August 1st, 2003. The second part, which concerns internal control procedures, follows this section on Corporate Governance.
In 2006, the Supervisory Board met 8 times, of which one meeting was an entire day devoted to examination of the Group strategy, and the overall attendance rate was 84%.
Norbert Dentressangle Chairman and Chief Executive Officer of Financière Norbert Dentressangle Groupe Norbert Dentressangle May 2006 / (52) (1) (2) Beausemblant – BP 98 2010 AGM (Member of the Supervisory Board) 26241 Saint-Vallier-sur-Rhône
President Customer Solutions & Chairman, Global Field Operations: Chairman, Global Field Operations: Chairman, Global Field Operations: Operations, Member of the Executive SAP SAP SAP Committee: SAP AG Director: Director: Director: Directors: SAP America, Inc. (United States), SAP FRANCE S.A., S.A.P. ITALIA Sistemi, SAP Systems Integration AG (Germany), SAP America, Inc. (United States), SAP Global Marketing Inc. (United States), applicazioni, prodotti in data processing SAP FRANCE S.A., SAP Global Marketing Inc. (United States), SAP Asia Pte. Ltd (Singapore), s.p.a. (Italy), SAP Hellas Systems SAP Finland Oy (Finland), SAP Asia Pte. Ltd (Singapore), SAP JAPAN Co., Ltd (Japan), Application and Data Processing S.A. SAP Svenska Aktiebolag (Sweden), SAP JAPAN Co., Ltd (Japan), SAP FRANCE S.A., S.A.P. ITALIA Sistemi, (Greece), SAP America, Inc. (United States), S.A.P. ITALIA Sistemi, applicazioni SAP FRANCE S.A., S.A.P. ITALIA Sistemi, applicazioni, prodotti in data processing SAP JAPAN Co., Ltd (Japan), prodotti in data processing s.p.a. (Italy), applicazioni, prodotti in data processing s.p.a. (Italy), SAP Hellas Systems SAP Manage Ltd (Israel), SAP Hellas Systems Application s.p.a. (Italy), SAP Hellas “Systems Application and Data Processing S.A. SAP Global Marketing Inc. (United States) and Data Processing S.A. (Greece), Application and Data Processing S.A.” (Greece), SAP (Beijing) Software SAP America, Inc. (United States), (Greece), SAP (Beijing) Software System Co., Ltd (China), SAP JAPAN Co., Ltd (Japan), System Co., Ltd (China), Ginger S.A. Enigma Inc. (United States) SAP Danmark A/S (Denmark),
Professor of Politics and Chair of the Committee: European Studies, Princeton University (United States) Associate Professor: Institut d’Etudes Politiques (Paris) Member of the Management Committee: Institut Montaigne, Centre Américain, Institut d’Etudes Politiques (Paris) Member of the Editorial Committee: Comparative Politics, La Revue des Deux Mondes, Politique International Member: Council on Foreign Relations (New-York), HEC International Advisory
SAP France & Belgium 1991 – 1995: Co-Founder President & Chief Executive
Dentressangle Group, has also held equity interests in real estate, industrial and business service firms
Industrielle et Financière de Pompey 1981 – 1998: Chairman and Chief Executive Officer of
Committee Chairmen report on completed Committee work at the next scheduled Supervisory Board meeting.
Selection, Ethics, Governance and Human Resources Committee The Selection, Ethics, Governance and Human Resources Committee had four members on December 31, 2006, including two independent members: Messrs Jean-René Fourtou (Chairman), Gérard Mestrallet, Michel Pébereau and Ezra Suleiman.
– Christopher Condron (59), President and Chief Executive Officer of AXA Financial, Inc. (United States).
Chairman and Chief Executive Officer: AXA America Holdings Inc. (United States)
Service contracts between the AXA Group and members of the Management Board The French members of the Management Board (Messrs Henri de Castries, Claude Brunet, Denis Duverne, François Pierson) are employed by AXA under contract.
François Pierson Member of the Management Board, Chairman and Chief Executive Officer of AXA France, responsible of Large Risks, Assistance and AXA Canada
Thus, operating units draw up their strategic plans in accordance with preset targets by the Management Board. The BSD team prepares these preset targets, sends them to the business units and monitors compliance.
QBRs also provide members of the Executive Committee with regular and formal opportunities to meet and discuss the Group’s strategic priorities for the years to come, to develop action plans and monitor their execution.
