firms and increased productivity from agents.
Net investment results increased 25.9% compared to 1997 on a constant exchange rate basis, to € 2,533 million. In 1997, in connection with a sales program initiated in 1997, Equitable Life reclassified € 1,287 million of equity real estate from “held for production of income” to “held for sale”. Since held for sale properties are carried at the lower of depreciated cost or estimated fair value, less selling costs, the reclassification generated additions to valuation allowances of € 511 million. Excluding the impact of these valuation allowances, 1998 net investment income was relatively stable as compared to that of 1997. In 1998, an additional € 773 million of real estate was reclassified to “held for sale” leading to additional valuation allowances of € 78 million. In 1998, Equitable
(in euro millions Yield Amount Yield Amount Yield Amount except percentages) (a) (b) (a) (a) (c) (a) (a) (d) (a)
(c) On a constant exchange rate basis, the yields for 1998 would have been 8.14% for fixed maturities, 14.02% for real estate, 9.0% for mortgage loans on real estate, 14.19% for equity investments, 6.36% for policy loans, 9.3% for cash and short term investments and 8.61% for all general account investments.
On a constant structural basis, the income tax expense decreased by € 24 million primarily due to the decrease in the corporate tax rate from 31 % to 30%, effective in April 1999. AXA Sun Life’s contribution to
Life’s 1999 results of operations presented above do not yet reflect the impact of the acquisition of the minority interest in AXA China Region which occurred in November 1999.
Dongbu AXA Life recorded a net loss of € 21 million, compared with a net loss of € 8 million in 1997. In 1998, the operating results were adversely affected by
(i) the crisis in the Asian financial markets and a realized losses in the amount of € 2 million, (ii) an exceptional amortization of the goodwill relating to Dongbu
■ The following table summarizes the net investment results of the German Life Insurance Group for the principal categories of general account assets for the periods indicated. Certain investment assets of the
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Within the context of the corporate reorganization, the net investment income remained significant at € 580 million even though the net realized gains were € 314 million lower compared to 1998. 1998 was marked by high level of realized gains due to the sale of stock associated with purchase of the minority interests in
Royale Belge’s net income in 1998 was calculated on the basis of AXA’s economic interest of 98.7% over the last five months of the year versus 47.6% for the first seven months. In 1997, net income was marked by the realized gain on the Banque Bruxelles
The increase in amortization of VBI (€ 36 million in 1998 compared to € 7 million in 1997) was due to large amount of realized gains in the Netherlands as
Luxembourg. Gross premiums increased to € 548 million, of which € 455 million was earned by PanEuroLife, and € 83 million by AXA Luxembourg Vie. Gross premium growth in Luxembourg of 13.3% on a constant exchange rate basis was principally due to sales of separate account (unit-linked) products, which benefited from strong financial markets in 1998. Net income increased € 2 million over 1997 primarily due to the increase in AXA’s economic interest in PanEuroLife following the acquisition of Royale Belge’s minority interests. In January 1999, AXA sold PanEuroLife.
■ In 1999, gross property and casualty insurance premiums represented 25.3% of AXA’s insurance-related revenues compared to 25.2% in 1998. On a constant exchange rate and structural basis, gross property and casualty insurance premiums increased by 2.0% in an environment marked by intense competition on premium rates in the property and casualty insurance sector.
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in 1998 (both ratios excluding direct marketing insurance ) was primarily due to the decrease in the average premium. The equalization reserve was strengthened by € 38 million in 1998 versus € 46 million in51997, bringing the total equalization reserve to
■ Gross premiums increased 4.9% on a constant exchange rate and structural basis, to € 905 million.
Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results of the UK Property and
Cash & Short Term: Related Assets at year end 54 77 93
(a) Includes investment income, net of investment expenses and interest expense on short-term and long-term debt, and net realized investment gains or losses. (b) Includes the net result of premiums, insurance benefits and claims and commissions ceded under reinsurance contracts. (c) In 1999 and 1998, AXA used the weighted average exchange rate to translate the results of operations whereas in 1997 the year-end exchange rate was used.
