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Profile €75 billion oss premiums and ancial services revenues €910 billion assets der management €1.2 billion net adjusted earnings anagement expertise
• We will ensure that our employees excel professionally by making available the resources they need to constantly acquire new skills and knowledge, and by encouraging teamwork and empowerment in the workplace.
• With respect to the community, we seek to fully live up to our responsibilities in terms of corporate citizenship and the environment.
We are working together to achieve the shared goal of setting the standard worldwide in our business.
• The burst of the speculative bubble in the high technology sector
The impact of the September 11th events also weighed heavily on the sector, marking the most expensive insured event ever. Estimates of the total insured loss range from $50-$70 billion, though the collapse in the equity markets wiped out an even greater amount of capital. Not only were insurers’ profits impacted by the cost of claims from the World Trade Center, they also suffered from significantly lower investment returns, a sharp reduction in their stocks of unrealized capital gains, and lower revenues.
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Brussels and Amsterdam Stock Exchanges on October 27, 2000, which we refer to in this annual report as the
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A description of the French GAAP accounting policies and the material changes in French GAAP arising from the adoption of the new French Regulations are provided in notes 1 and 2 to the consolidated financial statements included elsewhere in this annual report.
Gain on sale of discontinued operation (net of tax)10 – – 2,105 – – –
(*) 1998 and 1997 financial data are not restated for new presentation requirements set forth in the new French Regulations adopted on January 1, 2001.
Donaldson, Lufkin & Jenrette (DLJ) – – 10,686 9,671 – –
Gross Premiums and Financial Services Revenues b • Items 1-4 (V5) 1/07/02 11:42 Page 9 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Net income per ordinary share (basic) 0.30 2.27 2.57 1.43 Net income per ordinary share (diluted) 0.32 2.15 2.44 1.35
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AXA continues to consider opportunities that will increase the size and geographical diversity of its worldwide operations in insurance and asset management in conjunction with its strategy. For further details on significant transactions undertaken by AXA during 2001, see “Item 5 – Operating and Financial Review and
Ratings The Company and certain of its insurance subsidiaries are rated by recognized rating agencies.
The significance of individual ratings varies from agency to agency. In the opinion of the rating agencies, companies assigned ratings at the top end of the range have a stronger capacity to repay debt and make payment on claims compared to companies assigned ratings at the lower end of the range, as they have a weaker capacity.
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The relevant ratings for the Company and its principal insurance subsidiaries are as follows: The ratings set forth above may be subject to revision or withdrawal at any time by the assigning rating organization. None of these ratings are an indication of the historic or potential performance of the Company’s ordinary shares, ADSs, ADRs or debt securities and should not be relied upon with respect to making an investment in any of these securities.
Other Financial Services 2% 15% 16% Donaldson, Lufkin & Jenrette1 – 91% 89% Other financial services and real estate companies 100% 9% 11%
In Europe, the same distribution channels are used by both AXA’s life & savings operations and its property
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The table below summarizes AXA’s consolidated gross premiums and financial services revenues and gross insurance liabilities for the International Insurance Segment for the periods and as at the dates indicated.
There are currently national and international discussions taking place for the creation of schemes such as insurance pools to counter the risk of significant loss exposures of the magnitude experienced in the U.S.
Products AXA Corporate Solutions Reinsurance. These operations have a geographically diverse reinsurance portfolio, including the following classes of business: property damage (including catastrophe exposure), third-party liability, marine, financial risk/guarantee and life and health insurance. The reinsurance operation underwrites primarily both proportional and non-proportional reinsurance treaties and operates as a niche player in the global market, specializing in catastrophe covers and new sophisticated products such as, weather derivatives (such as, climatic bonds) and asset-based reinsurance products.
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Alliance Capital Alliance Capital, through its parent company Alliance Holding, is a subsidiary of AXA Financial and is a leading global investment management firm. Alliance Capital provides diversified investment management services to individual investors, private clients and to a variety of institutional clients, including Equitable Life (one of Alliance Capital’s largest institutional clients). On October 2, 2000 Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, Inc. a U.S. based asset manager.
Alliance Capital provides diversified asset management and related services globally to a broad range of institutional and individual private clients as set out below: • management of separate account, hedge funds and other investment vehicles for private clients (such as, high net worth individuals, trusts and estates, charitable foundations); • management of mutual funds sponsored by Alliance Capital, its subsidiaries and affiliates for individual investors; • management of pension and other investment funds on behalf of institutional investors including U.S.
AXA Bank Belgium. A subsidiary of AXA Royale Belge (subsequently renamed AXA Belgium), it offers a comprehensive range of financial services to individuals and to small businesses and has a network of independent bank agents, who also support the sale of products offered by AXA Royale Belge and AXA
and in note 25 to the consolidated financial statements included elsewhere in this annual report.