Information and Communication Investor Relations The quality of financial and accounting information depends upon the production, review and validation of financial information between the different services of the Group Finance Department, and on the principle of having a single source of information. With very few exceptions, all financial information reported by the Group comes from the PBRC Department. Exceptions arise periodically when the financial markets request management information that does not originate from the Group’s accounting and financial consolidation systems.
Financial and accounting information is monitored in different ways depending on the medium used, with the aim of enhancing disclosures in both qualitative and quantitative terms: Financial communication media (press releases, press and financial market presentations, etc.) Information issued via these media is produced by the Investor Relations, and is intended to give a clear and intelligible overview of the Group’s business and operations (e.g., merger and acquisition, financing). Key announcements are reviewed and validated by the Finance Department and the Legal Department prior to submission for approval to the Management Board. Press releases concerning financial statements are reviewed by the Supervisory Board. The External Auditors also review press releases concerning annual and half-year accounts closings.
Local internal audit teams focus mainly on identifying the risks facing their units, and on evaluating monitoring systems that may help to prevent them or limit their impact. Their field experience makes their efforts more effective.
– coordinating AXA’s 20F filed with the SEC, – developing and using management control tools, – analyzing quantitative data on Group business and results, and key performance indicators, – liaising with the External Auditors
This system is also used to deliver the management reporting information used to produce an economic perspective on the consolidated financial statements. The process through which this management reporting information is produced and validated is the same as that used to prepare consolidated financial information.
Variable compensation for the year 2003 paid in 2004 €1,824,728 €2,000,000
Directors fees earned in 2007 Directors fees earned in 2006 for 2006 for 2005
(adjusted price) at 31/12/2006 not granted as at 31/12/2006 66% – 09/05/2004 100% – 09/05/2005 50% – 30/05/2004 75% – 30/05/2005 100% – 30/05/2006 66% – 27/02/2005 100% – 27/02/2006 66% – 14/03/2006 100% – 14/03/2007 66% – 14/03/2006 100% – 14/03/2007 66% – 02/04/2006 100% – 02/04/2007 66% – 26/03/2007 100% – 26/03/2008 66% – 14/04/2007 100% – 14/04/2008 66% – 29/03/2008 100% – 29/03/2008 66% – 29/03/2008 100% – 29/03/2008 66% – 06/06/2008 100% – 06/06/2008 66% – 27/06/2008 100% – 27/06/2008 66% – 01/07/2008 100% – 01/07/2008 66% – 28/07/2008 100% – 28/07/2008 66% – 21/09/2008 100% – 21/09/2008 66% – 31/03/2009 100% – 31/03/2010 66% – 31/03/2009 100% – 31/03/2010 66% – 25/09/2009 100% – 25/09/2010
Approximately 30,000 employees in 32 countries took part in Shareplan 2006, and participating employees invested a total of 375.5 million euros (up 23.4% compared with the 304.3 million euros invested in December 2005), as follows: – 51.8 million euros in the traditional plan
The relevant paragraphs of the French Commercial Code provide that the right to a double vote ceases automatically when the share to which it is attached is converted to bearer status. This right also ceases automatically in the event that shares are transferred, with the proviso that the transfer is one of ownership. Accordingly, this right stands in the event of a transfer in the form of collaterals or a transfer of use rights. Moreover, a transfer of ownership that occurs in connection with succession, liquidation of an estate between spouses, or donation to a relative does not lead to the loss of acquired double voting rights.
As of December 31, 2006, AXA’s fully paid up share capital totaled €4,792,714,239.06 divided into 2.092.888.314 shares with a par value of €2.29 and eligible for dividends as of January 1, 2006.
Date Operations Number of Issue premium Number of shares Amount of share shares issued after the operation capital after the operation in euros)
Number of bonds in circulation as of February 28, 2006 6,637,107
December 31, 2006, are described in the table below: As of December 31, 2006 (a) As of December 31, 2005 As of December 31, 2004
In force for a period of five years as of the date of signature, this agreement is renewable automatically for an initial period of two years and for successive periods of one year thereafter, unless one of the two parties decides to terminate beforehand, in which case it is required to give three months notice prior to the next renewal date.
