World Leader in Financial Protection and Wealth Management 2000 Annual Report
‘‘ No matter what time it is in my life, AXA has a solution.’’
AXA today is the result of a series of ambitious objectives that have been reached and then surpassed, motivating employees and providing a sense of direction. For a number of years, these objectives primarily concerned the size of the AXA Group: become a significant and then a key player in the French market; establish a position in the global market, first by acquiring an operating presence in the United States and then by becoming one of the world’s principal insurance groups. Along the way, AXA has also enlarged its business scope, becoming one of the world’s premier asset management specialists.
Today, our ambition is to set the worldwide standard in financial protection and wealth management. This does not mean we have decided to change our core business: it means we have decided to transform the way we operate in the interest of offering our clients –
While these strengths are undoubtedly necessary, they are not sufficient to guarantee success. Achieving our vision also requires focusing on the needs of our three key stakeholders: our clients, our employees and our shareholders. In order to satisfy their requirements, we felt it was necessary to instigate a genuine cultural revolution everywhere we do business. We have moved beyond the stage of adapting our business processes and practices to keep pace with market forces, and are now ready to begin transforming them.
Shareholders are satisfied when the value of their investment increases, which can be measured by stock price growth. We will achieve ongoing stock price appreciation by generating steady earnings growth, increasing embedded value and demonstrating our ability to make timely acquisitions and build successful partnerships.
AXA’s market capitalization places it among the very top financial services organizations.
In 2000, we turned to the financial markets in connection with key strategic transactions.
This means we have more reason than ever to fully satisfy the requirements of those who have invested in our future.
The technology revolution is an opportunity for service organizations to make unprecedented strides in productivity and efficiency in less time than ever. We occupy a pivotal place in this radical transformation of the world’s economies. It is up to us to put our strengths to work for the stakeholders –
Clients: nOperationalize the financial protection and wealth management promise of the AXA brand.
nEnhance service quality and client satisfaction, as measured by the number of clients, retention rates and the number of products held per client.
nDevelop customer relationship management tools that will enable AXA to tailor its product and service offering to client needs.
n Implement “open architecture” when it is a source of competitive advantage by offering other manufacturers’ products through AXA’s proprietary channels and making AXA
Employees: nAttract, train, challenge and retain qualified people to fill critical gaps.
n Improve the operating performance of property and casualty units by lowering the Group combined ratio to 104%.
AXA makes organizational changes aimed at leveraging its size and diversity, developing cross-discipline pooling of resources and ensuring homogeneous Group management. As part of this organizational change, the composition of the AXA
Management Board changes, and its nine business units are given additional responsibilities.
After the AXA global brand was adopted throughout the region in 1999, National Mutual Holdings becomes AXA Asia Pacific
Holdings enter into talks aimed at increasing the Group’s ownership of the latter from 56.3% to 100%.
UK subsidiary is aimed at fully integrating SLPH's operations within the Group, particularly in the areas of e-business and asset management.
Net 2000 contest held every year under the auspices of the French
employee attitude survey conducted internationally, entirely online for the first time in its history. The response rate for the survey – written in 17 languages and distributed to more than 100,000 employees in 50 countries – is a record 67.8%.
AXA UK subsidiary PPP healthcare sells its equity interests in several healthcare establishments to a
Africaine d'Assurances, subsidiaries of AXA and ONA, respectively, combine to form AXA Assurance
Group AXA raises € 3.7 billion through the issuance of 30.2 million ordinary shares, in preparation for the funding of the buyout of the minority interests in Sun Life &
AXA Cessions combine to form AXA Corporate Solutions, offering global solutions to the sophisticated or highly specialized needs of international corporations.
Alliance Capital Management, a subsidiary of AXA financial, acquires the value asset manager Sanford C.
The High Court approves the financial reorganization plan concerning AXA Equity & Law’s
Inherited Estate, according to which a portion of the assets that had accumulated over the years would be attributed to AXA as the shareholder, with the remainder attributed to policyholders.
‘‘ Right now Antoine is in kindergarten, but one day he’ll be in college. I can’t afford to have financial problems then. It would be great if our financial advisor could help us find the best solution.’’
The investment markets were extremely volatile throughout most of 2000, with the
The AXA stock price rose by 13% in 2000, outperforming the CAC 40 but underperforming the DJ Stoxx Insurance index by 4.6%. The DJ Stoxx Insurance index performance was driven by stock price gains from German insurers as a result of domestic tax reform measures. AXA undertook a number of major transactions over the year, including the completion of its acquisition of
Financial minority interests; the sale of investment bank Donaldson, Lufkin &
Stock price on December 31, 1999: € 136.3 Stock price on March 14, 2001: € 127.5
The AXA stock price outperformed its benchmark indices in the first half of 2000 before falling below benchmark in the second half as the US economy slowed and a number of major financial transactions were completed worldwide. While the transactions completed by AXA have improved its risk profile, the investment markets appear to have focused more narrowly on the loss of DLJ as a cash earnings contributor, as well as on the capital increase that was required to finance the aforementioned buyout of AXA Financial minority interests and on the impact of the potential flowback of AXA stock generated by the fact that certain US institutions limit their holdings of non-US securities.
nonetheless remains a leading value in the insurance industry. The AXA share is included in the major European indices as well as the
Standard & Poor’s S&P Global 100 Index, the first global index that groups the world’s top 100 corporations on the basis of earnings.
n In 2000, the ratings of AXA’s principal insurance and reinsurance operating subsidiaries were maintained: AA (Standard &
Creating shareholder value: 1995-2000 nNet earnings per share (fully diluted, excluding non-recurring events) was € 5.69 in 2000, an increase of 14.2% compared with the corresponding prior period (€ 4.98).
Since 1995, diluted cash EPS has grown by 19.2% on an annualized basis.
nOver the same period, the AXA stock price has risen by an average of 28.9% per annum
May 9, 2001, shareholders will be asked to approve a 4-for-1 stock split.
NET FULLY DILUTED EARNINGS PER SHARE excluding non-recurring events nnet fully diluted EPS nnet fully diluted cash EPS
The AXA Shareholders’ Circle was established in 1997 to strengthen ties with individual shareholders, bringing together registered shareholders and interested holders of shares in bearer form. As members of the
AXA’s operations, results and strategy at regular intervals. Communications tools include: nThe AXA Shareholders’ Circle newsletter is published to coincide with the issuance of interim and annual financial statements, as well as with the annual meeting of shareholders.
Shareholders’ Committee whose 15 members are chosen from among the members of the
Some 1,500 shareholders attended last year’s annual meeting held on May 3, 2000 at the
Palais des Congrès in Paris. AXA also participates in the shareholders’ trade fair and in information meetings co-sponsored by
AXA’s buyout of AXA Financial minority interests in 2000, which increased its ownership from 60.25% to 100%, also increased substantially the number of ADS.
Investor contact information is listed on page 66 of this report.
TOTAL ASSETS UNDER MANAGEMENT as at December 31, 2000: (+ 14.2%)
5-year increase in cash ROE: 410 bp 5-year increase in shareholders’ equity: 257%
(as evidenced by American Depositary Receipts), each representing one Ordinary Share.
Part II Item 13 Defaults, Dividend Arrearages and Delinquencies ........................................... 192 Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds ...192
Part III Item 17 Financial Statements ....................................................................................... 192 Item 18 Financial Statements ........................................................................................ F-1 Item 19 Exhibits ............................................................................................................ E-1
Pages Presentation of Information................................................................................. 3 Exchange Rate Information................................................................................. 3 Special Note Regarding Forward-Looking Statements.......................................... 4
This Annual Report on Form 20-F (referred to herein as the “annual report”) has been filed with the
“AXA” refers to AXA (the “Company”), a company organized under the laws of France, and its direct and indirect subsidiaries. “Shares” refer to the Company’s ordinary shares. The principal trading market for the ordinary shares of AXA is the Premier Marché of the Euronext Paris SA (which resulted from the merger of the Paris, Brussels and Amsterdam Stock Exchanges on October 27, 2000, which we refer to in this annual report as the “ParisBourse”).
The information contained in this annual report, unless otherwise indicated, is on a pre-stock split basis and does not reflect the corresponding ratio change between the AXA ADS and ordinary shares.
This annual report includes AXA’s consolidated financial statements for the years ended December 31, 2000, 1999 and 1998 and as at December 31, 2000 and 1999. AXA’s consolidated financial statements, including the notes thereto, are included in “Item 18 - Financial Statements” and have been prepared in accordance with generally accepted accounting principles in France, which we refer to in this annual report as “French GAAP”.
Unless noted otherwise, the financial information contained in this annual report is presented in accordance with French GAAP. French GAAP is based on requirements set forth in French law and in European regulations that are described in notes l and 2 to the consolidated financial statements. French GAAP differs significantly from generally accepted accounting principles in the United States, which we refer to in this annual report as
“U.S. GAAP”. See notes 26 and 27 to the consolidated financial statements for a description of the significant differences between French GAAP and U.S. GAAP, a reconciliation of net income and shareholders’ equity from
FF 6.55957 = € 1.00 and transactions denominated in Euro started to take place, including new public debt issues. However, Euro banknotes and coins are not expected to enter circulation until January 1, 2002. Outstanding obligations denominated in national currencies have been converted at the legal rates established on January 1, 1999 (unless specific contracts provide for an alternative conversion rate). During the transitional phase, which is planned to begin on January 1, 2002 and end on July 1, 2002, national currencies, including banknotes and coins, will subsist as non-decimal denominations of the Euro. By July 1, 2002, the Central European Bank will withdraw the national currencies from circulation, and these currencies will no longer be legal tender for any transactions.