Excluding direct marketing insurance, net income of € 4 million increased by € 1 million compared to 1998, due to realized gains of € 30 million, offset by the deterioration in the claims ratio for all accident years that affected the market as a whole. The claims ratio for all accident years, net of reinsurance, was 86.5% in 1999, a 7.1% increase, due to exceptional loss development for prior accident years in 1998. However, the claims ratio for the current accident year was stable overall, and improved significantly in automobile insurance due to the implementation of a more selective underwriting policy which significantly raised the average premium. The net loss recorded by Direct Seguros (€
Morocco. In 1999, gross premiums for Morocco included € 31 million in gross premiums recorded by the Compagnie Africaine d’Assurances, consolidated as of July 1, 1999, when acquired. On a constant exchange rate and structural basis, gross premiums for AXA Al Amane decreased by 6.9%, primarily due b03-338 • Item 9 (US) ok 23/05/00 12:11 Page 165 PHILIPPE PHILIPPE 2:JOBS:AXA:03-338 • AXA COB 1999 (US):
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(a) Includes investment income, net of investment expenses and interest expense on short-term and long-term debt, and net realized investment gains or losses. (b) Includes the net result of premiums, insurance benefits and claims and commissions ceded under reinsurance contracts with unrelated third parties. (c) In 1999 and 1998, AXA used the weighted average exchange rate to translate the results of operations whereas in 1997 the year-end exchange rate was used.
■ In an international reinsurance market that remains highly competitive, gross premiums earned by AXA Re decreased by 13.7%, on a constant exchange rate basis. Gross property reinsurance premiums (89% of total gross premiums) decreased by 13%, with the increase relating to the underwriting and renewal of several large treaties in the US being more than offset by the unacceptably low premium rates on certain contracts and the impact of the decision made by AXA
This deterioration in property and casualty insurance benefits and claims was partially offset by the absence of life reinsurance reserve strengthening in 1998 which totaled € 37 million in 1997 and a reduction in the equalization reserve in 1998 of € 40 million as compared to an increase of € 7 million in 1998. In addition, there was positive loss reserve development and a favorable impact for foreign exchange rates in 1998.
AXA Global Risks is principally comprised of operations in the UK and France. The following tables presents information regarding AXA Global Risks for the years indicated.
Global Risks increased by 9.5%, primarily due to the increase in business underwritten through AXA subsidiaries and recorded by AXA Global Risks, the sharp rise in international program business underwritten and to growth in financial reinsurance business.
General operating expenses increased by € 141 million, principally from the significant growth of the holding company that will coordinate AXA IM
The tables below present the revenues and net income for the Other Financial Services Segment for the years indicated.
in 1998. In both 1999 and 1998, DLJ accounted for nearly 90% of the total revenue for this segment; its revenues increased 20.9% in 1999 from 1998 (on a constant exchange rate and structural basis).
for the write-down of shares in the property and casualty insurance subsidiary in Australia which is not consolidated.
International Commission, established pursuant to this agreement, has determined the payment principles of unpaid policies, and the first payments have been made accordingly.
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The Property and Casualty Insurance Segment’s net income under US GAAP is slightly higher than French
Furthermore, a large proportion of AXA’s insurance operations consist of products where the majority of the investment risk is borne by the policyholders. Such products provide AXA shareholders with predictable income and reduced risk. Risks attributable to policyholders are also actively managed to ensure that such risks are prudent and satisfy policyholders’ risk and reward objectives. In addition, AXA’s insurance operations worldwide are subject to local regulatory requirements in most jurisdictions in which AXA operates. The local regulations : • prescribe the type, quality and concentration (counterparty, geographical and type of securities held)
At December 31, 1999, interest-sensitive products and policies with long-term fixed payout patterns represented 27% of the total net life insurance liabilities.
AXA’s financial services activities are conducted primarily by DLJ. DLJ monitors its market and counterparty risk on a daily basis through a number of control procedures designed to identify and evaluate the various risks to which DLJ is exposed.