This construction reserve was excluded from the Loss Reserve Development table as it provides no indication as to how claims have been reserved (initially) and the outcome upon settlement of such claims in future periods based on the underwriting and associated reserving methodologies adopted by AXA.
Reconciliation of Loss Reserves Developed to Consolidated Financial Statements The following table reconciles the gross insurance liabilities (that is, the gross claims reserves including claim expenses) in the Loss Development Tables presented above to that presented in the AXA’s consolidated financial statements in accordance with French GAAP as at the dates indicated.
January 1998 the Florida Attorney General and the Florida Department of Insurance issued subpoenas to
INTERNATIONAL INSURANCE The global reinsurance and large-risk corporate property & casualty market place has been significantly affected by exceptional major losses in 2001, in particular from the U.S. terrorist attacks on September 11, 2001. As a consequence, losses by reinsurance companies have been incurred causing them to accept less proportional reinsurance risks in order to improve their control of specific risk exposures. Consequently, the
business assets, including those related to discontinued businesses, as well as the majority of its investment securities portfolio. In addition, AXA has provided a guarantee to Deutsche Bank covering certain losses that may occur on potential non-performing loans issued by Banque Worms. AXA and Deutsche Bank are finalizing the pricing of this guarantee. In this regard, a provision of €125 million was recorded in 2000 and based on the present estimates, the provision remains adequate.
The after-tax cumulative effect of the changes in French GAAP accounting principles was recorded in consolidated shareholders’ equity at January 1, 2001 and represented a decrease of €593 million, or a decrease of 2%.
France (18.7%), Japan (12.3%, excluding the impact of the acquisition of Nippon Dantaï), Australia/New
(1) Pro forma New French GAAP as if New French GAAP had been applied since January 1, 2000. The pro forma financial information was not subject to audit. See “Changes in Accounting Principles” above for a description of principal differences.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net Income totaled €3,904 million in 2000, up 93.2% as compared to 1999, and included €1,643 million of exceptional operations as discussed above, see “Year ended December 31, 2001 compared to year ended
(1) 2000 share data restated to take account of the 4-for-1 stock split approved by the shareholders at the annual general meeting of the shareholders held on May 9, 2001.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 In 2001, the Life & Savings segment accounted for 65% of AXA’s consolidated gross revenues as compared to 58% in 2000, or a decrease of 1.6% on a comparable basis. The contribution of the Life & Savings segment to AXA’s consolidated adjusted earnings decreased by €177 million when compared to the 2000 pro forma adjusted earnings.
Excluding exceptional operations, the contribution by the Life & Savings Segment to AXA’s consolidated net income increased by €264 million, or 24.3%, and accounted for 60% of AXA’s consolidated net income. This contribution was primarily attributable to the life & savings operations in Spain, Italy and the Netherlands, where gross premiums increased significantly due to the success of separate account (unit linked) products. In addition,
The success of AXA’s equity-based investment structured products launched throughout 2001, which represented 9% of total gross written premiums in 2001 versus 3% in 2000, was offset by lower sales on standard unit-linked products.
Expenses net of DAC and VBI increased by €54 million in 2001 as compared to 2000, primarily attributable to information technology expenses associated with strategic initiatives and reengineering of French insurance processes of €50 million. This increase was partly offset by a €16 million decrease in commercial staff expenses. VBI amortization expense increased by €18 million mainly due to a rise in lapse rates recorded on an old generation portfolio.
(SPDA) sales mainly in the fourth quarter of 2001, AXA Financial launched this fixed annuity product in late
Investment margin2 decreased by €97 million in 2001 as compared to 2000, or a decrease of €115 million on a constant exchange rate basis. The decrease was mainly due to a lower level of investment income of €124 million, primarily attributable to lower investment yields on the fixed maturities portfolio in 2001 partially offset by the positive effects of lower crediting rates on life and annuity account balances. Realized capital gains and losses including valuation allowances were globally flat, as the increase in valuation allowances on impaired bonds (mainly charged on the High-Yield bond portfolio) was offset by higher realized gains mainly on bonds and real estate. The year 2001 included a valuation allowance on Enron bonds of €35 million pre-DAC and pre-tax (or €12 million post-DAC and post-tax).
(3) Excluding the one-off cost of €541 million (€211 million after tax and minority interests) of reinsuring the Disability Income portfolio, which would have been recorded as a charge in 2000 if new French GAAP had been applied, whereas it had no impact on U.S. GAAP (and therefore on old French GAAP).