“US dollars” or “US$” or “$”. For historical exchange rate information, refer to “Item 3 - Key Information - Exchange
This annual report contains both historical and forward-looking statements concerning the financial condition, results of operations and business of AXA. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements, including those discussed elsewhere in this annual report and in AXA’s other public filings, press releases, oral presentations and discussions. Forward-looking statements include, among other things, discussions concerning the potential exposure of AXA to market risks, as well as statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions.
• AXA’s experience with regard to mortality and morbidity trends, lapse rates and policy renewal levels relating to its life and savings operations, which also include health products; • the frequency, severity and development of property and casualty claims including catastrophic events which are uncertain in nature, and policy renewal rates relating to AXA’s property and casualty business; • market risks related to (a) fluctuations in interest rates, equity market prices and foreign currency exchange,
You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as at the date of the particular statement. AXA undertakes no obligation to update publicly or revise any forward-looking statement as a result of new information, future events or otherwise. In light of these risks,
AXA’s results could differ materially from the forward-looking statements contained in this annual report.
SELECTED CONSOLIDATED FINANCIAL DATA The selected historical consolidated financial data presented below have been derived from AXA’s consolidated financial statements and related notes for the years ended December 31, 2000, 1999, 1998, 1997 and 1996.
U.S. GAAP” and notes 26 and 27 to the consolidated financial statements.
AXA Nichidan Insurance Holding, AXA Asia Pacific Holdings and their respective subsidiaries use a fiscal year end of September 30 and are consolidated as at and for the year ended September 30 in AXA’s consolidated financial statements.
(in US $ millions (in euro millions except per ordinary share except per ordinary share and ADS amounts)
In accordance with French GAAP: Gross premiums and financial services revenues (including change in unearned premiums) 74,665 79,532 66,537 56,729 55,586 25,454
Income before income tax expense 8,284 8,824 4,182 3,717 3,153 1,352
– Net income per ordinary share (n): – Net income per ADS (d) (n): In accordance with US GAAP: Income from continuing operations (before tax) (o) 1,387 1,478 970 1,261 1,011 347 Income from continuing operations (after tax and minority interest) (o) 893 951 864 618 156 233 Income from discontinued operations (net of tax) (o) 181 192 344 129 153 95 Gain on sale of discontinued operation (net of tax) (o) 1,976 2,105 – – – –
Per Ordinary share (b) (n): Basic – Income from continuing operations (after tax and minority interest) 2.38 2.53 2.48 1.86 0.50 1.30
In accordance with US GAAP, except for adjustment for unrealized investment gains and losses on assets allocated to UK with-profit contracts (f): – Net income per ordinary share (b) (n): – Net income per ADS (d) (n): Other data (non-GAAP): Number of ordinary shares outstanding – 416.2 356.3 350.3 331.4 193.1
In accordance with French GAAP: Long-term debt: Mandatorily convertible bonds and notes (h) 180 192 474 474 474 192
In accordance with US GAAP: Long-term debt (h) (o) : Shareholders’ equity per ordinary share (b) (n) 72.02 76.71 64.29 58.72 51.54 38.67
In accordance with US GAAP except for adjustment for unrealized investment gains on real estate allocated to UK with-profit contracts (f): Shareholders’ equity, per ordinary share (b) (n) 72.64 77.37 64.89 59.27 52.08 39.63
(a) Includes investment income net of investment expenses and interest expense on short-term and long-term debt (other than interest expense relating to bank operating expenses of AXA’s Other Financial Services operations) and net realized investment gains and losses.
(c) Gross premiums received from policyholders in respect of life and savings insurance products which are classified as “investment contracts” (such as, separate account products), in accordance with U.S. GAAP, are recorded as revenue under French GAAP. Under U.S. GAAP, such amounts received are recorded as deposits, and only the policy-related fees charged to the policyholders for cost of insurance, administration, investment management, etc, are recorded as revenue.
(e) An annual dividend generally is paid each year in respect of the prior year after the annual general meeting of shareholders (customarily held in May or June) and before September of that year. Dividends are presented above in the year to which they relate not the year in which they are declared and paid. At the annual general meeting of shareholders of AXA held on May 9, 2001, the shareholders approved the declaration of a dividend in respect of 2000 of € 2.20 per ordinary share. Dividends per ordinary share and per ADS do not include any French “avoir fiscal” which may be receivable from the French Treasury. In general, dividends per ordinary share are based on the number of ordinary shares outstanding at the end of the year for each year presented. In 2000, dividends per ordinary share will be based on the number of ordinary shares outstanding at December 31, 2000 and will also include the 4.9 million of ordinary shares issued to the remaining minority interests in AXA Financial following the completion of the merger of AXA Merger Corp. with and into AXA Financial on January 2, 2001.
(f) Under French GAAP, in accounting for U.K. with-profit contracts, revenue and expense are matched in net income by including both changes in the estimated fair values of assets allocated to U.K. with-profit contracts and corresponding increases or reductions in the liability for U.K. with-profit policyholder benefits. U.S. GAAP, which has developed in an environment that differs from the one in which the U.K. with-profit contract was developed, requires that the change in unrealized investment gains and losses on assets allocated to U.K. withprofit contracts be excluded from net income while requiring recognition of the corresponding change in the liability for with-profit policyholder benefits in net income. Accordingly, AXA believes this exclusion results in amounts that do not fully reflect the economic effect of the U.K. with-profit contracts. An increase in the estimated fair value of these assets results in an increase in the liability for policyholder benefits and a reduction in AXA’s consolidated U.S. GAAP net income and shareholders’ equity and, conversely, a decrease in the estimated fair value of these assets results in a decrease in the liability for policyholder benefits and an increase in AXA’s consolidated U.S. GAAP net income and shareholders’ equity. Set forth below (refer to table) is AXA’s consolidated net income and shareholders’ equity in accordance with U.S. GAAP except for adjustment for the change in unrealized investment gains and losses on assets allocated to U.K. with-profit contracts. AXA believes that this presentation is more meaningful under the circumstances. See notes 26 and 27 to the consolidated financial statements and see “Item 4–Information on the Company–Life and Savings Segment––Products” for a description of U.K. with-profit contracts.
(g) Includes future policy benefits and other policy liabilities, insurance claims and claims expenses, U.K. with-profit contract liabilities and unearned premium reserve and excludes separate account (unit linked) liabilities.
These translations are solely for the convenience of the reader and should not be construed as representations that the converted amounts actually represent such U.S. dollar amounts or could have been (at the relevant date) converted into U.S. dollars at the rate indicated or at any other rate.
(o) As a result of the sale of DLJ and in accordance with the U.S. GAAP accounting treatment of discontinued operations, the income statement data in accordance with U.S. GAAP has been restated in respect of “total revenues” and “income from continuing operations”. In respect of the balance sheet data in accordance with the U.S. GAAP, “Total assets” and “Long-term debt” have been restated: “Total assets” includes net assets of DLJ discontinued operations (which is reported as a single line item under total assets) and, therefore, “Long-term debt” excludes long-term debt in respect of the DLJ discontinued operations. See note 27 to the consolidated financial statements included elsewhere in this annual report, which provides AXA’s condensed statements of income for the years ended December 31, 2000, 1999 and 1998 and the consolidated balance sheets as at December 31, 2000 and 1999 for further details, as the impact of DLJ is presented separately.
CONSOLIDATED GROSS PREMIUMS Years ended December 31, AND FINANCIAL SERVICES REVENUE 2000/1999 % change on BY ACTIVITY 2000 1999 1998 % change a comparable (in euro millions) basis (a)
Other financial and real estate companies 1,074 1,136 750 (5.4%) (2.5%)
(in euro millions except As Cash As Cash As Cash per ordinary share amounts) reported Earnings (a) reported Earnings (a) reported Earnings (a)
Group shares received in respect of that transaction of € (67) million), totaling € 2,004 million net group share; – realized losses and valuation allowances of € 236 million (net group share) relating primarily to the Equitable Life high yield bond portfolio as a result of broad weaknesses in credit markets from a slowing economy during the third and fourth quarter of 2000, coupled with a review of investment strategy following AXA’s acquisition of the minority interests in AXA Financial, Inc. ; and
Year End Exchange Rate Average Exchange Rate euro euro euro euro euro euro
(a) At September 30th, being the fiscal year end for AXA Asia Pacific Holdings.
The following table sets forth, for the periods and dates indicated, certain information concerning the
Noon Buying Rate of one Euro to U.S. dollars in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York, which we refer to in this annual report as the “Euro Noon Buying
Rate”. The Euro Noon Buying Rates presented below are for your convenience and are not used by AXA to prepare AXA’s consolidated financial statements included elsewhere in this annual report.
(a) The average of the Euro Noon Buying Rates on the last business day of each full month during the relevant period. (b) Effective January 1, 1999, the French franc became a component of the Euro. As such, the Euro Noon Buying Rates for the years prior to 1999 are the Noon Buying Rates for the French Francs converted into Euro at a rate of €1.00 = French franc 6.55957.
The Euro Noon Buying Rate on December 29, 2000 was €1.00 = US$0.9388 and on April 30, 2001 was €1.00 = US$0.8874.
Year Net dividend Gross dividend Net dividend Gross dividend per ordinary per ordinary per ADS per ADS
share share (a) (b) (c) (a) (b) (c) (euros) (euros) (US $) (US $)
(b) One ADS is equivalent to one-half of an ordinary share. (c) Translated solely for convenience into US dollars per ADS using the Euro Noon Buying Rates on the respective payment dates. Because each ADS represents one-half of an ordinary share, amounts indicated in US$ per ADS equal one-half of the equivalent dividends per ordinary share. For convenience only, avoir fiscal amounts have been converted into US dollars at the Noon Buying Rate on such payment dates, although such amounts are paid subsequent to such payment dates. Also, the Noon Buying Rate may be different from the rate used by Depositary to convert the Euro to US dollars for purposes of making payments to holders of ADSs.
