n Insurance AXA Financial Services Pte 53% 100% Ltd Singapore Holding Cy (p)
In 2005, the Supervisory Board met 7 times, of which one meeting was an entire day devoted to examination of the Group strategy, and the overall attendance rate was 88%.
At the Company’s Annual General Meeting on April 20, 2005, the shareholders re-elected for four years Anthony Hamilton, Henri Lachmann and Michel Pébereau.
Claude Bébéar Chairman of Director or member of the Supervisory Board AXA June 1988 / (70) the Supervisory Board of AXA Financial (United States), BNP Paribas, Vivendi Universal 5, avenue Matignon 2 May 2008 and Mutuelles AXA; Non-voting member of the board 75008 Paris of Schneider Electric
BNP Paribas UK (United Kingdom) and Banque Marocaine 75002 Paris pour le Commerce et l’Industrie (BMCI); Non-voting member of the board of Galeries Lafayette
Jacques Tabourot Member of AXA April 2004 / (60) the Supervisory Board, 25, avenue Matignon April 2008 representing the 75008 Paris employee-shareholders
Senior Advisor Lazard Frères Senior Advisor Lazard Frères Senior Advisor Lazard Frères Senior Advisor Lazard Frères Managing partner of DD Finance Managing partner of DD Finance Chairman of Parande Développement Chairman of Parande Développement Chairman of the Supervisory Board Chairman of Montech Expansion (US) (Groupe Euris) (Groupe Euris) of Club Méditerranée Director of Club Méditerranée, Casino, Director of Lazard Frères Banque, Director of Société Immobilière Director of Casino, Fimalac Rue Impériale, Fimalac Club Méditerrannée, Casino, Rue Impériale Marseillaise, Lazard Frères Banque, Non-voting member of the Board Non-voting member of the Board Non-voting member of the Board Club Méditerrannée, Casino of Groupe Go Sport, Lazard Frère Banque, of Groupe Go Sport, Lazard Frère Banque of Groupe Go Sport EURAZEO
Henri Lachmann May 1996 April 2009 Chairman and CEO of Schneider Electric Chairman and CEO of Schneider Electric Chairman and CEO of Schneider Electric Chairman and CEO of Schneider Electric Chairman and CEO of Schneider Electric Chairman and CEO of Schneider Electric Chairman of the Board of Directors of Director or member of the Supervisory Vice-Chairman of Director or member of the Supervisory Director or member of the Supervisory
Anthony Hamilton 1968 – 1978: Worked in London and New York for the investment bankers Schroders, Morgan Grenfell, and Wainright. 1978: Joined Fox-Pitt, Kelton – CEO 1994 – 2003. 1993: Non-executive Director of AXA Equity and Law, (Chairman, 1995). 1997: Non-executive Director of AXA UK. 1999 – 2003: Product Unit Head of Swiss Re. End of 2004: Resignation as a Director of Fox-Pitt, Kelton Group Ltd (UK) and of Fox-Pitt, Kelton Limited (UK). Since September 2000: Chairman of AXA UK plc.
The Audit Committee met 7 times in 2005. The overall attendance rate was 75%.
– To control the appointment of the Company’s independent auditors, and review audit programs,
1991 – 1992: Corporate Sales Manager of Ford Switzerland. 1992 – 1993: Corporate Sales Manager of Ford France. 1993 – 1996: Chairman and Chief Executive Officer of Ford Belgium. 1996 – 2001: Chairman and Chief Executive Officer of Ford France. April 2001: Joined the AXA Group as a Member of the Executive Committee.
Since February 2002: Member of the AXA Management Board, in charge of Transversal Operations, Communication & Human Resources.
Claude Brunet Member of the Management Board in charge of Transversal Operations and Projects, Human Resources, Communication and Brand
Philippe Donnet (a) Chief Executive Officer of AXA Japan (Japan), President of the Board of Directors of AXA RE
Monitoring of financial commitments Financial commitments are monitored as part of the consolidation process, under which each subsidiary transmits information to the PBRC.
The DCFG is organized in such a way as to separate the responsibilities of the team in charge of initiating derivatives transactions from those of the team responsible for monitoring related risks. Derivative transactions are valued on a daily basis by the Company. At the end of each half year period, valuations are double-checked by an external banking institution for each and every single transaction.