Expenses increased by €82 million in 2001 as compared to 2000, or an increase of €36 million on a constant exchange rate basis. The increase in expenses was principally due to (i) an increased amortization of Information
The net technical margin mainly deriving from improved mortality in the life traditional products (€34 million), increased by €3 million to €39 million in 2001 as compared to 2000.
The 2000 amounts referred to below refer to the pro forma financial information, taking account of the new
• Commercial (29% of gross written premiums): Premiums were up 7% driven by non-motor lines (89%
Expenses increased by €29 million in 2001 as compared to 2000 on a comparable basis. The increase was mainly due to strategic projects in information technology, partly offset by the synergies from the merger with
The income tax benefit significantly increased by €196 million to €287 million in 2001 as compared to 2000 on a comparable basis. 2001 benefited from a €211 million release of deferred tax liability on equity securities, due to the German tax reform. In addition, there was a €64 million tax deduction resulting from the use of loss carry-forwards from Sicher Direct, merged with AXA Versicherung in 2001. In 2000 the German tax reform impacted the income tax benefit by €99 million, mainly due to the release of deferred tax liability in relation to the corporate tax rate decrease from 49% to 40%.
– On a comparable basis and excluding Direct Seguros, the adjusted earnings decreased by €5 million, as
Ireland. Gross written premiums increased by €68 million or 15% to €492 million in 2001 as compared to 2000. The increase resulted from a 13% increase in personal lines business (80% of gross written premiums)
(11) Income premium taxes have been reclassified from general expense to claims charges compared to last year published ratios.
ANALYSIS OF INVESTMENT RESULTS The following table summarizes the net investment results of AXA’s International Insurance operations for the principal categories of invested assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
(1) Gross of intercompany transactions. (2) Pro forma New French GAAP as if New French GAAP had been in force since January 1, 2000. (3) Reinsurance technical commissions have been posted in Insurance claims instead of Insurance acquisition expenses, in 2000.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Assets Under Management increased by €34 billion in 2001 to €517 billion at December 31, 2001, or an increase of €2 billion on a constant exchange rate basis.
In addition, adjusted earnings increased by €3 million due to an increase in AXA’s ownership interest in AXA
• AXA Bank Belgium’s adjusted earnings increased by €29 million to €76 million in 2001 as compared to 2000, mainly due to realized capital gains on the sale of fixed income securities of €33 million after tax.
AXA Client Solutions, AXA Financial Inc. and, to a lesser extent, AXA and one of the Belgian holdings recorded a significant realized gain on the sale of DLJ to Credit Suisse Group.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 In 2000, net income included the impact of exceptional operations for €1,068 million, which were the result of the realized capital gains on the sale of DLJ, net of losses on Credit Suisse Group shares received in connection with the transaction. This gain was recorded by AXA (the Company) for €8 million, by AXA
• An increase of nearly €1.5 billion attributable to AXA Bank Belgium.
DIVIDENDS RECEIVED Dividends paid to the Company from its affiliates were approximately € 1,882 million (2000: €1,520 million and 1999: €1,438 million), of which approximately € 410 million were in currencies other than the euro
AXA anticipates that cash dividends received from operating subsidiaries will continue to cover its operating expenses including planned capital investment in existing operations, interest payments on its outstanding debt and borrowings, and dividend payments during each of the next three years. AXA expects that anticipated investments in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash flows remaining after payments of dividends, debt service and operating expenses, proceeds from the sale of non-strategic assets and businesses and future issues of debt and equity securities.
For information on regulatory requirements see “Item 4 – Information on the Company – Additional Factors which may affect AXA – Regulation”. For information on AXA’s risk management in connection with market risk, see “Item 11 – Quantitative and Qualitative Disclosures About Market Risk”.
December 2000 to partly finance the buyout of minority interests in AXA Financial.
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YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 The French GAAP to U.S. GAAP adjustments were primarily attributable to the following items: The 2001 consolidated net income in accordance with U.S. GAAP totaled €1,484 million and was higher than
AXA’s consolidated net income in accordance with French GAAP by €964 million. This favorable impact was primarily attributable to €2,667 million being included in the consolidated net income under U.S. GAAP as a result of the plan of financial reorganization of AXA Equity & Law undertaken in 2001 and the transition rules of Statement of Financial Accounting Standards (“FAS”) No. 133, as amended “Accounting for Derivative
(ii) Deferred Acquisition Costs (DAC) : capitalization of acquisition expenses linked to new business, net of the corresponding Unearned Revenue Reserve (URR).
(3) amortization of Value of purchased life Business In-force (VBI) ; they include capitalization and amortization of software expenses,
– operating margin is the sum of (i) Investment margin, (ii) Fees and revenues, and (iii) net technical margin (items as defined above in the Margin Analysis above).