The Mutuelles AXA, four French mutual insurance companies, acting as a group, owned at March 15, 2001, directly and indirectly through Finaxa, a holding company they control, approximately 21.0% of the issued ordinary shares of AXA representing approximately 33.6% of the voting power. Most of the shares owned by the Mutuelles AXA have double voting rights pursuant to the provisions of AXA’s statuts, see “Item 10 -
Additional Information – Certain Rights of AXA’s Shareholders – Voting Rights” included elsewhere in this annual report. The Mutuelles AXA are parties to agreements pursuant to which they have stated their intention to collectively exercise majority control over Finaxa. Given the long-term nature of their relationship with AXA,
AXA cannot assure you that the interests of the Mutuelles AXA will not, from time to time, conflict with your interests as a shareholder. For example, even though the Mutuelles do not hold a majority of the total voting power in AXA, a decision by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may find attractive, may prevent other shareholders from realizing a control premium for their AXA ordinary shares. In addition, Finaxa has the right to terminate, under certain circumstances, or limit AXA’s rights to use the AXA trademark, as described under “–Finaxa may terminate the licensing to AXA
The life and savings business and the property and casualty business of the Mutuelles AXA and our French insurance subsidiaries use similar distribution channels but are managed in such a way as to maintain the legal distinctions between their respective businesses. There are no agreements between the Mutuelles AXA and AXA’s insurance subsidiaries that restrict in any way their ability to compete with one another. The Mutuelles AXA, which have no employees, use employees of our French insurance subsidiaries. Most of the costs and expenses of operating the life and savings business and the property and casualty business in our French insurance subsidiaries
THE SALE OF DONALDSON, LUFKIN & JENRETTE (DLJ) MAY ADVERSELY AFFECT
AXA publishes its consolidated financial statements in Euro. For the year ended December 31, 2000, approximately 57% of AXA’s gross premiums and financial services revenues and 55% of AXA’s benefits, claims and other deductions were denominated in currencies other than the Euro, primarily U.S. dollars, British pounds sterling, and Australian dollars. Consequently, fluctuations in the exchange rates used to translate these currencies into Euro may have a significant impact on AXA’s reported results of operations from year to year.
The level of volatility in the financial markets in which AXA invests and the overall investment returns earned in those markets also affect AXA’s profitability. In particular, AXA’s assets, earnings and ability to generate
In periods of increasing interest rates, withdrawals of life insurance policies and fixed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns. Obtaining cash to satisfy these obligations may require AXA to liquidate fixed income investments at a time when the market prices for those assets are depressed because interest rates have increased. This may result in realized investment losses. Regardless of whether AXA realizes an investment loss, these cash payments would result in a decrease in total invested assets, and a decrease in net income. Premature withdrawals may also cause AXA to accelerate amortization of policy acquisition costs, which would also reduce AXA’s net income.
The profitability of AXA’s spread-based businesses depends in large part upon AXA’s ability to manage interest rate spreads, and the credit and other risks inherent in our investment portfolio. AXA cannot guarantee, however, that it will successfully manage its interest rate spreads or the potential negative impact of those risks.
IN LAWS AND REGULATIONS MAY ADVERSELY AFFECT SALES OF AXA’s INSURANCE
in which AXA does business, including the United States government, have considered proposals for tax law changes that could adversely affect AXA’s products. These proposals have included, for example, proposals to tax the undistributed increase in value of life insurance policies. The enactment of any such tax legislation would likely result in a significant reduction in sales of AXA’s currently tax-favored products.
AXA’s asset management operations are subject to securities laws, which are primarily intended to protect investors in the securities markets or investment advisory clients and generally grant supervisory authorities broad administrative powers. Changes to these laws and regulations could have a material adverse effect on AXA’s asset management operations and on the company as a whole.
In 2000, the U.K. government adopted new legislation relating to employee pension schemes, which became effective in April 2001. The new legislation imposes a limit on the fee that insurance companies are allowed to charge for administering Stakeholders’ Pensions, the simplified individual pensions promoted by the new legislation. Certain of AXA’s competitors have begun charging the same low fees for unregulated pension products, thus increasing the pricing pressure on AXA’s U.K. life and savings business. As a result of this legislative change and the ensuing pricing and competitive pressure, the profitability of operating in the U.K. life insurance market may decrease significantly.
does not discount its insurance reserves for claims and claims handling expenses unless final settlement has been agreed and the payments are generally fixed over a period of time.
The process of estimating the insurance claims reserve is based on information available at the time the reserve is originally established. However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as: • development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience; • changes arising from the time lag between the occurrence of the insured event, notification of the claim (from the insured party, a third party or a ceding company) and the final settlement (payment)
of the claim, primarily attributable to long tail casualty claims which may take several years to settle due to size and nature of claim, and the occurrence of large natural catastrophes late in the financial year for which limited information may be available at year end; • judicial trends; • regulatory changes; and
As a result, actual losses may deviate from the original gross reserves established. Consequently, the reserve may be re-estimated reflecting those changes resulting in loss reserve redundancies (in cases where the original gross claims reserve was overstated) or deficiencies (in cases where the original gross claims reserve was understated).
As with other property and casualty insurers and reinsurers, AXA’s operating results and financial condition can be adversely affected by volatile and unpredictable natural and man-made disasters, such as hurricanes, windstorms, earthquakes, fires and explosions. AXA generally seeks to reduce its exposure to these events through individual risk selection and the purchase of reinsurance. AXA has experienced in the past, and could experience in the future, material losses from such catastrophic events.
In recent years AXA has completed a number of acquisitions around the world and AXA may make further acquisitions in the future. Growth by acquisition involves risks that could adversely affect AXA’s operating results, including the substantial amount of management time that may be diverted from operations to pursue and complete acquisitions, difficulties in managing and integrating the additional operations and personnel of acquired companies, significant delays in completing the integration of acquired companies and the potential loss of key employees or customers of these companies. AXA’s acquisitions could result in the incurrence of additional indebtedness, costs, contingent liabilities and amortization expenses related to goodwill and other intangible assets, all of which could materially adversely affect its businesses, financial condition and results of operations. Future acquisitions may also have a dilutive effect on the ownership and voting percentages of existing shareholders.
The businesses AXA has acquired include life and savings, property and casualty insurance and asset management operations. There could be unforeseen liabilities that arise out of the businesses AXA has acquired and may acquire in the future which may not be covered by, or exceed the amount of, the indemnification obligations of sellers.
AS A GLOBAL BUSINESS, AXA IS EXPOSED TO DIFFERENT LOCAL POLITICAL,
East, and Africa through wholly-owned and majority-owned subsidiaries, joint ventures, companies in which
and surplus, and the credit quality of local counterparties. These risks include, for example, political, social or economic instability in countries in which AXA operates, fluctuations in foreign currency exchange rates, credit risks of AXA’s local borrowers and counterparties, lack of local business experience in certain markets, risks associated with the exposure to insurance industry insolvencies through policyholder guarantee funds or similar mechanisms set up in foreign markets and, in certain cases, risks associated with the potential incompatibility with foreign partners, especially in countries in which AXA is conducting business through entities AXA does not control.
AXA’s expansion in emerging markets requires it to respond to rapid changes in market conditions in these countries. AXA’s overall success as a global business depends, in part, upon its ability to succeed in differing economic, social and political conditions. AXA may not continue to succeed in developing and implementing policies and strategies that are effective in each location where it does business.
AXA MAY BE UNABLE TO RETAIN PERSONNEL WHO ARE KEY TO ITS BUSINESS
The non-exclusive license grants AXA the right, subject to the prior written approval of Finaxa, to grant sublicenses to such companies or partnerships. Finaxa has no obligation to grant any such approval. Over the past several years, a number of AXA’s principal subsidiaries around the world have begun to use the AXA
name pursuant to sublicenses granted by AXA. AXA is obligated to pay Finaxa pursuant to the licensing agreement an annual fee of €762,245 as well as 50% of any net royalties AXA receives from sublicensees. The nonexclusive license to AXA may be terminated at any time by either party, three months after delivery to the other party of a written notice of termination. Finaxa has, however, agreed not to exercise its right to terminate the license so long as Finaxa is AXA’s largest shareholder. Upon termination, AXA and its subsidiaries are required to cease utilization of the AXA trademark and any sublicenses will immediately terminate. In the event that
Judgments of U.S. courts, including those predicated on the civil liability provisions of the Federal securities laws of the United States, may not be enforceable in French courts. As a result, AXA’s shareholders who obtain a judgment against AXA in the United States may not be able to require AXA to pay the amount of the judgment.
Fluctuations in the exchange rate for converting Euros into U.S. dollars may affect the value of AXA ADSs.
Specifically, as the relative value of the Euro against the U.S. dollar declines, each of the following values will also decline: • the U.S. dollar equivalent of the Euro trading price of AXA ordinary shares on the ParisBourse, which may consequently cause the trading price of AXA ADSs in the United States to also decline; • the U.S. dollar equivalent of the proceeds that a holder of AXA ADSs would receive upon the sale in France of any AXA ordinary shares withdrawn from the depositary; and
• the U.S. dollar equivalent of cash dividends paid in Euro on the AXA ordinary shares represented by the
THE HOLDERS OF AXA ADSs MAY NOT BE ABLE TO EXERCISE THEIR VOTING
The depositary for the AXA ADSs may not receive voting materials for AXA ordinary shares represented by AXA ADSs in time to ensure that holders of AXA ADSs can instruct the depositary to vote their shares. In addition, the depositary’s liability to holders of AXA ADSs for failing to carry out voting instructions or for the manner of carrying out voting instructions is limited by the deposit agreement governing the AXA American Depositary
Receipt facility. As a result, holders of AXA ADSs may not be able to exercise their right to vote and may not have any recourse against the depositary or AXA if their shares are not voted as they have requested.