Whenever a hedging strategy is implemented, the DCFG comes up, if needed, with the necessary documentation and efficiency testing for the hedging instruments’ bookkeeping.
Up until 2004, the AXA Group Consolidation Guidelines were based on French accounting standards. They have been replaced in 2005 with new Group Consolidation Guidelines that are compliant with IFRS standards. Previously, as part of the IFRS conversion effort, a Group Accounting Standards Guide had been prepared, reviewed by the independent auditors and disseminated to subsidiaries prior to completion of the first steps in the consolidation process for fiscal 2004, as a prerequisite to the transition in 2005 toward the new standard.
•notes to the consolidated financial statements, •all additional information to the notes and published in the Group’s interim and annual report, – the analysis of results, shareholders’ equity and the main balance sheet items, – the activity and management report.
The PBRC Department has spearheaded the Group’s conversion to IFRS standards, which included defining processes for applying accounting principles and completing consolidation work. It worked closely with the outside auditors on this project. In addition, the PBRC Department has also coordinated various governance structures set up at Group level in connection with this project. The conversion project and its status were described in the section entitled “Other information of a financial nature” of the AXA’s Annual Report 2004.
On December 31, 2005, 4,802 AXA employees outside the United States1 and 6,091 employees in the United States had been granted stock options.
March 26, 2004 having already been performance tested in 2004, the units that had been actually granted for the performance period 2004, i.e. 140,617 units have been cancelled and replaced by 140,617 free shares granted on April 21, 2005, without further performance conditions (restricted shares).
Shares Initial Shares Shares Shares Shares at 31/12/05 Number Date Initially Grant at stake Actually at stake Actually of shares Granted Date Granted Granted
A total of 16,252,190 new ordinary shares were issued, each with a par value of 2.29 euros. These shares began earning dividends on January 1st, 2005.
Jan. 16, Exercise of stock options 2,021,262 18,942,856 1,871,216,902 4,285,086,706 2006 Exercise of stock subscription warrants 4,780 64,773 1,871,221,682 4,285,097,652
Market value of the portfolio as of February 28, 2006 €300,597,824
To the best of the Management Board’s knowledge, no other shareholders owns more than 5% of the share capital. The Company has agreed to disclose any ownership in excess of 2% of its outstanding share capital known to it. Following the merger of Finaxa into AXA, BNP Paribas has crossed this 2% threshold and held, as of December 31, 2005, 3.6% of AXA’s share capital.
Of the 1,871,968,338 shares composing the share capital, 311,355,031 shares entitled their holders to double voting rights as at February 28, 2006.
Extract of the minutes of the Management Board of January 16, 2006 regarding the increase of the share capital (February 9, 2006)
November 10 to November 17, 2005 January 9 to January 13, 2006
November 18 to November 25, 2005 January 16 to January 20, 2006
Forms 6-K for December 2005: Press Release issued on December 12, 2005 by AXA, announcing that AXA enhances its embedded value disclosure by adopting European embedded value principles
Annualized Premiums Equivalent Group Share (a) 5,476 4,807 New Business Value (b) 1,138 895 Underlying earnings (c)
NET INCOME 4,173 3,738 (a) Annual Premium Equivalent (APE): Measure of new business volume. Represents 100% of regular premiums + 10% of single premiums, in line with EEV methodology. APE is group share calculation. (b) New Business Value: (NBV) The value of new business issued during the current year consists of the Value In Force of new business at the end of the year plus the statutory profit result of the business during the year. (c) Underlying earnings correspond to adjusted earnings excluding net realized capital gains attributable to shareholders. (d) Adjusted earnings represent the net income (Group share) before : (i) The impact of exceptional operations (primarily change in scope, including restructuring costs related to a newly acquired company during the considered accounting period).
The split by distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross written premiums from new business for the year ended December 31, 2005 and 2004, is presented below:
AXA RE and AXA Corporate Solutions Assurance distribute their products principally through insurance and reinsurance brokers.
AXA Assistance works mainly as a B to B company although it can resort to direct sales /marketing. In countries where AXA offers Property & Casualty insurance products such as France, Italy or Spain, AXA distribution networks offer assistance services in their insurance products.