AXA Corporate Solutions consolidated shareholders’ equity) ; the Net “Ultimate” Cost is the result of the claim cost (net of reinsurance) minus the reinstatement premiums (net of reinsurance).
In order to align the personal interests of Supervisory Board members with those of the Group, each
Chairman of the Supervisory Board of Bank Sal. Oppenheim Jr. & Cie KgaA (Germany) and Chairman of the Board of Bank SAL Oppenheim Jr & Cie (Schweiz) AG (Switzerland)
In January 1997, when AXA adopted its current structure consisting of a Supervisory Board and a Management
• The Committee alerts the management of AXA and, if it deems necessary, the annual general meeting of shareholders on any subject that may have an impact on AXA’s consolidated financial position.
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(excluding expatriation allowances payable in 2002)(column b); director’s fees paid in 2001 (column c); and benefits in kind for the year 2001 (column d); and
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For more information on double voting rights, see “Item 10 – Additional Information – Certain rights of 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 19, 2002, the Mutuelles AXA, acting as a group, owned, directly and indirectly through intermediate holding companies (including FINAXA), approximately 20.6% of the Company’s outstanding ordinary shares representing approximately 33.2% of the total voting power.
have also established a strategy committee (comité de coordination stratégique) composed of nine members appointed by the boards of directors of the Mutuelles AXA. The strategy committee elects a chairman from among its members who, at present, is Claude Bébéar, who is also Chairman of the Company’s Supervisory
Most of the costs and expenses of operating the life & savings business and the property & casualty business in the Company’s French insurance subsidiaries (other than commissions) are shared by these subsidiaries and the Mutuelles AXA and allocated among them through Groupements d’Intérêt Economique or GIEs. GIEs are partnerships that perform various common services for their members and allocate associated costs and expenses. These costs and expenses currently are allocated on the basis of actual use of the specific service, to the extent practicable. The manner of managing these insurance businesses or allocating these costs and expenses may change in the future.
meetings of the Company or any company controlling such shareholder. In addition, any agreement as described above is subject to the prior approval of the Supervisory Board if it is not entered into on an arm’s length basis and in the ordinary course of business as defined by French company law. Any such agreement may be declared void if it is not submitted to the Supervisory Board for approval and is proven to be detrimental to the Company. Additionally, the Company’s statutory auditors must be made aware of any such agreement within one month of its execution and must submit a report to shareholders, who then must approve the agreement at their next meeting. If the agreement is not approved by the shareholders, it will remain enforceable by third parties against the Company, but the Company may hold the interested member of the
CHANGES IN SHARE CAPITAL Pursuant to the statuts of AXA and French law, the share capital of AXA may be increased only with the approval of two thirds of the shareholders at an extraordinary general meeting following a recommendation of the Management Board and after a prior authorization of the Supervisory Board. Increases in AXA’s share capital may be effected by the issuance of additional ordinary shares which may be effected: • for cash,
Upon proposal by AXA’s Management Board and subject to prior approval by the Supervisory Board, the shareholders of AXA may decide to allocate all or part of distributable profits to special or general reserves, to carry them forward to the next fiscal year as retained earnings, or to allocate them to the shareholders as dividends. The Management Board may propose a dividend for approval by the shareholders at the annual general meeting of shareholders. If AXA has earned distributable income since the end of the previous fiscal year, as reflected in an interim income statement certified by its auditors, the Management Board may distribute, subject to French company law and regulations, interim dividends to the extent of the distributable income without shareholders approval.
Registered ordinary shares must be converted into bearer shares before being traded on the Paris Bourse and, accordingly, must be registered in an account maintained by an accredited intermediary. A shareholder may initiate a transfer by giving instructions to the relevant accredited intermediary. For dealings on the Paris
Bourse, a tax assessed on the price at which the securities were traded, or impôt sur les opérations de bourse, is payable at the rate of 0.3% on transactions of up to 153,000 euros and at a rate of 0.15% on transactions e • Items 8-17 (V5) 1/07/02 11:41 Page 160 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Any shareholder, including any holder of AXA ADRs representing the AXA ADSs, whose holding falls below any of these thresholds must also notify AXA.
CMF makes the notice public and the person or persons who have acquired the voting rights must publish a press release in a financial newspaper having national circulation in France. Upon any change of intention, the acquirer must file a new report.
AXA’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the ADS was changed from one ADS representing onehalf of an ordinary share to one ADS representing one ordinary share. In this description, we refer to the deposited AXA ordinary shares as of any time, together with all other securities, cash and property received by the depositary or the custodian in respect of these securities and at such time held under the deposit agreement, as the “Deposited Securities”. Only persons in whose names ADRs are registered on the books of the depositary will be treated by the depositary and AXA as ADR holders.