UNDER THE DEPOSIT AGREEMENT OR IF THEY WISH TO INVOLVE AXA
AXA nor the depositary will be liable if they: • are prevented, delayed or forbidden from performing any obligation by circumstances beyond their control,
• take any action based upon the advice of, or information from, legal counsel, accountants, any person presenting ordinary shares for deposit, any holder or owner of an AXA ADR or any other person believed by it in good faith to be competent to give such advice or information.
INTRODUCTION The Company is the holding company for AXA, a worldwide leader in financial protection and wealth management. With gross premiums and financial services revenues of €80.0 billion for the year ended December 31, 2000, AXA is the largest French insurance group and one of the largest insurance groups in the world. AXA
AXA operates primarily in Western Europe, North America and the Asia/Pacific region and, to a lesser extent, in other regions including the Middle East, Africa and South America. Its operations in these others regions, with the exception of Morocco, are not consolidated. AXA has five operating business segments: life and savings, property and casualty, international insurance (including reinsurance), asset management, and other financial services. In addition, various holding companies within the AXA group conduct certain non-operating activities.
For the years ended December 31, (in euro millions except percentages) 2000 1999 1998
Gross premiums and financial services revenues 79,971 100% 66,528 100% 56,697 100%
(b) Life and Savings Segment was formerly the Life Insurance Segment. (c) Net income before exceptional operations represents a non-GAAP measure. It should be noted that this financial information may not be comparable with similary-titled measures reported by other companies as it is not defined under either French GAAP or U.S. GAAP. See “Item 5 - Operating and Financial Review and Prospects - Consolidated Operating Results” for information in respect of the exceptional operations.
AXA capitalizes on its core strengths: over 50 million clients worldwide; a 44,000-strong captive distribution force; a global brand; unique product skills in areas as diverse as insurance underwriting, long-term investments, and financial advice on a scale that enables AXA to leverage best practices and operations platforms across the Group.
• Employees and sales associates. AXA values courage, loyalty, team spirit, pride, ambition, imagination, pragmatism and commitment to excellence. By promoting these values, AXA intends to attract, develop and reward talent in its core activities so as to be a leader in each local market in terms of compensation, training, coaching and mobility, as well as one of the most attractive companies to work for in the global financial services industry.
• Shareholders. AXA intends to be one of the largest financial service providers by market capitalization in order to maintain flexibility and seize attractive external and organic growth opportunities. In addition,
AXA aims to provide its shareholders with attractive total returns, derived from steady growth in earnings per share and embedded value.
Nichidan, allowing AXA to build a strong position in the world’s largest life insurance market; • The acquisition of Sanford C. Bernstein, Inc.’s activities in the United States and its integration with Alliance
AXA UK Holdings) enable AXA to consolidate its presence in the United States and the United Kingdom and generate more synergies with other parts of AXA; and
• Improved offering to clients: financial advice, backed by an enlarged product and service offering including third-party “best-of-breed” products; higher service quality and client satisfaction; more focus on “mass affluent”
clients, supported by effective Customer Relationship Management tools and processes; • Improved distribution capability: more training and resources for AXA’s captive distribution forces; the expansion of third-party distribution channels; the implementation of “open architecture” distribution (whereby a company sells its own products plus the products of third parties, and vice versa) whenever it is a source of competitive advantage; • Improved economic efficiency: group-wide optimization and standardization of core processes such as underwriting or claims handling; consolidation and leveraging of group-wide resources such as developments in information technology, resources and platforms; and
• Financial priorities: increasing the Company’s market capitalization to rank among the five largest global financial services firms, and generating steady improvement in returns as measured by growth in cash earnings per share, cash return on equity, growth in embedded value, and a lower consolidated combined ratio (in respect of AXA’s property and casualty business).
HISTORY AND DEVELOPMENT AXA was organized under the laws of France in 1852. Its corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059.
AXA traces its origins to several French regional mutual insurance companies. In 1982, Les Mutuelles
Unies, a group of French regional mutual insurance companies took control of Groupe Drouot, a significantly larger French stock company engaged in insurance business in France and other countries in Western Europe.
Compagnie du Midi in exchange for a substantial equity interest and in 1990, the name of Compagnie du Midi was changed to AXA. In 1991, the French insurance operations of AXA were reorganized and Les Mutuelles
Unies and the mutual companies associated with the former Compagnie du Midi became the entities that are now referred to as the “Mutuelles AXA”. As at December 31, 2000 and March 15, 2001, the Mutuelles AXA, acting as a group through Finaxa (a holding company), owned directly and indirectly approximately 21.0% of the issued ordinary shares of AXA representing 33.6% of the voting rights.
with a Management Board and a Supervisory Board. The Company’s headquarters are located at 25 Avenue
– Donaldson, Lufkin & Jenrette (b) 0.3 – – 0.3 –
– Sun Life & Provincial Holdings (a) 3.7 3.7 – – –
Investment in start up operations (d) 0.4 – 0.1 0.1 0.2
– AXA acquired over 95% of Nippon Dantai Life Insurance Company Ltd. (“Nippon Dantai”). As a result of this acquisition, AXA increased significantly its presence in the Japanese life insurance market as Nippon
Dantai was the 13th largest life insurance company and the 2nd largest stock life (non-mutual) insurance company in Japan at that time; – Alliance Capital Management L.P (“Alliance Capital”), a subsidiary of AXA Financial, acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, Inc.: a US-based asset manager with assets under management of approximately $90 billion (€96 billion) at the date of the acquisition, being October 2, 2000. The total consideration of $3.5 billion (approximately €4.0 billion at date of acquisition) consisted of $1.5 billion in cash and 40.8 million newly issued units of limited partnership interest of Alliance Capital Management L.P.; and
– AXA acquired the remaining 44%, 40% and 26% minority interests in Sun Life & Provincial Holdings (United
Kingdom), in AXA Financial (United States) and in AXA China Region (based in Hong Kong and owned by AXA Asia Pacific Holdings, in which AXA has a 51% voting interest), respectively. Sun Life & Provincial
Sun Life & Provincial Holdings. Based in London, GRE’s principal operations were in the United Kingdom,
and merged it with AXA’s existing Belgian bank, IPPA, in early 2000 to create AXA Bank Belgium.
Asia Pacific Holdings”) in connection with the demutualization of its subsidiary, National Mutual Life Association of Australasia ("National Mutual Life").
Incorporated (subsequently renamed AXA Financial, Inc. or “AXA Financial”), the holding company of Equitable
Life. In subsequent years, AXA Financial has conducted a stock repurchase program, with the result that AXA’s ownership interest in AXA Financial, had increased from 58% on January 1, 1998 to 60% before the buyout of the minority interests.
Finance in Luxembourg and Guardian National Insurance in South Africa (December 2000).
SIMCO, a real estate company owned 36% by AXA. Subsequently, CIPM was merged into SIMCO. As a result of these transactions, AXA reduced its exposure to real estate by approximately €1.0 billion.
(2) On the following business day, AXA and its affiliates sold 6.4 million shares back to Credit Suisse Group for consideration of $1.2 billion in cash. The remaining 19.3 million shares were sold by the end of January 2001.
The Company is the holding company for AXA. AXA’s principal operations are located in Western Europe, North America and the
Segment Market Segment Market Segment Market contribution contribution contribution contribution contribution contribution (%) (%) to total (%) to total (%) to total segment (%) segment (%) segment (%)
Total gross premiums and financial services revenues (in euro millions except percentages) 79,971 66,528 56,697
AXA (the Company) Long Term Debt (subordinated) Standard & Poor's A–
U.S. registered Subordinated Debt (multi-currency) in December 2000 Standard & Poor's A–
Life and Savings Segment accounted for €46.0 billion or 58% of AXA’s gross premiums and financial services revenues for the year ended December 31, 2000.
CGNU plc and became the UK’s largest provider) and the fact that Equitable Life, the UK’s second largest provider, was closed to new business in 2000.
(f) Represents market ranking and market share for life insurance products. For savings- related investment products, AXA’s Australian operations were ranked 10th.
generation ages over the next decade, there will be a corresponding growth in the number of individuals looking for savings-oriented products and in the number of households seeking advice related to financial, tax and estate planning. In addition, the trend continues among U.S. employers to move away from defined benefit plans
Stakeholders’ Pensions (a simplified individual pension scheme promoted by the new legislation). As a result of this legislative change and the ensuing pricing and competitive pressure, the profitability of operating in the UK
– Australia. Individual retirement products, group retirement products and individual life products represented 52%, 35% and 13%, respectively, of annual gross premiums for the twelve months ended September 30, 2000. In general, it is expected that savings-related investment products will continue to be the growth area due to the aging of the “baby boom” generation and continued governmental support for self-funded retirement.
The principal competitive factors affecting the Life and Savings Segment’s business are (i) price, (ii) financial strength and claims-paying ability ratings, (iii) size and strength of the distribution platform, (iv) range of product lines and product quality, (v) quality of service, (vi) investment management performance, (vii) historical levels of bonuses with respect to participating contracts, and (viii) changes in regulations that may affect the policy charging structure relating to commission and administrative charges. Ratings are an increasingly important factor in establishing the competitive position of insurance companies in each of the principal markets in which AXA
(in euro million, except percentages) 2000 (a) 1999 1998 December 31, 2000
Total gross premiums include: – Separate Account (Unit linked) contracts 43% 19,612 15,080 13,079 117,469
Certain of AXA’s life and savings products provide features which enable the policyholders to participate in the excess assets over the liabilities (the surplus) of the life company issuing the contract. Such participations, including participations on UK with-profit contracts that are explained below, are paid to policyholders as dividends that increase the present value of policyholder benefits.