Premiums retroceded by AXA RE to external reinsurers in 2005 are split between (i) ceded €26 million premiums related to specific and proportional retrocessions (deemed to protect specific lines of business ), and (ii) ceded €276 million related to covers (deemed to cover the whole portfolio against major events).
The table below sets forth the total assets managed by the companies comprising AXA’s Asset Management segment, including assets managed on behalf of third parties, and the fees earned by such companies on these assets as at the dates and for the periods indicated.
AXA Investment Managers (« AXA IM ») AXA IM is a key player in international Asset Management business. AXA IM provides its clients with a wide range of global products and expertises via mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom products are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for Main Fund and Unit-Linked.
Insurance cash flows are generally positive and can be slightly negative in the case of exceptional events. A portion of the assets is invested in liquid, short-term bonds and other listed securities in order to avoid additional liquidity risk that may arise from such events. In the event of large catastrophic or other losses, AXA’s Property & Casualty operations would be able to liquidate a certain amount of their investment portfolios.
On a consolidated basis, subordinated debt (including derivative instruments impact) totalled €7,752 million after taking into account all intra-group eliminations, down from €8,089 million at December 31, 2004.
Partly offset by, – the issue of €150 million of commercial paper by the Company on behalf of the Group’s French, UK and German subsidiaries; – reduced mark-to-market of derivatives hedging instruments, following foreign exchange rates changes (€+55 million).
For AXA and its shareholders, this transaction simpli f ied the Group’s ownership structure, enhanced the stock’s standing in the market and increased the free float. It also made AXA the direct owner of the AXA brand, which has been owned until now by FINAXA. For FINAXA shareholders, the transaction increased the liquidity of the shares they own and removed the discount at which their shares had traded.
In accordance with the practical methods of calculation implemented by AXA by reference to these texts, the adjusted solvency ratio was an estimated 216% at December 31, 2005, compared to 202% at December 31, 2004 on the basis of Solvency I rules, which were effective as of January 1, 2004 and taking into account a portion of future profits generated by in-force life insurance contracts as allowed by the 2002.12 Directive dated March 5, 2002.
– Implementing pre-launch product approval procedures, and in particular reviewing risk-adjusted profitability analyses (see section “Pre-launch product approval and exposure monitoring”).
One of the basic functions of the insurance business is to invest premiums received from customers with a view to settling any losses that might occur. The way these premiums are invested must take into account the way in which any losses will be settled. This is the role of asset-liability management. In an effort to protect and enhance shareholder value, AXA actively manages its exposure to market risks.
– Exposure to foreign-exchange risk is generally limited for the Group’s life insurance companies. Foreign-currency commitments are matched to a large extent by assets in the same currency.
• Hedging programmes that make use of derivatives may be set up to hedge the risk of a fall (floor) or a rise (cap) in interest rates.
MANAGEMENT: Liquidity risk is managed carefully and conservatively by keeping a long maturity on debts – mostly subordinated – and by maintaining a large amount of committed credit facilities (around €6 billion undrawn at December 30, 2005).
– In addition, to deal with any liquidity crises that may arise, the back-up plan to tender eligible assets to European Central Bank tenders would allow around €20 billion to be mobilised, creating a very large alternative source of refinancing.
Value (EEV) in the Life & Savings business, as described in the “Other financial information” chapter of this document.
As a result, the sensitivity of AXA’s income to movements in the euro is limited and stable over time. This results from the quality of hedging on the US dollar, which is the main contributor to group income after the euro.
To manage the risk of reinsurer insolvency, a security committee is in charge of assessing reinsurer quality and acceptable commitments. The committee is under
Responsibility for managing day-to-day operational risks lies mainly with subsidiaries, which are best positioned to take the appropriate measures to mitigate the risks facing their organizations. However, for some risks, AXA defines standard rules for identifying and monitoring operational risks.
laundering. In its January 16, 2006 ruling, the court of arbitration stated that the AXA Group should have disclosed certain information to Nationwide as part of the PanEurolife sale process. As a result, it ordered AXA to pay Nationwide damages of €20.5 million and around €16 million to cover Nationwide’s legal costs. These amounts have been provisioned in the financial statements.
All coverage is systematically controlled by AXA Cessions and local entities.