AXA has priced US$ perpetual deeply subordinated notes for a total amount of approximately euro 1.1 billion. Successful completion of the Winterthur financing (12/11/2006)
AXA to sell Winterthur US property & casualty operations to QBE Insurance Group for a total consideration of US$1.8 billion (01/04/2007)
Extract of the minutes of the Management Board regarding the increases and decrease of the share capital (12/15/2006)
Official public notice of shareholders’ agreement clauses www.amf-france.org Shareholder’s agreement between AXA and Schneider (05/15/2006)
Form 6-K for December 2006: Press Release issued on December 27, 2006 by AXA, announcing that it has called meetings of holders of each of its 2014 and 2017 convertible bonds
To the Shareholders of AXA S.A. 25, avenue Matignon 75008 Paris
Of which: Gross written premiums 48,786 43,496 41,103 Fees and charges relating to investment contrats with no participating feature 608 509 417
In 2006, AXA Group had approximately 52 million customers worldwide. The breakdown of AXA customers was as follows: for Life & Savings and Property & Casualty businesses approximately 33 million in Europe, 9 million in Asia/Pacific, and 5 million in North America, and approximately 4 million customers for AXA’s Asset Management companies.1
AXA targets both individual and commercial customers. Individual customers pertain to all the socio-economic categories, and include families with or without children, employees and retirees. Commercial customers include mainly small and medium-sized enterprises (SMEs).
During 2006, AXA invested significantly to improve its offering to individuals including launching an open architecture offering to widen investment choice (including “self investment”). AXA also targets individuals who require financial protection against events such as illness or death, as well as older clients from lower socio-economic groups with policies that cover funeral expenses upon death.
– Pure savings, which provide investment return to policyholders, while AXA bears the investment risk.
In Australia and New Zealand, AXA has leveraged the capabilities of the global group and local multi-manager expertise to build a market offering that is differentiated by its breadth of investment styles and asset classes, and by its quality. This capability has been recognized through high research house ratings and awards such as the Money Management 2005 Fund Manager of the Year in Australia and the Fundsource Research 2006 Fund Manager of the Year for New Zealand equities and for International Fixed Interest in New Zealand. In advice, AXA continues to be a leader in the provision of lifestyle financial planning and quality financial advice2.
4,600. AXA believes it will benefit from DBV Winterthur’s very good reputation and expertise in the civil servants market with respect to health products.
In the German market, tied agents are the dominant sales channel for Property & Casualty products. Brokers are gaining more importance, especially in the commercial segment. For AXA Germany, in the last three years, brokers signed a growing share of the business in the retail market. In addition, direct business, especially via the internet, is growing fast and has become a relevant sales channel in motor. AXA’s direct sales channel is responsible for more than 10% of the motor premiums in 2006.
BASED ON GROSS REVENUES IN 2006 General agents Intermediaries, Direct sales and Other networks, and salaried independent marketing including corporate sales force advisers & brokers partnerships and bank networks
In 2006, AXA IM finalized the full integration of Framlington’s activities, a UK-based asset management company specialized in retail unit trust management. This acquisition gives AXA IM critical mass and visibility in the UK retail market.
Insurance cash flows are generally positive and can be slightly negative in the case of exceptional events. A portion of these cash flows is invested in liquid, short-term bonds and other listed securities in order to avoid the liquidity risk that may arise from such events. In the event of large catastrophic losses, AXA’s Property & Casualty operations would be able to liquidate part of their investment portfolios to meet their obligations.
The contractual maturities of financing debts are detailed in Note 16.4 to the consolidated financial statements.
The solvency margin calculation is based on a formula that contains variables related to economic, financial and technical parameters. It also takes into account the matching of specific categories of assets and liabilities.
– Validation of these strategic allocations by the entity’s risk management unit and then by GRM.
In addition, AXA’s insurance operations are subject to local regulatory requirements in most jurisdictions in which AXA operates. These local regulations prescribe: – The category, nature and diversification (by issuer, geographical zone and type) of investments.
– Interest-rate sensitivity analyses assess changes in the value of interest-rate positions by currency and by maturity following a 1% upward shift in the yield curve.
Furthermore, the Group’s liquidity profile is strengthened by the following factors: – The Group’s financial strength gives it broad access to various different markets via standardized debt programs: for example €3 billion of commercial paper and a €12 billion program under EMTN documentation.
In Switzerland, Winterthur is exposed to exchange-rate risk through its investments in foreign currencies (particularly the euro, pound sterling and US dollar). It owns these investments in order to diversify its investments and enable policyholders to benefit from the performance of international financial markets. It controls and limits its exposure to exchange-rate risk by using foreign exchange derivatives (mainly forwards).
These analyses cover AXA SA, which carries most of the Group’s debt, along with the largest subsidiaries in France, the USA, the UK, Belgium, the Netherlands, Germany, Southern Europe (Spain, Portugal and Italy), Australia, Hong Kong and Japan. These analyses also include the Winterthur Group. At December 31, 2006, these subsidiaries represented more than 95% of AXA’s consolidated invested assets and technical reserves within its insurance operations.