DLJ’s trading activities generally result in the creation of inventory positions. Position and exposure reports are prepared daily by each of its business groups engaged in trading activities. In addition, there is a consolidated summarized position report indicating both long and short exposure, along with approved limits, which enables senior management to control inventory levels and monitor results of the trading groups. DLJ also produces a daily revenue report for each of its business groups. The daily revenue reports, together with the position and exposure reports, enable senior management to monitor and control the overall activity of the trading groups.
S e n s i t i v i t y A n a l y s e s NON-TRADING ACTIVITIES
Foreign Exchange Rate Risk. The potential exposure to a 10% adverse fluctuation of December 31, 1999 and 1998 foreign exchange rates would be a French
Anthony J. Hamilton 1997 2001 General Partner of Fox-Pitt, Kelton Ltd
Henri Lachmann 1997 2001 Chairman and Chief Executive Officer of Schneider Electric
Michael Hegarty Vice Chairman and Chief Operating Officer of AXA Financial Inc. 1998
The Selection Committee recommends nominees to the Supervisory Board and the Management Board, nominates their respective Chairman and Vice
Issuance of Ordinary Shares for Royale Belge acquisition 9.56 87 897 – 985
Net change in trading activities and broker-dealer receivables & payables (494) (4,953) (4,404)
The notes on pages F-7 to F-103 form an integral part of these Consolidated Financial Statements.
Germany and Austria), and (v) AXA Royale Belge and its insurance subsidiaries and AXA Banque Belgium
Insurance Directive) of December 19, 1991, (collectively, the “New Regulation”); Décret No. 95-153 of
February 7, 1995 and its related Arrêté of April 19, 1995, modifying certain claims reserves calculations, and French Banking Regulation Rule 91-02. A description of the significant differences between French
Such amount was recorded as a reduction of shareholders ’ equity as of January 1, 1998. Total expense recorded in 1998 was €19 million.
Comprehensive Income”. This statement established standards for reporting and displaying comprehensive income and its components in a full set of generalpurpose financial statements. This statement required that an enterprise classify items of other comprehensive income (i.e. other than net income) by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and reserves in the equity section of the balance sheet.
directly or indirectly holds at least 20% of the voting rights or when significant influence is exercised through an agreement with other shareholders.
Business combinations generally are accounted for as purchases. For insurance company acquisitions after
(that is, “triggering events”), an evaluation will be performed to determine whether the carrying value of goodwill and value of purchased business in-force is supportable based on the future operating cash flows and profits (before amortization of goodwill and value of purchased business in-force). The operating cash flows used in this assessment are those of the
Mortgage loans on real estate are stated at principal balances, net of unamortized discounts and valuation allowances. Impairment measurement is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.
Netherlands, the actuarial assumption for mortality is specified by legislation, the assumption for interest is the rate guaranteed in the contract, and contracts are assumed to remain inforce until their contractual maturity date or the death of the insured. For the UK, the
The balance sheet in a UK insurance company will include not only the policyholder insurance benefits
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issued a statement setting forth a new basis for preparing consolidated financial statements in France. For insurance business, this statement becomes effective
Total Equity Securities and Mutual Funds 28,192 28,057 6,898 700 34,390
(losses) included in net income relating to trading account securities held by AXA’s financial service companies was € 187 million, € (174) million and € 40 million for the years ended December 31, 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998, the cost of trading account securities held by the insurance companies was € 3,423 million and € 2,656 million, respectively. The increase in net unrealized gains (losses) included in net income relating to trading account securities held by insurance companies was € 260 million, € (206) million and € 209 million for the years ended December 31, 1999, 1998 and 1997, respectively.
The provisions for valuation allowances relating to financial services operations are included in operating expenses. For the year ended December 31, 1999 the related provision increased by € 4 million compared to the years ended December 31, 1998 and 1997 where this provision decreased by € 154 million and
AXA’s significant derivative activity is included in Note 17. Estimates of fair value do not reflect any premium or discount that could result from offering for sale at one time AXA’s entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the disclosed fair value estimates cannot necessarily be realized in immediate settlement of the instruments and therefore do not necessarily represent values for which these instruments could have been sold at the date of the consolidated balance sheet.