Australia / New Zealand. The savings related investment sector continued to be a growth area in Australia for 2005. Strong local investment returns have translated into high net flows in the mutual fund and advice market. The pension market experienced funds growth of 20.8%1 over the year, driven by the strong investment market and the mandatory pension scheme in Australia. Continued government support for self-funded retirement has driven two major changes in pension funds during 2005 – the abolition of the surcharge (a tax on contributions) from June 30, 2005 and the allowance of spouse cocontributions from January 1, 2006. The risk insurance market continued to record strong growth, climbing a further 11.9%2 over the year.
Belgium. The Belgian Property & Casualty market should have grown by 4% in 2005. The motor market which represents 34% of total Property & Casualty should have grown by 2.3% while household premiums should have risen by 3.9%. The Workers’ compensation market should show an acceleration of its growth in 2005 to 3.2% (vs 0.7%
Financing operations On January 25, 2005, AXA issued, under its €8 billion Euro Medium Term Notes program, €250 million of undated deeply subordinated notes (“Titres Super Subordonnés”), allowing the Group to improve financial resources quality and to strengthen its financial structure.
France new business increased by 13% with a strong acceleration in the fourth quarter of 2005: Individual
Southern Europe new business increased by 12%, mainly driven by traditional savings’ new business in the agent network in Italy as well as some significant corporate contracts, partly offset by lower unit-linked business as 2H04 was particularly strong, benefiting from the launch of some significant bancassurance agreements. Activity in individual Life products (including the launch of new products) remained strong.
Tax, minority interest and change in scope decreased by €171 million mainly reflecting in Japan a non recurring release of deferred tax asset valuation allowance (€225 million) reflecting the improvement in recoverability of tax losses carried forward and change in scope for Netherlands Health (€–24 million).
(ii) UK holdings (€–24 million to €–96 million) mainly due to an increase in tax,
(1) Adjusted and underlying ROE are calculated with Shareholder’s equity excluding change in Fair Value on invested assets and derivatives (included in consolidated shareholder’s equity).
Income arising from investment in associates - Equity method 10 10
Profit or loss (excluding change) on financial assets (under FV option) & derivatives 9 14
Gross revenues (100%) decreased by 14% at current exchange rate or 12% at constant exchange rate to €4,735 million. Excluding (i) group pension transfers (€22 million versus €218 million last year) and (ii) the conversion program started in January 2003 to life products (€98 million versus €247 million last year) and to health products (€165 million versus €447 million last year), premiums decreased by 4% at current exchange rate or 1% at constant exchange rate to €4,451 million : – Investment & Savings (31% of gross revenues excluding conversions and group pension transfers ): Premiums decreased by 11% at constant exchange rate to €1,396 million mainly due to a reduction in single premium individual fixed annuities sold via bancassurance partnerships (€-184 million). The reduction in fixed annuity premiums arises from a transition towards variable type products, which AXA Japan is currently developing through the launch of new innovative products.
Non-unit linked premiums increased by 4% to €626 million mainly driven by annuity business.
Underlying earnings were €–18 million lower to €56 million mainly due to lower investment margin and higher taxes.
Net income decreased by €61 million to €131 million as a result of lower adjusted earnings and a decrease of the change in fair value of mutual funds under fair value option. These mutual funds were mainly invested in corporate bonds and benefited more from the decrease in interest rate in 2004 than in 2005.
Profit or loss (excluding change) on financial assets (under fair value option) & derivatives 3 2
As a result, the combined ratio improved by 0.8 point to 97.9%.
Property & Casualty Operations - United Kingdom & Ireland (in euro millions)
Net technical result improved by €52 million to €713 million driven by a 6% earned premium growth and a slight improvement in loss ratio (–0.4 point to 75.6%).
Net capital gains attributable to shareholders net of income tax 53 56
Hong-Kong Gross revenues increased by +21% on a comparable basis to €65 million mainly driven by motor portfolio growth.
Fees, commissions and other revenues, including those earned from AXA insurance companies eliminated in consolidation, increased by €251 million (or +27%) from 2004 to €1,195 million. Excluding fees retroceded to distributors, net revenues grew by 28% on a comparable basis, which is mainly driven by higher average AUM (+21% on a comparable basis), a better product mix and higher performance fees.
(iii) Amortization of acquisition expenses on current year and prior years new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF.