At Group level, in order to calculate AXA’s potential exposure to foreign currency fluctuations, movements of the major foreign currencies have been analyzed in terms of their impact on Group net income in euros. The scenario that resulted in the most adverse effects for AXA was a decline in all currencies against the euro, or a rise in the euro against these currencies.
Recent developments relating to bird flu have attracted increasing attention to risks associated with pandemics. Although assessing pandemic risks involves a significant amount of various assumptions, it generates increasing interest and requires the development and implementation of an appropriate risk management strategy.
To manage the risk of reinsurer insolvency, a security committee is in charge of assessing reinsurer quality and acceptable commitments. The committee is under GRM’s authority and is run by AXA Cessions, which is the AXA entity in charge of placing the Group’s Property & Casualty and Life & Savings insurance with external reinsurers (see section “Definition of reinsurance requirements and analysis of underwriting”). This risk is monitored by comparing the various financial strength ratings available on various reinsurers as well as by conducting in-depth analyses of the recoverability of receivables in the event of reinsurer insolvency. The teams in charge of the Group reinsurance program analyze this information to add a credit risk dimension to their work in placing insurance and transferring risk to the reinsurers. The security committee meets monthly – and more frequently during renewal periods – and decides on any action to be taken with the aim of limiting AXA’s exposure to the risk of default by any of its reinsurers.
Hong Kong. The economy of Hong Kong continued to grow in 2006 with GDP growing by 5.8%1 and Hang Seng index growing by 34.2% in 2006. Hong Kong remains a very attractive life
(1) Please note that the numbers quoted for the market data are 9M06.
On December 22, 2006, AXA Asia Pacific Holdings (AXA APH) reached an agreement with AXA SA to acquire Winterthur Life Hong Kong Limited (WLHK). This followed the announcement of the completion of AXA SA’s acquisition of the Winterthur Group from Credit Suisse. AXA APH will acquire WLHK for consideration in the range of HK$1.7 billion to HK$2.4 billion ($AUD 278 million to $AUD 393 million). HK$1.9 billion ($AUD 311 million) will be payable on completion. This amount will be subject to an adjustment based on the future performance of the business measured in 2009. AXA APH will be seeking shareholder approval for this acquisition at the Annual General Meeting in 2007. In addition, AXA APH has declined the opportunity to acquire Winterthur’s Indonesian life insurance operations and Japanese operations.
(b) Restated means: (i) transfer of the forex impact from adjusted earnings to net income, (ii) following clarification of IFRIC agenda committee following IASB decision, AXA has reclassified TSDI instruments (perpetual subordinated debts) into shareholders’ equity for all periods presented in the 2006 financial statements with impact on net income, and (iii) in line with new accounting FRS27, the reclassification in the United Kingdom of some With-Profit technical reserves to allow for all future terminal bonuses payable to With-Profit policyholders within the allocated policyholder reserves, previously held in the unallocated policyholder bonus reserve, without any impact on earnings.
(vi) Tax and minority interests1 increased by €253 million mainly attributable to the United Kingdom (€+172 million due to increasing pre-tax earnings and nonrecurring increases in deferred tax provisions of €102 million, primarily as result of a reassessment of the likelihood of a future distribution from the attributed Inherited Estate), and Japan (€+54 million in line with higher taxable earnings), partly offset by France (€–65 million as some dividends on equities were taxed at a reduced rate while previously taxed at full rate and reflecting the 0.5 point decrease in French short term tax rate), and the United States (€–18 million principally due to the impact of a €92 million favourable tax settlement in 2006 partly offset by higher taxes on higher pre-tax earnings).
– the non-repeat of €115 million release of valuation allowance on tax losses carried forward in Japan in 2005.
Shareholders’ Equity As at December 31, 2005 (a) 36,525 – Share capital 507
(a) Restated means: * on earnings: (a) Forex impact out of adjusted earnings and in net income and (b) following clarification of IFRIC agenda committee following IASB decision, AXA has reclassified TSDI instruments
APE increased by €317 million to €1,134 million or +38% on a constant exchange rate basis largely due to strong sales of unit-linked investment bonds and Pensions. Development of distribution relationships in respect of lower margin wholesale Offshore Bond products led to significant volume increases (+109%). Pension business also demonstrated strong growth (+29%) following changes to Pensions legislation.