Deferred acquisition costs related to life insurance and the changes thereto are as follows: b03-338 • Items 17-19 (US) 23/05/00 12:14 Page F-29 PHILIPPE PHILIPPE 2:JOBS:AXA:03-338 • AXA COB 1999 (US):
Had no goodwill been charged to retained earnings and reserves, additional goodwill amortization of € 54 million would have been recorded against income.
In connection with this transaction, the Company has reorganized the GRE group and sold several nonstrategic businesses, mainly in the United States,
“Notes’’) at € 41 per Note in connection with the acquisition of Abeille Re. Each Note is convertible at the holder’s option into 1.03 ordinary shares (subject to certain antidilution adjustments). These Notes matured on January 1, 1999 and converted into 1.6 million ordinary shares of the Company at a total value of € 63 million.
Compagnie Financière de Paris : variable, due 2003 (I) – 110
At December 31, 1999, aggregate maturities of long term operating debt based on required principal payments at maturity for 2000 and the succeeding four years are € 26 million, €1,151 million, € 1,246 million, € 207 million and € 128 million, respectively, and €2,063 million thereafter.
Equitable Life: Surplus Notes, 6.95% scheduled to mature 2005 (E) 396 341
National Mutual Life: Deferrable Loan Agreement, variable rate due 2001 (I) 173 143
Stock agreement issued in October 1993 to exchange 2.05 million shares outstanding (of the 2.25 million shares originally issued) for US$ 205 million (€ 203 million ) in aggregate principal amount of 9.58%
Convertible Bonds. In December 1996, certain of AXA’s subsidiaries repurchased (by cash) € 128 million of aggregate principal amount of the Mandatorily
The expected costs of providing postretirement benefits are accrued during the period that the employees earn such benefits. AXA funds postretirement benefits costs as the benefits are utilized, and made postretirement benefits payments of € 33 million, € 28 million, and € 18 million for the years ended
(a) At December 31, 1999, approximately 73% of total insurance life liabilities relate to participating policyholder contracts (whereby the policyholder participates in the investment return / profits of the insurance company) and includes UK with-profit contracts and separate account contracts.
Net Investment Results Before Intersegment Eliminations 14,760 13,721 12,379 226 169 433 645 178 1 15,631 14,068 12,813
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PanEuroLife (Luxembourg based life insurance company ) for € 96 million and realized a net gain of € 22 million (group share).
When French Savings Contracts are issued, shares of the funds supporting such French Savings Contracts are transferred from the General Account to the corresponding Separate Account on a first-in, first-out basis and a gain or loss is recognized by AXA through its
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■ AXA uses interest rate swap contracts to manage its exposure to interest rate fluctuations. Interest rate swap contracts allow AXA to raise long-term borrowings at floating rates and swap them into fixed rates that are lower than those available to AXA if fixed-rate borrowings were obtained directly. Under interest rate swap contracts, AXA agrees with other parties to exchange, at specified intervals, fixed-rate and floating-rate interest amounts calculated by reference to an agreed-upon notional principal amount.
December 31, 1999, the notional amount of purchased interest rate caps was € 36,579 million (1998: € 14,584 million). The related net annual premium in 1999 was € 32 million (1998: € 25 million) with an initial average duration of between 7 and 10 years.
At December 31, 1999 AXA did not have any investments in ‘Hedge Funds’. However, in the United States
Belgium, AXA is also cooperating with a similar body, the Buysse Commission.
R e s t r i c t i o n s a n d M i n i m u m C a p i t a l R e q u i r e m e n t s
The original number of ordinary shares under option would represent 25% of the shares issued by the subsidiary, if and when such options were exercised. Any shares acquired by exercising options are nontransferable and the holders have certain rights to put the shares to AXA for a price based on the equivalent market price of AXA Financial, Inc. common stock at the date when put. At December 31, 1999, the outstanding balance of options was 76,500 (1998: 804,000).