(often exceeding 50%) or upon surrender prior to maturity. The amount of terminal bonus to be paid is determined at the discretion of management.
Variable life and variable annuity product benefits are linked to investments supporting such contracts, referred to as “separate account (unit linked) contracts”. The investment risk (and reward) is transferred to the policyholder while the life company earns fee income from managing the separate account assets. The income streams on these unit-linked products are much more predictable than the income streams on traditional life insurance protection products.
Europe and Asia Pacific and attributable to (i) an increase in consumer awareness of such products, (ii) government initiatives to move away from state funded pensions to private funded pensions and (iii) favorable investment market trends. This trend has continued to a certain extent in the United States where there is a more mature market in respect of such products. In July 2000, AXA Nichidan Life (Japan) commenced the sale of variable life products (representing 6% of new individual business sales) and in January 2001, AXA China Region (Hong
The majority of individual retirement products and individual life and savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual life and retirement products issued by AXA have front-end charges (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges (charges assessed in the case of early surrender). Both front-end charges and surrender charges are intended to offset a portion of the acquisition costs.
AXA's Property and Casualty Segment offers a range of personal and commercial property and casualty insurance products. The Property and Casualty Segment accounted for €15.6 billion, or 19% of AXA’s gross premiums and financial services revenues for the year ended December 31, 2000.
The table below summarizes AXA’s consolidated gross premiums written and claims reserves and ratios for the Property and Casualty Segment for the periods indicated.
For the ten-year loss development of the property and casualty claims reserves, see to “Property and Casualty
Courtage, AXA Conseil and Direct Assurance), the United Kingdom (AXA Insurance UK), Germany (AXA Colonia), and Belgium (AXA Royale Belge).
(a) Source: Swiss Re Sigma report 9/2000 “Worldwide insurance in 1999”. (b) In general based on 1999 market data for each specific country or an estimate for 2000. (c) The UK product lines are ranked as follows: third in private motor (8.5% market share), fourth in homeowners/domestic property (6.2%
market share), fifth in commercial vehicle (5.4% market share) and third in total commercial property (10.3% market share). The rankings took into account the 2000 merger of Commercial General Union and Norwich Union, which became CGNU plc and created the largest property and casualty insurance group in the United Kingdom.
Belgium. Premiums on automobile insurance have increased slightly in 2000 as compared to 1999.
The nature and level of competition vary among the countries in which AXA operates. Overall, the property and casualty insurance industry in each of AXA’s principal markets is highly competitive, with surplus underwriting capacity leading to low premium rates. The principal competitive factors are (i) price, (ii) financial strength and claims-paying ability, (iii) range of product lines and product quality, (iv) quality of service, (v) type of distribution and (vi) changes in regulations, which may affect premium rates charged or claims settlement costs paid. In
France, Germany and Belgium, markets are fragmented with hundreds of insurers competing for business. In the United Kingdom, industry-wide consolidation across the sector, which has affected both major insurance companies and brokers, has led to increased concentration among the top few players in recent years.
AXA’s property and casualty insurance operations offer a full range of products including automobile, homeowners, property and general liability insurance for both personal and small to medium-sized commercial customers.
AXA distributes its property and casualty insurance products through a number of channels that vary from country to country. The distribution channels used by AXA’s property and casualty operations, based on gross premiums written for the year ended December 31, 2000, are presented below.
Based on gross premiums General Intermediaries/ Direct Sales Other networks, including written in 2000: agents independent advisers/ and marketing corporate partnerships brokers and bank networks
Global Risks). In 2000, these operations were restructured and combined under a common holding company,
Segment accounted for €3.7 billion, or 5% of AXA’s gross premiums and financial services revenues for the year ended December 31, 2000.
The table below summarizes AXA’s consolidated gross premiums and claims reserves and ratios for the
For the ten-year loss development of AXA’s property and casualty claims reserves, see “ - Property and
AXA Corporate Solutions operates principally in France, the United States, the United Kingdom, Canada and Singapore.
AXA Corporate Solutions Insurance (formerly AXA Global Risks). These operations underwrite large insurance risks for large national and international corporations. The principal insurance products underwritten include property and casualty; marine, aviation and transport; construction risk; financial risk; and directors and officers liability. AXA Corporate Solutions Insurance also offers loss-prevention and risk management services.
The table below presents gross premiums and insurance reserves by major product for the periods and as at the dates indicated.
AXA Corporate Solutions distributes its products principally through insurance and reinsurance brokers.
AXA Corporate Solutions Reinsurance reviews its exposures to ensure that the risks underwritten are diversified geographically and by line of business in order to avoid risk of concentration. Exposure to single events is limited through reinsurance outwards to third-party reinsurers (retrocession contracts). AXA Corporate Solutions and its subsidiaries ceded €1,020 million to third party reinsurers (through retrocession agreements) in 2000.
AXA provides assistance services primarily through AXA Assistance. The services include medical aid for travelers and automobile road assistance. The clients include insurance companies, credit card companies, tour operators and automobile manufacturers.
Asset management has become increasingly important to AXA, from both a strategic and profitability perspective. The development of third-party asset management activities is a key part of AXA's financial services strategy, which seeks to capitalize on existing strengths and to expand the client base. This strategy is founded on the belief that its asset management expertise will enable AXA to benefit from the expected growth in savingsrelated products in the markets in which it operates in future years. The Asset Management Segment accounted for €3.0 billion, or 4% of AXA’s gross premiums and financial services revenues for the year ended December
AXA’s principal asset management companies are Alliance Capital and AXA Investment Managers. The asset management companies are responsible for the vast majority of AXA insurance-related assets under management as well as assets managed on behalf of third parties. AXA has asset management specialists in each of its major markets: Western Europe, the United States and the Asia/Pacific region.
The table below presents the total assets managed by AXA’s Asset Management Segment (including those assets managed on behalf of third parties) and the related fees earned by AXA’s Asset Management Segment on those assets as at the dates and for the periods indicated.
Alliance Capital, a subsidiary of AXA Financial, is one of the largest asset managers in the United States.
Alliance Capital provides diversified investment management services to individual investors and to a variety of institutional clients, including Equitable Life which is one of Alliance Capital’s largest institutional clients.
In October 1999, Alliance Capital reorganized by transferring its business and assets to a newly formed operating partnership in exchange for all of the Alliance Capital Units (“the Reorganization”). Since the date of the Reorganization, Alliance Capital has conducted the diversified investment management services business
(formerly conducted by Alliance Holding), and Alliance Holding is the holder of the Alliance Capital Units and engages in related activities. The Alliance Holding Units trade publicly on the NYSE while the Alliance Capital
As at December 31, 2000, Alliance Capital had €483 billion of assets under management, including €418 billion of assets managed on behalf of third-party clients.
AXA IM is one of the largest asset management companies based in Europe. As at December 31, 2000,
AXA IM provides diversified asset management and related services globally to a broad range of clients including: AXA’ s insurance subsidiaries (insurance-related invested assets and separate account assets), institutional investors and individual investors through mutual funds sponsored by AXA IM that are distributed through AXA’s distribution networks and external distributors.
(DLJ), a U.S.-based investment and merchant bank, which was sold to the Credit Suisse Group on November 3, 2000, and other financial services activities conducted primarily in Belgium and in France. For the year ended
December 31, 2000, the Other Financial Services Segment accounted for € 11.8 billion, or 15% of AXA’s gross premiums and financial services revenues, of which almost 91% related to DLJ. Due to the sale of DLJ, future revenues and net income from this segment will decrease significantly.
AXA Bank Belgium. Banque IPPA and ANHYP merged in early 2000 and created AXA Bank Belgium, a subsidiary of AXA Royale Belge. AXA Bank Belgium 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 insurance products offered by AXA Royale Belge and AXA Investment Managers.
AXA. Its main activities include custodial services for securities, cash and securities flows management and bank account services to high net worth individual policyholders and to general agents of AXA France Assurances.
(in euro millions except percentages) value (a) value value (a) value value (a) value value (a) value value (a) value
Less: equities allocated to UK with-profit contracts (c) 25,111 25,111 – – – – 25,111 25,111 10% 9%
(a) Amounts are net of valuation allowances. For details on valuation allowances see note 3 to AXA’s consolidated financial statements. (b) These amounts exclude separate account (unit linked) assets and investments in companies accounted for under the equity method. (c) Trading account securities and assets allocated to UK with-profit contracts are carried at estimated fair value in the consolidated balance sheet of AXA. (d) Refer to note 2 to AXA’s consolidated financial statements included in this annual report that sets out the investment valuation methodology.
results for the three years ended December 31, 2000, see notes 3 and 13 to the consolidated financial statements included elsewhere in this annual report.
AXA's fixed maturities and equity investments are predominantly publicly traded. These investments together with real estate, mortgages and loans are concentrated in the markets in which AXA’s principal subsidiaries operate.