The rights of holders and beneficial owners of ADRs are subject to the same disclosure requirements regarding acquisition and ownership of AXA ordinary shares that are applicable to holders and beneficial owners of AXA
ordinary shares upon the receipt and cancellation of ADRs which have been pre-released. The depositary may receive ADRs in lieu of AXA ordinary shares in satisfaction of a pre-release. Each such pre-release or delivery of AXA ordinary shares must be: • subject to a written representation from the person to whom ADRs or AXA ordinary shares are to be delivered that such person or its customer: – at the time of the relevant transaction, owns the AXA ordinary shares or ADRs to be remitted, as the case may be,
Neither the depositary nor the custodian will accept for deposit any AXA ordinary shares: e • Items 8-17 (V5) 1/07/02 11:41 Page 164 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
• A voting instruction card prepared by the depositary and AXA setting forth the date established by the depositary for the receipt of the voting instruction card.
APPRAISAL RIGHTS French company law does not provide an appraisal procedure allowing dissenting shareholders to have their shares appraised in the context of a merger or consolidation. However, French law provides that, in certain circumstances, including mergers, spin-offs, asset contributions or squeeze-outs, an independent expert must pass upon the fairness of the consideration being offered.
The statuts of AXA provide that the Management Board or the Supervisory Board may call meetings of shareholders but, if the Management Board or the Supervisory Board fail to call a required meeting or refuse to call any meeting, AXA’s statutory auditors or, under specified circumstances, an agent appointed by a court may call such meetings. One or more shareholders together holding 5% of the issued Shares, or a duly qualified association of shareholders holding their Shares in registered form for at least two years and together holding 1% of AXA’s voting power, or any interested party in the case of an emergency, may request the court to appoint such agent. French law would also permit new majority shareholders to call a general meeting to consider certain matters in the event they were to acquire of control of AXA.
ANTI-TAKEOVER STATUTES There are no French anti-takeover statutes similar to the anti-takeover statutes enacted by certain states in the
In addition, the stock market regulations of the CMF require any person or persons acting in concert acquiring one third or more of the share capital or voting rights of AXA to initiate a public tender offer for the balance of its share capital. The tender offer must also cover all securities issued by AXA that are convertible into or exchangeable for equity securities. For provisions of French company law and AXA’s statuts imposing notification and disclosure requirements on holders whose AXA shareholding exceeds specified thresholds see
RIGHTS OF INSPECTION French company law provides that any shareholders may inspect the company’s stock ledger, financial statements, resolutions proposed at general meetings, minutes of general meetings, the list of the members of the Management and Supervisory Boards and shareholders, the reports of the Management and
AXA Merger Corp. and AXA Financial, Inc., filed as an exhibit to the Company’s Registration Statement on
• Persons holding AXA ordinary shares or ADRs representing ADSs as part of a hedging, straddle, conversion or other integrated transaction,
However, it should be highlighted that since a directive (instruction) dated December 14, 2001 from the
• partnership or a trust (other than a pension trust, a real estate investment trust or a real estate mortgage investment conduit) in its capacity as an Eligible U.S. Holder is entitled to the avoir fiscal only to the extent that its partners, beneficiaries or grantors, as applicable, are themselves Eligible U.S. Holders (other than a regulated investment company) and are themselves subject to U.S. Federal income tax on their respective shares of both the dividend and the avoir fiscal,
If an Eligible U.S. Holder sells AXA ordinary shares in a trade executed on the monthly settlement market during a month during which a dividend payment date with respect to the AXA ordinary shares occurs, generally the seller, rather than the purchaser, will be entitled to the avoir fiscal with respect to the dividend paid on that dividend payment date.
The Application for Refund and instructions for its completion are available from the U.S. Internal Revenue
The commentary below describes the impact of market risk exposures on AXA’s consolidated financial position and consolidated operating results under French GAAP.
Foreign Exchange Rate Risk. The potential exposure to a 10% adverse fluctuation of December 31, 2001 and 2000 foreign currency exchange rates would be an estimated French GAAP earnings loss exposure of €11 million and €240 million, respectively. In order to calculate the largest potential exposure to foreign currency fluctuations, all material combinations of foreign currency fluctuations were analyzed. The analyses revealed the most adverse scenario for AXA in terms of French GAAP earnings would be a decline in all currencies relative to the Euro.
Accounting principles generally accepted in France vary in certain material respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended December 31, 2001 and determination of consolidated shareholders’ equity and consolidated financial position at December 31, 2001 and 2000 to the extent summarized in notes 33 and 34 to the consolidated financial statements.