Investments in companies accounted for by the equity method 689 689 9 9 495 495 1,913 1,193
United-Kingdom. Subsequent to the GRE acquisition, a program to restructure property and casualty operations was undertaken. The costs related to implementing this program, which is scheduled for completion in 2001, are estimated at € 174 million, of which € 114 million was recorded in the opening balance sheet and € 39 million was charged to 1999 income.
Netherlands, Germany, Japan and Hong Kong were placed under the control of AXA Investment Managers to foster operating synergies. Excluding AXA IM
In Turkey, AXA strengthened its partnership with Oyak by contributing its local subsidiaries (acquired from
French life insurance companies were removed from consolidation effective January 1, 1998.
Bank ANHYP is consolidated as of December 31, 1998 when it was acquired.
Asia/Pacific AXA Insurance Investment Holding (Singapore) 100.00 100.00 100.00 99.97 Detura (Hong Kong) – – 75.00 36.35 AXA Asia / Pacific Holding (Australia) 51.00 47.11 51.00 48.47 AXA Asia / Pacific International (Australia) (3 companies) 100.00 47.11 100.00 48.47
Compagnie Financière de Paris 97.18 97.18 97.17 97.17 Compagnie Parisienne de Participations 100.00 97.18 100.00 97.17
E v e n t s - U n a u d i t e d ACQUISITIONS
interest in AXA China Region. At the end of February 2000, AXA Asia Pacific Holdings had 100% interest in
AXA’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in France. These accounting principles differ in certain material respects from accounting principles generally accepted in the United States.
Unlike French GAAP and in accordance with US GAAP, the identifiable net assets of Royale Belge were revalued on a fair value basis on July 31, 1998, the date at which the additional minority interests were acquired by AXA. The net assets under US GAAP were € 663 million greater than the value under French
allocated to UK with-profits contracts are carried at fair value. The changes in unrealized investment gains on assets are recognized in net income, along with a change in insurance reserves as a portion is attributed to participating policyholder contracts. Accounting for with-profits contracts under French GAAP matches revenue and expense in net income. Changes in the estimated fair value of assets allocated to with-profits contracts are included in net income as such changes are taken into account in determining the related liability for with-profits policyholder benefits. Therefore, fluctuations in the estimated fair value of assets allocated to with-profits contracts have no direct impact on net income. However, other factors, such as expense charges, income taxes and management’s exercise of judgement in setting the level of bonuses, impact net income. Management, in the exercise of its judgement, considers the overall profitability and financial and competitive position of AXA Sun Life, profit on other business and its objectives of meeting policyholders ’ reasonable expectations and minimizing sharp fluctuations in the level of bonus payments to policyholders from year to year.
Savings Contracts are issued or the fund shares are sold to entities not included in the Consolidated
Accounting for Stock Issued to Employees, for all stockbased compensation plans.
Under French GAAP total premiums received for all insurance contracts, including life insurance contracts with flexible premiums or insignificant mortality or morbidity risk (such as, separate account contracts and universal life contracts) are recorded as revenues and benefits paid to the policyholder on all insurance contracts are recorded as expenses in AXA’s consolidated operating results.
Future policy benefits, other policy liabilities, insurance claims and claims expenses 218,597 218,597 214,946
NET INCOME PER ORDINARY SHARE: (a) US GAAP, except for adjustment for the increase in net unrealized investment gains on assets allocated to UK with-profit contracts of € 1,030 million.
For the years ended December 31, 1999, 1998 and 1997, the negative impact of dilutive securities issued on a US GAAP basis is as follows: Accumulated Other Comprehensive Income 1999 1998 1997
GAAP accumulated other comprehensive income were as follows: b03-338 • Items 17-19 (US) 23/05/00 12:14 Page F-101 PHILIPPE PHILIPPE 2:JOBS:AXA:03-338 • AXA COB 1999 (US):
Endowment insurance Life insurance under which an insured receives the face value of a policy if the individual survives the endowment period. If the insured does not survive, a beneficiary receives the face value of the policy.
Incurred but not yet reported Reserves for estimated claims and claims expenses which have been incurred but not yet reported to the insurer or reinsurer, including future development of claims which have been reported to the insurer or reinsurer but where the established reserves may ultimately prove to be inadequate.