(iv) Administrative expenses. (v) Claims handling costs. (vi) Policyholder bonuses if the policyholder participates in the expenses of the company.
Expense ratio is the ratio of: (i) Expenses (excluding claims handling costs but including non recurring expenses), to (ii) Earned revenues, gross of reinsurance.
Assets backing contracts where the financial risk is borne by policyholders (e) 141,410 112,387 113,786 101,002 10 Investments from banking and other activities (f) 10,084 11,336 8,962 8,100 11 Investments in associates – Equity method 208 330 871 1,254 15 Reinsurer’s share in insurance and investment contracts liabilities 9,087 7,898 7,897 8,489
Total liabilities arising from investment contracts (b) 82,365 71,659 – –
Net cash related to sales and purchases of tangible and intangible assets 11 (187) Net cash provided by investing activities (18,805) (16,531)
AXA’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in France (referred to as “French GAAP”) until 31 December 2004. The comparative figures in respect of 2004 incorporate IAS 32, IAS 39 (including the amendment to IAS 39 relating to the fair value option), and IFRS 4 impacts were restated to reflect these adjustments. First-time adoption of IFRS is described in Note 2 where are provided reconciliations and descriptions of the effect of the transition from French GAAP to IFRS on the Group’s shareholders’ equity, net income and cash flows.
Investment properties backing totally or partially liabilities arising from: – contracts where the financial risk is borne by policyholders,
Loans are stated at outstanding principal balances, net of unamortized discounts and valuation allowances.
Net investment hedge The accounting of hedges of net investments in foreign operations is similar to the accounting of cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in shareholders’ equity; the gain or loss relating to the ineffective portion is recognized immediately in the income statement. Gains and losses accumulated in shareholders’ equity are included in the income statement on disposal of the foreign operation.
An additional provision is fully recorded in the event of an adverse impact on the benefits due to a change in mortality tables.
1.16.5. Revenues from other activities Revenues from other activities mainly include investment management fees recognized as earned as the service is provided. They mainly comprise: – Revenues from other activities of insurance companies, notably commissions received on sales or distribution of financial products,
First-time adoption at January 1, 2004 In accordance with the rules governing the first-time adoption of standards, as set out by IFRS 1, the AXA
Other impacts (mainly impact of reevaluation of financial assets with change in fair value through profit & loss) (a) 24
Net impact on opening shareholders’ equity of reevaluation of financial assets, excluding consolidated investment funds 2,670
Accrued interest Under IFRS, accrued but not yet due interests are incorporated to invested assets value. As a result, revalued financial assets are presented at fair value including accrued interest. Accrued but not yet due interests were previously presented under other debtors-creditors under French GAAP. The reclassification (with no net impact on shareholders’ equity) increased the value of invested assets in the opening balance sheet by €2,969 million.
The impairment is calculated in reference to the market value at the closing date rather than to a recoverable value. Under IFRS, any impairment of equity securities is irreversible. The amount of additional impairment recorded in the opening balance sheet is €2,269 million including consolidated funds and €2,251 million gross excluding consolidated funds, i.e. a net impact on shareholders’ equity of €–1,445 million excluding consolidated funds.
The net impact on opening shareholders’ equity is €192 million. This includes the revaluation of underlying items when appropriate in cases of hedge accounting in the meaning of IAS 39 or in cases of “natural hedge” (use of the fair value option to value the underlying item, or selective use of current interest rates for insurance contracts – IFRS 4.24). This residual net impact relates mainly to derivative instruments held by the AXA SA holding company, for which hedging effects cannot be reflected adequately due to the constraints imposed by IAS 39.
Income arising from investments in associates – Equity method 76 (21) 55 Financing debts expenses (h) (575) (7) (583) Operating income before tax 5,243 819 6,061
– Releases of impairment on financial assets following disposal and lower impairment charge in this period (net positive impact of €526 million in full-year 2004).
– No exceptional income from the release of reserves relating to the exercise of their put options by the former shareholders of Sanford C. Bernstein (AllianceBernstein). This income is cancelled under IFRS (see Goodwill below), resulting in €–112 million in full-year 2004.