Change in goodwill arising from Royale Belge acquisition – – – 52 – 52 Impact of foreign currency fluctuations – – – 954 – 954 Change in goodwill arising from UAP acquisition2 – – – 88 – 88 Effect of restructurings – – – 7 – 7 Transition allowance – – – 8 – 8 Net income – – – – 2,021 2,021
– Exchanged in the buyout of minority interests in AXA Financial, Inc. 83.6 191 2,940 – – 3,131 Exercise of stock options and conversion of bonds 2.8 7 27 – – 34 Cash dividend – – – (713) – (713) Impact of foreign currency fluctuations – – – (296) – (296) Goodwill from buyout of minority interests in AXA Financial, Inc. – – – (2,518) – (2,518) Effect of restructurings – – – 8 – 8 Net income – – – – 3,904 3,904
(6) Non-cash transactions in 2001 included: (i) conversion of the 4.5% mandatorily convertible bonds into ordinary shares at maturity in January 2001 of Euro 320 million, (ii) the merger of Lor Finance and Financiére 45 (existing wholly-owned subsidiaries) with and into AXA (the Company) of Euro 2,198 million, and (iii) ordinary shares exchanged in connection with AXA’s buyout of minority interests in AXA Financial following the completion of the squeeze out merger of AXA Merger Corp. (a wholly-owned subsidiary of AXA created to effectuate the transaction) with and into AXA Financial on January 2, 2001 of Euro 737 million.
BALANCE SHEET • The investments and debtors are presented by nature of activity.
– Intercompany transactions: Effective prospectively from January 1, 2001, realized capital gains and losses on intercompany transactions involving the sale of assets between AXA group companies, including insurance and reinsurance companies, are eliminated in consolidation unless there is an other-than-temporary realized loss, which is recorded immediately with a contra adjustment to policyholder participation, if necessary.
– Pension Plans: AXA has opted to apply the preferred method introduced by the new French Regulations, which allows the costs associated with pension plans and post-retirement benefits to be provided for and recorded in the operating results over the term of employment. In this context, commitments for benefits accruing from periods of long service to the company (or other similar benefits) can also be recognized as a liability.
participating (with-profit) fund and related surplus assets referred to as the “inherited estate”, AXA changed its accounting for UK “with-profit” contracts. The UK “with-profit” contracts are participating life insurance contracts that provide for the sharing of investment performance and other company experience with policyholders. The excess of assets over liabilities (including the unrealized investment gains and losses) in the participating long-term business fund are maintained within a Fund for Future Appropriations (“FFA”). The FFA
Pensions and other post-retirement benefits AXA provides and administers pension plans and other post-retirement related benefits to its employees worldwide. AXA applies the preferred method introduced by the new French Regulations, which allows the costs associated with the pension plans to be provided for and recorded in the operating results over the term of employment. The pension cost and the related provision is determined based on actuarial valuation methods and estimates, which give a substantially even charge over the expected service lives of employees on a going concern basis. The pension cost for AXA (the Company) and its subsidiaries is included in insurance liabilities when the pension plan is covered by insurance contracts written by AXA and the employees benefit directly from AXA, as the insurer.
For all share options granted by the Company or any other AXA entity that provide a guarantee for liquidity, a liability (corresponding to the difference between the market value of the shares and the exercise price)
– In October 2000, Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, a U.S.-based asset management company.
December 31, 2000, with no impact on scope of consolidation in 2001.
United Kingdom Guardian Royal Exchange Plc 100.00 99.99 100.00 99.99 AXA UK Holdings Limited 100.00 100.00 100.00 100.00
Financial Services f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-23 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
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Companie UAP (1997) In 1997 AXA acquired Companie UAP (“UAP”) and €1,863 million represented the excess purchase price over the net identifiable assets acquired. In accordance with French GAAP, a portion of the goodwill in proportion to the value of ordinary shares issued to total purchase price can be charged directly to retained earnings and reserves. Consequently, €1,641 million of the excess purchase price was charged directly to retained earnings and reserves. As a result of purchase accounting adjustments made in 1998 and in 19991, the excess purchase price increased to €1,866 million at December 31, 1999, of which €1,584 million represented the amount charged directly to retained earnings and reserves.
Goodwill charged directly to retained earnings and reserves At December 31, 2001, goodwill (net of notional amortization) recorded in retained earnings and reserves totaled €4,038 million, or a gross goodwill amount of €4,439 million (2000: €4,194 million net and 1999: €1,740 million net). The notional amortization in 2001 was €156 million and included €11 million for the 1998 Royale Belge acquisition, €53 million for the 1997 UAP acquisition and €92 million for the AXA Financial buyout of minority interests in 2000.