The life & savings and property & casualty operations in France, the United States, the United Kingdom, Australia/
Segment – UK Life Insurance Group”). At December 31, 2000, assets allocated to the UK with-profit contracts
(at estimated fair value) included equity investments (€19,052 million), fixed maturities (€3,529 million), real estate (€2,228 million) and mortgage and policy loans (€302 million). The estimated fair values of the fixed maturities and equity investments (substantially all of which are publicly traded) were determined on the basis of quoted market prices. The real estate investments are appraised on an annual basis. Unrealized investment gains accounted for approximately 31.4% of the estimated fair value of such assets as at December 31, 2000
AXA is required by applicable insurance laws and regulations and generally accepted accounting principles to establish reserves for outstanding claims (claims which have not yet been settled) and associated claim expenses that arise from its property and casualty and international insurance operations. AXA establishes its claims reserves by product, type of insurance coverage and year, and charges them to income as incurred. Claims reserves
• Reserves for incurred but not yet reported (''IBNR'') claims and claims expenses. IBNR reserves are established on an undiscounted basis, to recognize the estimated cost of losses that have occurred but have not yet been notified to AXA. These reserves, like the reserves for reported claims and claims expenses, are established to recognize the estimated costs, including the expenses associated with claims settlement, necessary to bring claims to final settlement.
• development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience,
With respect to AXA’s foreign property and casualty and international insurance operations, the claims reserves are established and monitored in the local currency in which the property and casualty entity operates.
The information within this section presents separately (i) AXA’s property and casualty insurance operations
(the Property and Casualty Segment plus the insurance operations within the International Insurance Segment)
AXA Corporate Solutions Reinsurance is presented separately because (i) this business consists of insurance assumed from other insurers, (ii) the type of insurance and the nature of the risks and exposures covered is different compared to the insurance coverage provided by AXA’s property and casualty insurance operations, (iii) a portion of this business is reinsured to other reinsurers through retrocession programs which are monitored separately within the reinsurance operations, and (iv) the claims are accounted for on an underwriting year basis covering a 24month period rather than on an accident year basis covering a 12-month period.
AXA’s French property and casualty operations underwrite construction coverage with a ten-year contract term. In accordance with the French regulations, a specific provision is added to the claims reserves based on
"Reconciliation of Loss Reserves to Consolidated Financial Statements" table following the Loss Reserve Development tables.
The loss reserve development table presents the claims reserve development for calendar years 1990 through 2000. The top line entitled “gross reserves for unpaid claims and claims expenses” represents the original gross claims reserve liability reported at the balance sheet date for the year indicated. The upper portion of the table entitled “paid (cumulative)” represents the cumulative amount paid as of the end of each succeeding year with respect to the original gross claims reserve liability reported. The lower portion of the table entitled “Reserve re-estimated” represents the previously recorded liability as adjusted (that is, re-estimated) based on claims experience as of the end of each succeeding year. The estimate is increased or decreased, as more information becomes known in future periods relating to unsettled claims. For example, the gross claims reserve as at December 31, 1994 was originally €5,595 million and adjusted by €9,949 million primarily due to the UAP acquisition in 1997, and by the end of 2000, cumulative amounts paid totaled €8,591 million and the original gross claims reserve has been re-estimated to be €12,490 million at December 31, 2000. The “cumulative redundancy (deficiency)”
losses develop and are paid relatively quickly. In 2000, approximately 40% of the claims reserves were paid in the year that the claim event occurred (1999: 40%).
Note 12 to the consolidated financial statements includes: (i) a reconciliation of beginning to ending gross outstanding claims reserves including claim expenses for each of the three years ended December 31, 2000 and (ii) the effect on income relating to changes in claims reserves for the three years ended December 31, 2000 under the caption “increase (decrease) in provision attributable to prior years”.
(b) The loss reserve development table is presented on an underwriting year basis for AXA Corporate Solution Reinsurance’s business. Accordingly reserves re-estimated and the excess of re-estimated reserves in excess of the original reserves include reserves for losses occurring up to twelve months subsequent to the original yearend. For example, if an underwriting year reinsurance contract term was from January 1 to December 31, 1998 it may cover underlying policies with terms beginning both on January 1, 1998 and December 31, 1998. Losses incurred on underlying policies beginning on January 1, 1998 could occur as early as January 1, 1998 while losses incurred on underlying policies beginning on December 31, 1998 could occur as late as December 31, 1999.
(a) Represents disability claims and construction reserves. (b) Claims outstanding and related claims expenses on life insurance business. (c) Reinsurance ceded is not recognized separately as a debtor in the balance sheet but is included with insurance provisions in accordance with French GAAP. Reinsurance ceded is subject to review for recoverability.
In certain jurisdictions, regulations limit sales commissions and certain other marketing expenses that may be incurred by the insurer. In general, insurers are required to file detailed annual financial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular examinations of the insurers operations and accounts and make occasional requests for particular information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. Applicable legislation typically requires periodic disclosure concerning the corporation that controls the licensed insurer and other affiliated companies, including prior approval of transactions between the insurer and other affiliates such as, intercorporate transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory schemes are designed to protect the interests of policyholders’ rather than security holders. For further information refer to note 19 to the consolidated financial statements included elsewhere in this annual report.
European Union (''EU'') insurance directives on life insurance and insurance other than life insurance which were implemented in France, the United Kingdom, Germany and certain other jurisdictions through legislation which became effective in July 1994. These directives are founded on the ''home country control'' principle according to which the ongoing regulation of insurance companies, including their non-home insurance operations (whether direct or through branches), is the responsibility of the home country insurance regulatory authority. The home country insurance regulator monitors compliance with applicable regulations including regulations governing solvency, actuarial reserves and investment of assets. Selling activities of non-home insurance operations, however, are generally regulated by the regulator in the country in which the sale of the insurance product takes place.
As a result of the implementation of these directives, an insurance company that has been licensed to conduct insurance business in one jurisdiction of the EU may do business directly or through branches in all other jurisdictions of the EU without being subject to licensing requirements under the laws of the additional jurisdictions. In France, the United Kingdom, Germany and certain other jurisdictions, equalization reserves are required to protect the insurer against the impact of large claims and catastrophes. The basis on which these equalization reserves are established is set out in the local country regulations based on pre-established formulas applicable to certain lines of business and may be capped at a maximum level. In the United Kingdom, AXA’s insurance operations, like other UK insurers, have been subject to, and participated fully in, an ongoing review by UK regulatory authorities of pension sales practices. Provisions have been established, based on actuarial assumptions and current information available to management, in order to cover the cost of the review and required compensation to policyholders.
This review is scheduled for completion by the UK regulator by June 2002.
In the United States, AXA’s insurance operations are subject to regulation and supervision by the states and territories. Within the United States, the method of regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an insurance commissioner. While regulation varies by jurisdiction, most jurisdictions have comprehensive laws and regulations governing approval of policy forms and rates, the standards of solvency that must be met and maintained (including risk based capital measurements), the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, and the form and content of reports of financial condition to be filed. In January 1998 the Florida Attorney General and the Florida Department of
Insurance Commissioners (“ NAIC ”) adopted the Codification of Statutory Accounting Principles (the "Codification")
and the New York Insurance Department recently adopted Regulation 72 implementing a version of the Codification, effective January1, 2001. Codification provides regulators and insurers with uniform statutory guidance, addressing areas where statutory accounting was previously silent and changing certain existing statutory positions. The application of these rules as adopted by New York currently is estimated to have no significant effect on Equitable
Life or AXA’s other U.S. insurance subsidiaries. Life insurers in the United States are also subject to risk-based capital
("RBC") guidelines which provide a method of measuring the adjusted capital (statutory capital and surplus plus asset valuation allowance and other adjustments) that a life insurance company should have for regulatory purposes taking into account the risk characteristics of the company's investments and products. Equitable Life and AXA’s other U.S. life insurance subsidiaries expect that statutory surplus after adoption of the Codification will continue to be in excess of the minimum RBC levels required to avoid regulatory action.
In addition to licensing requirements, AXA’s insurance operations in these jurisdictions are also generally regulated with respect to currency, policy terms and language, amount and types of security deposits, amount and type of reserves, amount and type of local investment and the share of profits to be paid to policyholders on participating policies. In certain jurisdictions, regulations governing the constitution of the insurance reserves and similar regulations may hinder remittance of profits to shareholders and repatriation of assets.
Alliance Capital and AXA Investment Managers are subject to extensive regulation in the various jurisdictions in which they operate. These regulations are generally designed to safeguard client assets and insure adequacy of disclosure concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity and qualifications of the investment manager. These regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations.
Investment Managers are investment advisers registered under the United States Investment Advisers Act of 1940.
Act of 1940 and the shares of most of these funds are qualified for sale in all states in the United States and the
These regulations generally require diversification of invested assets, impose limitations on investments in certain asset classes and also generally prescribe the terms of transactions between the investment manager and the insurance company be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to other clients for similar services or, in certain cases, which include the ancillary service agreements, based on cost reimbursement.
PROPERTY The Company’s headquarters are located in an office building located at 25 Avenue Matignon 75008
A summary of the material differences between French GAAP and U.S. GAAP relevant to AXA is included in note 26 to the consolidated financial statements. There have been no material changes in accounting principles during the year ended December 31, 2000 as described in note 26.
Equity indices worldwide were down by 11, or 12% on the year, although there were significant disparities between countries or geographic regions and between industry sectors. All Asian stock markets (including Japan)
underperformed in 2000. The Japanese stock market recorded its worst performance in 10 years, with the TOPIX
index down by nearly 25%. Excluding Japan, the Asian markets fell by 33% in 2000. In the United States, the
States. This change was primarily due to two factors: a series of oil price increases that began in early 1999 and
As 2000 came to a close, however, there were initial signs that both trends were being reversed. Oil prices declined sharply in December 2000 (to U.S.$24 a barrel) and the Federal Reserve Bank seemed to be returning to a less restrictive monetary policy.
The world’s life and savings markets grew at sustained levels throughout 2000, as the trend toward separate account (unit-linked) products and away from traditional life insurance contracts continued, particularly in Europe.