Adjustments to French GAAP net investment result amounted to €2.010 million for full year 2004. These adjustments mainly related to: – The impact of additional impairment on available-forsale securities recorded in the opening balance sheet, which boosted realized capital gains and reduced the impairment reserves to be booked during the period1 by comparison with French GAAP.
Net impact on shareholders’ equity of reevaluation of financial assets, excluding consolidated investment funds (d) 4,456 2,670
IFRS transition adjustments reflect the differing movements in equity, fixed-income and foreignexchange markets between 2004 opening and closing balance sheets.
Nippon Dantaï (AXA Nichidan) 1,409 11 – – (85) – 1,334
(a) Gross value of goodwill is presented net of accumulated amortization under French GAAP as of December 31, 2003. (b) Including the impact of exercises and revaluations of minority interests buyout commitments.
Gross value Increase in Increase in Write back of Accumulated Currency Other Gross value December 31, impairment impairment impairment impairment translation changes (a) December 31, 2005 during relating to GW of GW sold losses adjustment 2005 the period created on during transferred acquisitions the period out relating during to goodwill the period transferred in the “held for sale” category
AXA Equity & Law – – – – – – – –
At December 31, 2005, this goodwill had a net value of €3,299 million.
At January 1, 2004, the net book value of this goodwill was €688 million under French GAAP. With the adoption of IFRS, the goodwill figure is made up of £238 million relating to UK entities and €346 million relating to German entities.
At December 31, 2005, the net value of this goodwill was €691 million.
DAC = Deferred Acquisition Costs. (a) Relating to contracts subject to IFRS 4, i.e. insurance contracts and investment contracts with discretionary participating features. Also corresponds to the Life & Savings segment.
Change in impairment and amortization of investment property (all activities): Impairment – Amortization – Investment property Investment property
TOTAL – Invested financial assets exposed to fair value interest rate risk 14 77 154 245
Loans at fair value through profit & loss (a) – – – 1
Receivables arising from banking activities 13,300 (482) 12,818 13,072 11,786 (305) 11,481 11,804
At December 31, 2005 and 2004, there was no significant restriction on the cash position, other than that described in section 29.3. (Restriction on dividends payments to shareholders).
14.1.2. Change in shareholder’s equity group share for 2004 a) Share capital and capital in excess of nominal value In 2004, three types of capital increase were carried out: – capital increases reserved for employees in July 2004 and December 2004 totaling €254 million, and including a €43.1 million increase in the nominal share capital,
Savings Casualty Insurance Savings Casualty Insurance Future policy benefits reserve Life & Savings 190,063 – 373 190,435 176,218 – 419 176,637
NB: Excludes derivatives related to insurance and investment contracts, which are detailed in section 20.4. (a) Includes reserve for claim handling costs.
Property & International Total Property & International Total Casualty Insurance Casualty Insurance
(b) See section 1.11.2. – Reserves mesured according to IFRS 4.24 option which allows to evaluate certain portfolios with current assumptions. (c) and (d) As unit linked contracts they share the same reserves measurement determined on the basis of held assets units fair value (“current unit value”). Only the valuation of related assets only is different: – for unit linked contracts with discretionary participating feature (c), an asset representing the deferred acquisition costs is recognized in continuity with French GAAP, – for unit linked contracts with no discretionary participating feature (d), an asset representing the rights to future management fees is recognized in accordance with IAS 18
Cumulative payments at: Eight years later 9,660 12,143 12,970 Nine years later 10,114 12,473 Ten years later 10,303
Reserve re-estimated at: Eight years later 2,653 2,468 2,774 Nine years later 2,452 2,513 Ten years later 2,490
The deferred policyholders participation liability also includes the impact of shadow accounting (cf definition at 1.11.2) mainly in relation to unrealized gains and losses relating invested financial assets available for sale as detailed on 14.2.1
Other provisions for risks and charges totaled €534 million, including €114 million in France, €135 million in the UK, €70 million in Australia and New Zealand and €78 million in Compagnie Financière de Paris.