VBI amortization decreased by €320 million, or €319 million on a constant exchange rate basis, to €–31 million as a result notably of the combined impact of (i) the non recurring 2005 amortization further to the change in future investment assumptions (€219 million), (ii) the lower 2006 amortization due to a reduced VBI opening balance and, (iii) to a lesser extent, to the impact in 2006 from actuarial assumption changes mainly related to mortality (€+38 million).
– lower interest credited funded by net capital gains (€+93 million to €–45 million),
Gross revenues decreased by 6% to €1,357 million. Investments and savings revenues decreased by 4% to €1,202 million mainly due to the lower amount of traditional contracts from institutional activity, as well as a lower unit-linked production through partnerships with banks partially offset by the launch of new products. Life premiums decreased by 17% to €155 million, mainly as a result of the termination in May 2005 of an important bank-insurance agreement in Traditional Life.
(a) The disability portfolio which was previously reported under the Life segment is now reported under the Property & Casualty segment since December 1st, 2004. The Health portfolio which was previously reported under the Life segment has been disposed of at December 1st 2004.
Gross revenues were up 2% to €1,254 million on a comparable basis.
Net income decreased by €13 million to €282 million resulting from lower adjusted earnings and unfavorable change in fair value on fixed maturities under fair value option, partly offset by gains on derivatives.
– The all accident year loss ratio improved by 4.0 points to 66.0% due to the better current year loss ratio and to higher prior years’ results.
Adjusted earnings decreased by €3 million to €1 million in line with underlying earnings.
Asia (Excluding Japan) Singapore Gross written premiums (excl ACS business) increased by 3.3% to €85 million on a constant exchange rate basis, mainly driven by personal motor given our competitive pricing and improved renewal retention ratio.
Adjusted earnings group share 116 92 102 96 Profit or loss on financial assets (under FV option) & derivatives 1 5 (5) 1
Expenses increased by €5 million to €–208 million. The expense ratio improved by 0.1 point to 12.8% reflecting the growth in premiums.
– For insurance contracts and investment contracts with DPF: (i) Gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net Technical Margin”.
All financial amounts are shown net of derivatives impact (please refer to note 19). (g) Includes long term assets, i.e. when maturity is above 1 year.
Restated Restated Liabilities arising from insurance contracts with financial risk borne by the policyholders 108,984 92,888 73,578
Income from operating activities before tax 8,241 6,757 6,495 10 Income arising from investments in associates – Equity method 34 21 55
Change in fair value of investments and financial instruments accounted for at fair value through
Information relating to previous periods and presented for comparison purposes has been prepared in accordance with IFRS 1.
purpose entities, such as securitization vehicles, for example resulting from sales of receivables transferred by entities outside the Group and with the purpose of issuing Collateralized Debt Obligations (CDOs), whose redemption is backed by the proceeds from acquired receivables.
Foreign exchange differences arising from the translation of a net investment in a foreign subsidiary, borrowings and other currency instruments qualifying for hedge accounting of
Derivatives are initially recognized at fair value at purchase date and are subsequently re-measured at their fair value. Unrealized gains and losses are recognized in the statement of income unless they relate to a qualifying hedge relationship as described below. The Group designates certain derivatives as either: (i) hedging of the fair value of recognized assets or liabilities or of a firm commitment (fair value hedge); or (ii) hedging of highly probable expected future transactions (cash flow hedge); or (iii) hedging of net investments in foreign operations.
– liabilities arising from investment contracts with no discretionary participating features where the financial risk is borne by policyholders.
– the change in financial assets impairment (excluding releases of impairment following sales).
Statement of consolidated cash flows Following the change in the consolidated income statement format regarding the “Change in goodwill impairment” item, and in order to make the presentation more consistent with that adopted by its peers, the Group has also changed the starting point of the statement of consolidated cash flows. The statement of consolidated cash flows now starts with “Net operating result before tax”, whereas it used to be with “Income from operating activities, gross of tax expenses”. As a result, the following income statement items are now included in the starting point of the statement of consolidated cash flows: “Change in goodwill impairment”, “Income arising from investments in associates – Equity method” and “Financing debt expenses”.
Asia/Pacific (excluding Japan) AXA Life Insurance Singapore 100.00 52.69 100.00 52.95
Germany AXA Versicherung AG Minority interest buyout 100.00 96.52 100.00 92.19
AXA Kranken Versicherung AG Minority interest buyout 99.69 96.23 99.69 91.91
The following operations, described in the 2005 financial statements, continued in 2006: Acacia The Acacia SPV is consolidated within the operations of AXA France Vie. The main impact of this is a €220 million increase in the AXA Group’s other liabilities, and a parallel increase in receivables resulting from insurance operations.