Australia. The life and savings market continued to expand in 2000. The savings market grew by 16%
United Kingdom. Although the total number of new policies issued was unchanged, the property and casualty market grew by an estimated 10% in 2000 as compared to 1999. The growth was due to significant premium rate increases relating to automobile insurance products. The claims ratio deteriorated due to the higher average cost of bodily injury claims due to legislative changes.
Germany. The market trends were mixed. Premium rates increased in personal automobile insurance, but remained stable in commercial automobile insurance due to intense price competition. Overall, premium growth was 1.3% in 2000 as compared to 1999. 2000 was characterized by a reduction in the frequency of automobile insurance claims (primarily in the second half of 2000) and in large claims relating to commercial property and casualty risk.
Belgium/Netherlands. In line with the trend observed in 1999, the property and casualty insurance market in Belgium grew by 1.5% in 2000. In The Netherlands, premium growth was low due to premium rate pressure.
The asset management market experienced a period of intensive consolidation, particularly in Europe and the United States (examples include the acquisitions made by Allianz and the Caisse des depôts), in anticipation of the expected convergence in the global asset management and financial services markets.
In 2001, it is expected that the Asia Pacific region will account for approximately 12% of AXA’s consolidated total revenues, with Japan accounting for approximately 8%. Nippon Dantai was Japan’s thirteenth largest life insurance company and its second largest non-mutual insurance company at the time of the acquisition. It is strongly positioned in terms of distribution channels and customer base.
United Kingdom. On July 12, 2000, AXA acquired the outstanding minority interests (43.8%) in Sun
The purchase consideration was £2.3 billion (approximately €3.7 billion). Goodwill of €2.0 billion was recorded in respect of the transaction and is being amortized over 30 years.
L.P. Part of the cash was funded by AXA Financial through a financing arrangement whereby, in June 2000, AXA Financial purchased 32.6 million units of limited partnership interest of Alliance Capital Management
L.P. for $1.6 billion. Following the consummation of these two operations, AXA Financial owned 52.8%
of Alliance Capital’s operations, as compared to 56.3% at January 1, 2000. Goodwill was recorded in respect of AXA Financial’s additional investment in Alliance Capital ($0.5 billion) and Alliance Capital’s acquisition of the Sanford C. Bernstein activities ($3.4 billion). Total goodwill of $3.9 billion (€4.3 billion) is being amortized over 20 years.
• On November 3, 2000, AXA sold its interest in DLJ to the Credit Suisse Group. Total consideration in respect of this transaction was $7.3 billion (€8.4 billion), and consisted of $2.4 billion in cash and 25.7 million shares of the Credit Suisse Group. On the business day following the sale of DLJ, Credit Suisse Group repurchased 6.4 million shares for $1.2 billion. The realized gain on the sale of DLJ was €2.0 billion (net group share). The remaining 19.3 million shares of Credit Suisse Group held by AXA and its affiliates were sold by the end of January 2001.
AXA and its subsidiaries, including AXA Merger Corp, increased their ownership from 60.2% to 92.4% of the issued and outstanding shares of AXA Financial common stock. In addition, pursuant to an Agreement of Plan of Merger dated October 17, 2000 among AXA, AXA Merger Corp. and AXA Financial, AXA had an obligation to acquire all of the remaining shares of AXA Financial common stock outstanding through the merger of AXA Merger Corp. with and into AXA Financial. The merger was completed on January 2, 2001. See “Events Subsequent to December 31, 2000”. For the purposes of preparing the consolidated financial statements, the date of acquisition was December 31, 2000.
AXA Merger Corp. with and into AXA Financial. As a result of AXA issuing ordinary shares in the exchange offer, a portion of the goodwill was charged directly to shareholders’ equity of €2.5 billion. The remaining goodwill of €4.8 billion was recorded as a goodwill asset and is being amortized as follows: 30 years (life insurance operations) and 20 years (asset management operations), or €175 million per year.
Hong Kong. In November 1999, AXA Australia (whose fiscal year-end is September 30) purchased the outstanding minority interests (26%) in AXA China Region for HK $4.1 billion (€519 million). Subsequent to this transaction, AXA China Region was delisted from the Hong Kong Stock Exchange. Goodwill recorded in respect of this acquisition was AU$ 473 million (€300 million) and is being amortized over 20 years, consistent with the estimated useful life used in the accounting for the acquisition of AXA Asia Pacific Holdings (formerly National
Mutual Holdings, the parent company of AXA China Region) in 1995.
AXA and BBVA each maintained their 50% ownership interest in Hilo Direct Seguros.
AXA) resulted in the issuance of 2.0 million new ordinary AXA shares, increasing shareholders’ equity by €216 million.
June 2000. AXA received net cash proceeds of €3.7 billion through the issuance of 30.2 million ordinary shares (price per share: €123) with preferential subscription rights. These proceeds were used primarily to fund the buyout of the minority interests in Sun Life & Provincial Holdings.
Since 1994, AXA has regularly offered shares to its employees. In July 2000, AXA employees invested a total of €235 million in the employee stock ownership program, resulting in the issuance of 2 million of AXA
February 2000. AXA issued € 1.1 billion in dated subordinated convertible notes. In March 2000, AXA
Dantai and the buyout of minority interests in AXA China Region.
Following the annual meeting of shareholders on May 3, 2000, Claude Bébéar was appointed Chairman of the Supervisory Board and Henri de Castries was appointed to succeed him as President of the Management
Board. The other members of the Management Board are Françoise Colloc’h, Gérard de La Martinière, Edward
February 6, 2001. Following the letter of intent executed in October 2000, AXA agreed to sell Banque
On December 22, 2000, the High Court of Justice in the United Kingdom approved the financial reorganization plan that AXA Equity & Law submitted to its policyholders, according to which a portion of the assets of AXA Equity
On January 1, 2001, the outstanding 4.5% mandatory convertible bonds matured. At such time, the debt was converted into 7.2 million ordinary shares of AXA, of which 2.8 million ordinary shares will be owned by subsidiaries of AXA. This will increase shareholders’ equity by €320 million and decrease consolidated debt by €192 million (€128 million of debt was held by AXA affiliates and, therefore, eliminated on consolidation in prior periods) in 2001.
On January 2, 2001 and in connection with the buyout of the minority interests in AXA Financial, Inc.,
AXA ADS, and (iii) AXA Financial became a wholly-owned subsidiary of AXA. 4.9 million of ordinary shares were issued in connection with the merger thereby increasing shareholders’ equity by €0.7 billion. As a result, the exchange offer and subsequent merger of AXA Financial were completed. Total ordinary shares issued by AXA
At the annual general meeting of shareholders of AXA held on May 9, 2001: • AXA’s shareholders approved a 4-for-1 stock split of 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 one-half of an ordinary share to one ADS representing one ordinary share. The pro-forma impact on net income per ordinary share is presented in note 27 to the consolidated financial statements included elsewhere in this annual report; and
and the ordinary share. The dividend was paid on May 14, 2001 to holders of AXA ordinary shares and is payable on June 8, 2001 to holders of AXA ADSs.
• In order to better reflect actual business volume, income related to the sale of investment products by insurance companies, in particular income earned by AXA Client Solutions (United States), has been recorded as revenues.
• In 2000, acquisition costs that relate to unearned premiums in respect of the property and casualty business were included under the balance sheet caption “Other assets”. They were previously under the balance sheet caption “Deferred acquisition costs”. All changes or variances are presented on a comparable basis1, i.e. on a constant exchange rate, structural and methodological basis, unless otherwise stated.
The tables below present AXA’s consolidated gross premiums and financial services revenues and net income for the years indicated.
CONSOLIDATED GROSS PREMIUMS AND FINANCIAL SERVICES REVENUES Years ended December 31,
Impact of exceptional operations (a) 2,779 (53) – 1,643 156 –
TOTAL excluding impact of exceptional operations 3,247 2,932 2,505 2,261 1,865 1,531
France (18.7%), Japan (12.3% excluding the impact of the acquisition of Nippon Dantaï), Australian/New Zealand
products. Revenue growth was more modest in the United States (4.1%) due to financial market volatility, which resulted in slower growth in gross premium in the second half of 2000. Gross premiums decreased by 3.7% in the United-Kingdom compared with the corresponding prior year, as in 1999 new business was supported by promotional campaigns on with-profit contracts, which were not repeated in 2000.
Revenue growth in the Property and Casualty Segment was 3.7% on a comparable basis, mainly due to growth in AXA’s operations in the Southern European countries, in particular, Italy (an increase of 15%
due to growth in the portfolio) and Spain (an increase of 23%, primarily due to premium rate increases). Revenue growth was also recorded in the United-Kingdom (1.6%, attributable to premium rate increases) and Belgium
– provision of €125 million recorded during the period in connection with the sale of Banque Worms, which was agreed in February 2001.
In 2000, AXA’s consolidated net income before exceptional operations was €2,261 million, or an increase of €396 million, or 21.2%, as compared to 1999 consolidated net income before exceptional operations of €1,865 million. Before goodwill amortization expense (group share), net income would have been €2,540 million, or an increase of 24.2%.
On a constant exchange rate basis, 2000 consolidated net income before exceptional operations would have been €108 million lower, and the impact of exceptional operations €229 million lower.
Revenue growth in the Property and Casualty Segment was 2.0%, despite slight declines in gross premiums earned in France, Germany and Belgium, which together accounted for nearly 60% of gross revenues in this segment.