Total by contract type: – Life contracts (including endowment) Gross 2,672 Net 2,132
In other cases, the fair value is estimated based on financial and other information available in the market, including reference to quoted prices for similar securities, or estimated discounted cash flows, including an element of premium risk.
Equity securities and holdings in mutual funds 66,076 65,773 73,310 1,652 1,599 1,685
Invested assets excluding investments in participating interests 243,009 240,128 253,367 9,437 9,033 9,289
Held to maturity and available for sale 139,639 143,288 5,464 (1,206) Allocated to UK with-profits business trading 10,859 Other trading securities 1,922
is presented in the table below. Fixed maturities not due at a single maturity date have been included in the table below in the year of final maturity. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
8 - Investments in Affiliated Companies (Equity Method) Companies that were accounted for by using the equity method are presented in note 3, along with AXA’s ownership interest percentage. An analysis of net carrying value and contribution to net income is given below.
12-Shareholders’ Equity As part of the Plan of Financial Reorganization undertaken by AXA Equity & Law (United Kingdom) in 2001, as discussed in note 4 “Business Combinations”, a portion of the Inherited Estate, after the allocation of a £250 million (€397 million) reorganization bonus, was attributed to AXA and totaled £777 million (€1,235 million).
(€1,718 million), and to a lesser extent relating to the buyout of minority interests in AXA China Region and
(5) National Mutual Life Association of Australasia repaid its subordinated debt facility in September 2001 of A$283 million (euro174 million based on 2000 year-end exchange rates). This debt was replaced by a subordinated loan from AXA (the Company) for the same amount.
Less reinsurance ceded on: – Claim reserves and others reserves 397 407 2,775 2,593 4,243 2,440 7,415 5,439
– UK with-profit business liabilities 35,041 25,111 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-43 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
employees and, at Equitable Life, certain life insurance agents. The specific features of these plans vary in accordance with the regulations of the country in which employees are located, and are primarily based on years of service and salary (that is, defined benefit plans).
Item 10 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-47 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
(3) In July 2000, AXA Financial, Inc. issued U.S.$480.0 million 7.75% Senior Notes due 2010. Substantially all of the net proceeds of U.S.$472.7 million were used to repay a portion of the promissory notes from which the proceeds were used to purchase new Alliance Units in connection with the Bernstein acquisition.
Compagnie Financière de Paris: Variable rate due through 2003 – 108
(2) Includes realized investment gains and losses and unrealized investment gains and losses on assets accounted for as trading, including assets supporting the UK with-profit business of euro (3,042) million.
In addition, the net investment result for the Life & Savings Segment included a realized loss and investment valuation allowance related to the high-yield bond portfolio in the U.S. operations. As a result of broad weaknesses in the credit market from a slowing economy during third and fourth quarter 2000, a loss of €604 million was recorded (€236 million net group share and net of the impact on deferred acquisition costs).
Savings Contracts or increases in balances for existing French Savings Contracts; such shares can also be held for investment, be sold or be redeemed at fair value by the issuing fund. Fair value of fund shares is determined annually or more frequently for real estate funds and daily for mutual funds.
Including: (1) Represents total acquisition expenses as presented in the statement of income including amortization expense for value of purchased life business in-force (VBI) and the change in deferred acquisition costs (DAC), which is net of changes in unearned premium reserves.
(1) The employees of entities proportionately consolidated are included using the percentage of proportionate ownership.
At December 31, 2001 At December 31, 2000 Net Deferred Net Deferred Net Deferred Net Deferred
based on quoted market prices, if available, estimated discounted cash flows, or quoted market prices of comparable instruments. 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.
In respect of short term and long term debt, (i) the carrying amount of short-term borrowings approximates its fair value, and (ii) the fair value of long-term debt is determined using published market values, where available, or contractual cash flows discounted at market interest rates reflecting the credit worthiness of the Company or subsidiary issuing the debt. The estimated fair values of financial instruments for which carrying value differs from estimated fair value are as follows: Item 1
F-64 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-64 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Commitments to finance and Guarantees: From time to time, AXA has provided certain commitments to finance and guarantees to affiliates, investors, banks and others. At December 31, 2001, these commitments include additional capital contributions to be made in respect of real estate joint ventures and private equity funds. In addition and in the normal course of its banking operations, conducted primarily through AXA
Foundation Initiative. In France, AXA is actively cooperating with the Matteoli Commission, a governmental commission investigating Holocaust era issues, and AXA’s French subsidiaries have contributed €3.5 million
Combinations” in the consolidated financial statements included in Item 18 of in this annual report.