Loans held to maturity 2 – – 2 Loans available for sale – – – – Loans at fair value through profit & loss 374 – 3 377 Loans held for trading – – – – Mortgage loans 7,044 – – 7,044
Total liabilities arising from insurance contracts 339,088 (6) (94) 338,988 301,421 22 (40) 301,403
Minority interest of controlled investment funds and puttable instruments held by minority interests holders 5,115 18 – 5,133 3,717 – – 3,717
Non controlled investment funds available for sale 35 147 – (10) 173 Non controlled investment funds designated as at fair value
Equity securities available for sale 639 1,365 63 (285) 7,550 Equity securities designated as at fair value through profit & loss (b) 502 962 223 – (4,080) Equity securities held for trading – 96 140 – 237
Claims ceded (included change in claims reserves) 864 312 1,273 (13) 2,436
As a reminder, the assumptions for 2004 were as follows: not allowed to offset the PBO. Separate assets are insurance contracts issued by AXA which support the defined benefit pension plans. The accounting consequence of these separate assets is a potential increase in the accrued liability or decrease in the prepaid asset. These assets are shown separately in the following table. The most significant amount of separate assets relates to our Unites States pensions plans whose funds are largely invested in separate account (unit-linked) insurance contracts issued by AXA Equitable. These funds are dedicated to the specific insurance contracts and are not available to general creditors, so their economic nature is no different from plan assets. As the separate account assets are available to the pension plan through an insurance contract IFRS requires their categorization as separate assets despite their economic nature.
Change in separate assets Fair value of plan assets, beginning of year 2,265 2,195 – – Actual return on separate assets 206 208 – – Employer contributions 197 147 – – Employee contributions 4 4 – – Net transfer (including acquisitions) (82) 3 – – Benefits paid (168) (155) – – Effect of foreign currency fluctuation 274 (137) – – Fair value of separate assets, end of year 2,697 2,265 – –
Funded Status Unfunded Status (plan by plan) (6,729) (5,707) (703) (572) Overfunded Status (plan by plan) 1 3 – –
The plan asset mix splits the assets held by the companies of the Group according to the main categories. The plan asset mix is presented for both pension and other benefits:
There are diverse methods to determine the expected long term rate of return across the Group given each area’s specificities. Globally it is based on the historic returns adjusted for future expectations on each asset class and for the shift of asset mix. In addition, external consultants review or compute these assumptions for reasonableness in each countries.
– €225 million of collateral received by AXA Bank Belgium as part of its cash management activities, an increase of €134 million.
– €325 million of commitments by AXA Germany relating to future acquisitions by private equity funds.
The memorandum of understanding has a term of five years from the date on which it came into force (December 16, 2005), and is then renewable by tacit agreement for an initial two-year period, then for subsequent one-year periods, unless cancelled by either party by giving a three months' notice before any term.
In compliance with the assignment entrusted to us by the shareholders, we have audited the accompanying consolidated financial statements of AXA S.A. for the year ended December 31, 2005.
– The carrying values of purchase goodwill are tested at each closing for recoverability using the methods described in note 1.6.1 to the consolidated financial statements.
– Offset by a €48 million rise in financial expenses arising from perpetual debt issues with total per value of €875 million in late 2004 and early 2005, along with a €6 million increase in interest on commercial paper on the back of end-of-year financing requirements caused by purchase of exchangeable bonds issued by FINAXA in 1998.
Other payables totaled €286 million, and included €81 million of accrued expenses, €54 million of remaining capital to be called up on AXA Italia SPA, €41 million in payables to minority investors in AXA Financial and €50 million in financial expenses payable on swaps.
Allowances : for depreciation of buildings and deferred charges (19) (33) (26)
NBV/APE Margin 16.3% 18.6% 20.8% + 2.2 pts + 2.3 pts + 2.8 pts
Tillinghast has concluded that the methodology and assumptions comply with the EEV Principles. In particular: – The methodology makes allowance for the aggregate risks in the covered business through AXA’s market consistent methodology, which includes a stochastic allowance for the cost of financial options and guarantees; – The operating assumptions have been set with appropriate regard to past, current and expected future experience; – The economic assumptions used are internally consistent and consistent with observable market data; and
21. Additional information 21.1. Share capital.................................................................................................................................................................... 62 to 67, 78 to 82 and 86 21.2. Memorandum and Articles of association........................................................................................................................................ 76 to 77 23. Third party information and statement by experts and declarations of any interest........................................................ n/a 24. Documents on display............................................................................................................................................................................................................................ 93 25. Information on holdings ..................................................................................................................... 105, 111 to 112, 116 and 119 to 120