AXA Japan In 2002, AXA Japan sold 102 buildings with net book value of JPY 40 billion to a fund owned by a third party and AXA Japan for JPY 43 billion, with a view to selling the buildings to other parties.
Other operating income and expenses (76,259) (19,119) (3,819) (3,552) (482) (499) 594 (103,135)
Net realized investment gains and losses 2,889 499 133 33 (3) 5 – 3,557
In addition, AXA refinanced CHF1.1 billion (€0.7 billion) of loans granted by Crédit Suisse Group to Winterthur.
UAP (1997) In 1997, AXA acquired UAP, and goodwill of €1,863 million was booked, of which €1,641 million was charged directly to retained earnings and reserves. As a result of purchase accounting adjustments made in 1998 and in 1999, the total goodwill increased to €1,866 million at December 31, 1999, of which €1,584 million represented the amount charged directly to retained earnings and reserves.
Changes in VBI amortization, capitalization and impairment (282) (558) (468) Change in shadow accounting on VBI 291 (161) (163)
The increase in deferred acquisition costs and equivalent in the Property & Casualty and International Insurance businesses was mainly due to the Winterthur acquisition (€284 million).
Costs (a) fees (b) Costs (a) fees (b) Costs (a) fees (b)
Note 8: Other intangible assets 8.1. Breakdown of other intangible assets Other intangible assets (€2,350 million at December 31, 2006, including €1,185 million from Winterthur) mainly included: (in Euro million)
– Fair values of mortgages, policy loans and other loans are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be originated. Fair values of doubtful loans are limited to the estimated fair value of the underlying collateral, if lower than the estimated discounted cash flows.
Non quoted fixed maturities (amortized cost) 10 10 – 1 1 0.01% 11 11 –
Equity securities available for sale 35,604 35,604 6.11% 2,733 2,733 16.77% 38,337 38,337 6.40%
Loans designated as at fair value through profit and loss (c) 378 378 0.06% 2,768 2,768 16.99% 3,146 3,146 0.53%
– €13,358 million of loans and, – €18,293 million of assets backing contracts where the risk is borne by policyholders.
Non controlled investment funds at fair value through profit and loss (c) 1,917 1,917 0.42% 73 73 0.73% 1,990 1,990 0.42%
TOTAL December 31, 2006 Amortized Fair value Net book Unrealized Unrealized cost (a) value (b) gains losses Fixed maturities available for sale 240,661 247,297 247,297 8,163 1,527
Additional information on the credit risk associated with bonds is provided in Note 4 “Management of financial and insurance risks”.
Sub-total fixed maturities 14 74 143 230 Loans at amortized cost 1 4 11 15
Net carrying amount by maturity as at December 31, 2004 12 months More than 1 year More than Total net or less up to 5 years 5 years carrying value
– The entries into the scope of consolidation of Krungthai AXA Life Insurance Company Ltd (€16 million), Philippine AXA Life Insurance Corporation (€10 million), PT AXA Mandiri Financial Services (€3 million) and Axa Affin General Insurance Berhad in Asia-Pacific (€11 million).
In 2005, “Other changes” related mainly to changes in consolidation method. The following companies are now fully consolidated: – Turkish Life, Non life and holding companies
4,540,278 treasury shares backing contracts where financial risk is borne by policyholders were not deducted from shareholders’ equity (as they were held in controlled funds). Their total estimated historical value was €80 million and their market value €124 million at end 2005.
Sub-total Deeply Subordinated notes (“TSS”) – 2,679 Equity component of convertible debt 203 203
Sub-total Deeply Subordinated notes (“TSS”) – 3,048 Equity component of convertible debt 203 203
c) Employee benefits actuarial gains and losses The main contributors to the €252 million change in actuarial gains and losses on employee benefit obligations were the United States (€146 million), Germany (€63 million) and the Netherlands (€16 million). Additional information on the pension benefit obligation is provided in Note 25.2.
Loss reserves development (prior years) (826) (132) (958) (634) 199 (435) (562) (101) (663)
ii. In Germany, removals from scope of consolidation (€–794 million), mainly due to transfer of the run-off portfolio to AXA Liabilities Managers, which belongs to the international insurance segment (€–640 million), and the disposal of DARAG (€–127 million).
N.B.: This table summarizes future policy benefit reserves arising from insurance and investment contracts for the Life & Savings segment, whether or not the risk is borne by policyholders (i.e. including unit-linked business).