ownership interest in FINAXA. This minimum number of shares is subject to adjustment for certain events such as splits and consolidations. Additionally, the BNP Agreement grants both BNP Paribas and the
Amendments to Loan Agreements dated 10 October 1999 and 27 September 2000 (modified 17 July 2001) between the Company, as lender, and Asia Pacific Holdings Limited and AXA Asia Pacific Finance Ltd, as borrowers
Guaranty of obligations of AXA China Region Ltd by AXA Asia
In addition to the foregoing transactions to which the Company is party, there are various on-going business relationships and transactions between various subsidiaries of the Company which include the following: Investment Management. The AXA Group has two principal asset management subsidiaries, Alliance Capital
insurers to arrange reinsurance cover with suitable third-party reinsurers. Total premiums ceded by AXA Group insurers through AXA Cessions were approximately €480 million for the year ended December 31, 2001 (2000: €376 million and 1999: €289 million) and total claims reserves with respect to this ceded reinsurance were approximately €1, 235 million at f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-73 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Total Other Financial Services 1,128 11,760 10,806 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-80 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Gross premiums and financial services revenues 37,105 13,671 3,141 2,138 10,830 1 (358) 66,528
Life Business In Force (VBI)” relating to the amortization of VBI. Information on the net investment results by segment is presented in note 20 “Net Investment Result”.
Net investment result included in technical result1 7,454 – 7,454 12,325 10,594
Life & Savings Segment f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-84 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Minority interests’ share in net income for the financial year 2,124 –
Regulations that became effective from January 1, 2001 (as discussed in note 2), and (ii) certain new accounting principles under U.S. GAAP that became effective from January 1, 2001. The significant differences in accounting principles between French GAAP and U.S. GAAP along with the significant changes in 2001 are summarized below.
257 million (or approximately €273 million at transition date) of Held-to-Maturity securities as Available-for-Sale securities, resulting in an after-tax cumulative-effect-type adjustment of US$ 9 million in Other Comprehensive
securitizations, servicing of receivables, secured borrowings and collateral transactions. FAS 140 emphasizes the legal form of the transfer rather than the previous accounting that was based upon the risks and rewards of ownership. Under FAS 140, qualifying special purpose vehicles (“SPE”) are not consolidated by the transferor. FAS 140 became effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001 with certain exceptions. During 2001, AXA did not have any significant transactions that were impacted by the adoption of FAS 140.
the after-tax gain (group share) of €326 million was recorded in shareholders’ equity.
French GAAP to U.S. GAAP in respect of 2000 and 1999.
(2) Total revenues attributable to the discontinued DLJ operations were euro 9,768 million under both French GAAP and US GAAP. (3) Financial data restated in accordance with the new French Regulations adopted on January 1, 2001.
(1) US GAAP, except for adjustment for the increase in net unrealized investment gains and losses on assets allocated to UK with-profit contracts.
SUPPLEMENTAL SEGMENT ANALYSIS FOR 2001 AND 2000 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-110 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Interest on assumed conversion of convertible bonds6 – 9 19 – 9 19
The change in estimated fair value of derivative instruments not in qualifying U.S. GAAP hedging activities included in the 2001 U.S. GAAP consolidated net income was a loss of €93 million, included under the caption “Net investment result”.
Net Deferred Tax Asset Net Deferred Tax Liability (in euro millions) French GAAP Adjusted1 U.S. GAAP French GAAP Adjusted1 U.S. GAAP
AXA’s business combinations and investments under the equity method (referred to collectively in this section as “business combinations”) completed on or after July 1, 2001. For all business combinations completed by
FAS 144 supersedes FAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Directoire et Conseil de Surveillance for 1999 have been represented to conform to those financial statements published in France, except for certain formatting differences. In France, parent company financial statements are prepared using a French statutory basis of accounting, which uses the cost method of accounting for investments.
Item 19 The following is a list of the exhibits filed with this annual report or incorporated herein by reference: 1. By-laws of the Company (filed herewith).
New York and all owners from time to time of American Depositary Receipts issued thereunder, filed as Exhibit 3A to the Registration Statement on Form F-6 filed on April 18, 2001 (commission file no. 333-13376) and incorporated herein by reference.
November 21, 2000 (registration no. 333-50438) and incorporated herein by reference.
2. Amended and Restated Deposit Agreement, dated as of April 27, 2001, among AXA, The Bank of New York and all owners from time to time of American Depositary Receipts issued thereunder, filed as Exhibit 3A to the Registration Statement on Form F-6 filed on April 18, 2001 (commission file no 333-13376) and incorporated herein by reference.