(Unit-Linked) – Liabilities arising from contracts where financial risk is borne by policyholders: Investment contract with Discretionnary Participation Features (DPF) measured according to existing accounting
The second part of the table entitled “Reserve re-estimated” shows, for a given column N, an estimate of the final cost of liabilities carried at December 31 of year N in respect of all years of occurrence prior to and including N, at each future period end. The final cost estimate varies as information relating to losses still outstanding becomes more reliable.
Initial net claim reserves in excess of (less than) re-estimated net claim reserves as at December 31, 2006: Percentages of original net reserve (a) 31.8% 32.6% 15.2% 21.8% 27.8% 30.8% 40.6% 22.6% 6.9% 22.9%
14.9.3. Major business areas The tables in section 20.1. set out the Group’s major insurance business areas, and reflect the Group’s high level of diversification.
GMDB features provide a guaranteed death benefit which may be higher than the contract account balances of the unit-linked contract, depending on performance of the unit-linked assets. GMIB features provide a guaranteed lifetime annuity which may be elected by the contract-holder after a stipulated waiting period, and which may larger than what the contract account balance could purchase at then-current annuity purchase rates.
Financial cost related to dezactualisation (a) – – – – – – –
Information on the fair value figures presented in this note is provided in addition to information on carrying values and should be used with caution. As a matter of facts, on the one hand, these estimates are based on snapshots taken on accounts closing dates of parameters such as interest rates and spreads, which in fact fluctuate over time, and resulting in instantaneous values, and on the other hand because there are many possible methods of making these estimates.
Debts relating to investments under a lending agreement, excluding Winterthur’s contribution (€172 million), totaled €23,926 million at December 31, 2006, an increase of €9,155 million (€9,934 million at constant exchange rates) mainly attributable to France (€4,378 million) and Japan (€4,708 million).
Derivatives on other debt instruments issued (other than financing debt) – French bank – – –
Real estate investment funds 895 – – ERIV: AFET Amortizing mortgage loan based on EURIBOR 3 month + 1.45 point, maturity date: 2011 214 – –
– Lower debts at CDO Jazz 1 (€123 million), in line with lower volume of managed assets backing these credit lines.
17.3. Fair value measurement of other debt instruments issued and bank overdrafts (other than financing debt)
Debt owed to credit institutions designated as at fair value through
Deferred tax assets booked on tax losses not previously recognized (82) (16) (24)
Policyholder tax – Deferred tax through reserves relating to the fair value adjustment of AFS assets (7) – 7 – – –
TOTAL recognized DTA by latest date of DTA use 327 57 103 Corresponding carryforward losses 18 7 128
Deferred tax through reserves relating to gains and losses on defined benefits pension plans 140 – 216 12 1 369
Investment property 18,608 – – 18,608 Fixed maturities held to maturity – – – –
Equity securities at fair value through profit & loss 22,076 (25) – 22,050
(a) As described in note 1.12.2 on accounting principles, the adoption of FRS 27 in the United Kingdom led to restatements in all the periods presented (see note 14 for details).
Non controlled investment funds held for trading – 3 – – 3
Non controlled investment funds available for sale 35 147 – (10) 173
Changes in the fair value of financial instruments designated at fair value through profit & loss, relating to available-for-sale equities and fixed maturities, correspond to the change in fair value of underlying items in fair value hedges (as defined by IAS 39) in Japan.
Claims ceded (included change in claim reserves) 860 315 777 (63) 1,890
(a) Includes all acquisition expenses relating to insurance and investment contracts before capitalization/amortization of deferred acquisition costs and equivalents. (b) Change (capitalization and amortization) in deferred acquisition costs relating to insurance and investment contracts with discretionary participation features and changes in net rights to future management fees relating to investment contracts with no discretionary participation features.
25.2.3. Annual change in pension benefit obligation The annual change in the projected benefit obligation (PBO) is calculated on the basis of: – Service cost for the period (representing the increase in the PBO attributable to one year of additional service).
Change in benefit obligation Benefit obligation, beginning of the year 11,421 9,573 8,602 716 581 508
Net transfer In (out) (including acquisitions) 3,220 88 – – 1 –
Net position (excluding separate assets) (6,430) (6,654) (5,666) (595) (703) (572) Fair value of separate assets at the end of the year 2,480 2,697 2,265 – – –
Benefits paid through separate assets 168 168 155 – – –
Balance sheet liability at the end of the year (6,430) (6,654) (5,666) (595) (703) (572) Fair value of separate assets at the end of the year 2,480 2,697 2,265 – – –
AXA ADR STOCK OPTIONS The US holding company may grant options to purchase AXA ADRs. These options are issued at the market value of AXA ADRs on the date of grant. Options granted prior to 2004 vest over a three-year period, with one third vesting on each anniversary date. However, starting in 2004, new grants generally vest over a four-year period with one third vesting on each of the second, third and fourth anniversary dates (generally in March). Options currently issued and outstanding have a 10-year contractual term from their date of grant.
In 2005 and 2006, Performance Shares were issued in France only.
– the acquisition of Citadel in Canada (316 employees); – an increase in administrative staff, the teams that manage customers of financial partners, and the private banking team at AllianceBernstein (602 employees); – an increase in the Assistance business (600 employees), mainly in Latin America, Central Europe and the Mediterranean basin.
These transactions may involve the Company acquiring different types of securities from its subsidiaries and affiliates (e.g. ordinary shares, preferred shares, senior debt securities, subordinated debt securities, etc.) from time to time.
Guarantees amounted to €4,088 million (€4,063 million excluding Winterthur’s contribution), mainly consisted of (i) guarantees received from customers of AXA Bank Belgium and the Belgian Life & Savings entities (€2,773 million) and from French banks (€995 million) principally in the form of mortgages on buildings that provide security for loans and (ii) €94 million of guarantees received from credit institutions in the case of the failure of general agents of AXA Italian entities.
– €585 million of financing commitments to customers, mainly including commitments related to mortgage loans granted by DBV Finance in the Netherlands (€392 million) and the German life and health entities (€176 million).
Financing commitments given totaled €3,974 million as at December 31, 2006 (€2,680 million excluding Winterthur’s contribution), consisted of: – Financing commitments to customers
In connection with AllianceBernstein’s acquisition of the business of SCB Inc., formerly known as Sanford C. Bernstein, Inc., in 2000, AXA Financial Inc. entered into a purchase agreement under which certain former shareholders of Sanford C. Bernstein have the right to sell (“Put”) to AXA Financial, subject to certain restrictions set forth in the agreement, limited partnership interests in AllianceBernstein L.P. (“AllianceBernstein Units”) issued at the time of the acquisition.
Net financial expenses, including interest expense net of income from loans and investments, totaled €334 million, compared to €182 million in 2005.
– Allowances to provisions for contingent liabilities totaled €104 million, compared to €108 million in 2005. This figure mainly consisted of annual provisions for redemption premiums payable on bonds convertible into AXA shares, which totaled €89 million,
– AXA Life Europe, a company intended to write unit-linked insurance contracts with guaranteed minimum benefits in several european countries via its various branches, received a capital injection of €132 million.
Receivables from subsidiaries amounted to €3,046 million, up €563 million from €2,483 million at end-2005, €745 million of which derived from the recovery of loans initially granted by the Crédit Suisse Group to Winterthur’s subsidiaries, offset in part by the repayment of a €115 million loan granted to AXA Konzern.
AXA LIFE HONG KONG 6 1 100.00% 90 151 Gloucester Road - Wan Chai - HONG KONG
9, avenue de Messine - 75008 Paris 25 boulevard du Souverain - 1170 BRUXELLES
NBV/APE 20.8% 24.1% + 3.3 pts + 3.5 pts + 3.5 pts
Constant scope eliminates the impact of acquisitions/divestitures in 2005 and 2006.
The Life & Savings ANAV is is derived by aggregating the local regulatory (statutory) balance sheets and reconciling with the Life & Savings IFRS shareholders’ equity on the following main adjustments: – Addition of unrealized capital gains/losses not included in Shareholders’ equity.
Rate (the unwind calculation is based on IDR multiplied by VIF + Required Capital).
The following table presents an analysis of the movement of Life & Savings EEV between 2005 and 2006:
The following table provides an analysis of movement of the Group EV between 2005 and 2006:
Estimated upward parallel shift of 100 bp in risk-free rates (44) 164
The sensitivity of the Life & Savings EEV and NBV to changes in major assumptions has been calculated as follows for the 2006 values (measured in Euro million, group share): An independent actuarial consultancy, Tillinghast, was hired by AXA to perform a review on the Life & Savings EEV, and has issued the following statement of opinion: “Tillinghast has assisted AXA in developing the methodology and reviewing the assumptions used in the Life and Savings Embedded value at December 31, 2006, and the 2006 new business value for the principal life operations of the AXA Group. Our review included the analysis of movement in embedded value from December 31, 2005, and the sensitivities shown above.
– The economic assumptions used are internally consistent and consistent with observable market data; and