AXA’s consolidated net income totaled €2,021 million in 1999, which included a net non-recurring gain of €156 million in connection with the acquisition of GRE. This gain included the following items: • a dilution gain realized by the Company due to the decrease in AXA’s ownership of SLPH, as SLPH issued ordinary shares to partly finance the acquisition of GRE (€469 million, group share); • the exceptional amortization of goodwill relating to inadequacies in the technical reserves in connection with
CONSOLIDATED SHAREHOLDERS’ EQUITY At December 31, 2000, consolidated shareholders’ equity totaled €24.3 billion. The movement in shareholders’ equity since December 31, 1999 and December 31, 1998 is presented in the table below: Shareholder’s Number of ordinary Equity shares outstanding
– Capital increase reserved for employees of the Company 113 1
– Change in goodwill arising from UAP acquisition (due to AXA’s dilution in SLPH dilution and an adjustment to goodwill from Royale Belge aquisition charged to shareholders’ equity) 140 –
– Capital increase reserved for employees of the Company 235 2
Certain information provided below including, earnings per share excluding the impact of exceptional operations, represent non-GAAP measures and, therefore, may not be comparable with similarly-titled measures reported by other companies as it is not defined under either French GAAP or U.S. GAAP.
Based on AXA’s consolidated net income of €3,904 million in 2000 and a weighted average number of outstanding ordinary shares in 2000 of 379.5 million, basic earnings per share in 2000 was €10.28 (1999: €2,021 million, 353.0 million and €5.73, respectively, and 1998: €1,531 million, 338.7 million and €4.52, respectively).
The following analysis was based on AXA’s consolidated net income, excluding the impact of exceptional operations of €1,643 million in 2000 and €156 million in 1999 (1998: nil).
• Diluted EPS excluding the impact of exceptional operations was €5.69 in 2000 as compared to €4.98 in 1999, or an increase of 14.2%.
declared in 2001 in respect of the 2000 financial year. The increase corresponded to 17.3% growth based on a compounded average growth rate.
At the same time, the number of outstanding ordinary shares has increased from 188 million in 1995 to 416.2 million at December 31, 2000 (421.1 million following the completion of the buyout of the minority interests in AXA Financial on January 2, 2001).
(1) Basic earnings per share before exceptional operations and goodwill amortization in 2000 was €6.69, or an increase of 15.5% as compared to 1999. Diluted earnings per share before exceptional operations and goodwill amortization in 2000 was €6.38, or an increase of 16.8% as compared to 1999.
RESULTS OF OPERATIONS BY OPERATING SEGMENT The tables below present the gross premiums and net income attributable to AXA’s Life and Savings Segment
In 2000, the Life and Savings Segment accounted for 58% of AXA’s gross revenues as compared to 56%
The following table presents the operating results of the life and savings operations in France for the years indicated.
(b) Includes the net result of premiums, insurance benefits and claims and commissions ceded under reinsurance contracts. (c) Acquisition expenses are net of changes in deferred acquisition costs (DAC) and changes in the unearned revenue reserve, and includes the amortization of the value of purchased life business in-force (VBI).
of gross premiums in 2000, or an increase of 1.3% as compared to 1999. The increase was primarily due to 11.5% growth in credit insurance.
Acquisition expenses remained relatively stable (an increase of €11 million) despite significant growth in new business and significant reductions in certain sales-related expenses and commissions arising from a change in the product mix. Administrative expenses decreased by €84 million. In 1999, administrative expenses included a €142 million provision (€89 million net of tax) for charges related to the implementation of the strategic change program. Excluding the impact of this provision, administrative expenses increased by €58 million in 2000, primarily due to expenditures relating to Information Technology in connection with the strategic change program. Excluding the impact of the strategic change program provision in 1999, the ratio of general expenses1 to gross premiums was 12.6%, as compared to 13.9% in 1999. The ratio of general expenses to insurance reserves was virtually unchanged at 1.96% in 2000 (1999: 1.95%). Specific to retirement savings-related products, the ratio of general expenses to retirement savings reserves was 1.40% in 2000 as compared to 1.48% in 1999.
Income before income tax expense increased by €151 million in 2000. Income tax expense increased by €98 million in 2000, which included a €21 million charge due to a change in French regulations on the taxation of dividends received relating to participating equity interests.
The life and savings operations in France contributed €385 million to AXAís consolidated net income in 2000, as compared to €331 million in 1999. Excluding the impact of several non-recurring events in 1999 (capital gains on Elf and Paribas equity securities tendered in the respective public offers of exchange, the strengthening of reserves on certain contracts, the strategic change program provision, the deferred tax asset relative to financial reinsurance arrangements) and in 2000 (change in the taxation of certain type of dividends received), contribution to AXA’s consolidated net income would have been €406 million in 2000 (1999: €377 million). Excluding these events, the increase in net income was attributable to business growth and productivity gains.
The net investment result decreased by €140 million primarily due to a reduction in net realized gains partially offset by an increase in interest income of €255 million. In 1999, net realized gains amounted to €734 million, including €413 million in connection with the tendering of Paribas and Elf equity securities. In addition there were capital losses of €95 million on the sale of bonds in connection with a portfolio-restructuring program undertaken during a period of higher interest rates. Of the total increase in investment income, €268 million was due mainly to the fixed maturity securities attributable to higher bond yields. In 1998, gains of approximately €1,126 million were realized of which €233 million was realized, in connection with the buyout of minority interests in AXA Royale Belge.
Acquisition costs remained stable year on year despite the growth in new business due to a cost realignment across the life insurance products and lower commissions rates. Administrative expenses increased by €158 million in 1999 and included a €142 million provision for costs associated with implementation of the strategic change project in AXA France. Excluding this provision, the ratio of general expenses to gross premiums and insurance reserves was 13.9 % and 1.95%, respectively (1998: 15.1% and 2.12%, respectively).
Income tax expense decreased €91 million as compared to 1998 due to a lower tax rate and a €55 million income tax benefit recorded in respect of financial reinsurance arrangements associated with UAP in 1999.
The French life and savings operations contributed €331 million (group share) to AXA’s consolidated net income, or an increase of €66 million from 1998. This result was affected primarily by the provision established in respect of AXA France’s change program.
The following table summarizes the net investment results of the French life and savings operations for the principal categories of general account 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.
The following table presents the operating results of the life and savings operations in the United States for the years indicated.
On a comparable basis, gross revenues increased by 4.1% in 2000 as compared to 1999. The significant growth recorded in the first half of the year (13.9%) was followed by a slowdown in the second half of the year due to uncertainty arising from investment market volatility. Variable life and annuity sales increased by 1.4% and accounted for 65% of gross premiums. The increase was mainly due to the commercial success of products with new features and options, and continued growth in sales through the non-proprietary wholesale network (an increase of 12.8% for brokers, financial advisors and banks as compared to a decrease of 3.8% for the agency sales force). Gross individual life insurance premiums increased by 2.4% and accounted for 23% of gross premiums in 2000. Gross premiums from other products increased by 7.6% and accounted for 8% of gross premiums. The increase was primarily due to growth in business with institutions.
Revenues from other activities increased by 121.8% due to growth in AXA Client Solutions’ asset management business (up 260.9%) and a 38.4% increase in mutual fund sales commissions.
The net investment result was €4,448 million, an increase of €2,015 million in 2000 as compared to 1999. This increase included the €2,483 million gross realized gain on the sale of DLJ net of unrealized and realized losses on Credit Suisse Group shares received in connection with the transaction (€936 million net group share). This net increase was partially offset by a significant increase in realized losses and valuation allowances on fixed maturities investments of €867 million (including €604 million in the second half of the year, €236 million1 net group share), as compared to €291 million in 1999, principally on high-yield bonds. In addition realized gains on publicly-traded equity securities decreased in 2000. Excluding these items, as well as the €90 million gain realized on the initial public offering of DLJdirect tracking stock in 1999 and the impact of foreign currency fluctuations, the net investment result would have increased by €43 million, primarily due to the increase in interest income (attributable to higher returns on fixed maturity investments and on short-term investments).
Insurance benefits and claims decreased by €474 million, or 4.1% on a comparable basis. In 2000, there was an increase in management fees, which relate primarily to the separate account portfolios, and a decrease in interest credited on policyholder account balances.
Acquisition expenses (before the change in DAC) increased from €851 to €931 million in 2000, or 9.5%
recorded in 1999, DAC amortization decreased by 18.7%, mainly due to the realized losses and valuation allowances recorded in respect of the high-yield bonds in 2000.
The increase in income tax expense was primarily due to the realized gain on the sale of DLJ.
The net investment results decreased by €83 million in 1999 as compared to 1998, or 7.5%. This decrease was due primarily to net realized losses of €32 million in 1999 as compared to net realized gains of €86 million in 1998. Realized losses and valuation allowances from the writedown and sale of U.S. high yield and emerging market fixed maturities were partially offset by realized gains on publicly-traded equity securities and a realized gain of €90 million from the sale of approximately 18% interest in DLJdirect tracking stock in the second quarter
Insurance benefits and claims increased by 8.1%, principally due to an increase in gross premiums, partially offset by lower benefits paid in the year and a decrease in interest crediting rates on policies.
Acquisition expenses (before the change in DAC) increased by 8.8%, primarily due to an increase in new business gross premiums. Acquisition costs (after the change in DAC) increased substantially in line with the increase in gross premiums. The amortization of DAC totaled €481 million, or an increase of 46.1% from 1998, due to the €124 million non-recurring adjustment from revisions to estimated gross profits related to the investment asset reallocation in the second quarter 1999. Excluding this non-recurring adjustment, DAC amortization increased by 8.5 %, mainly due to the impact of higher separate account fees and higher margins. Administrative expenses increased by €82 million in 2000 primarily due to higher strategic initiative and infrastructure expenses, inflation and higher compensation and benefits.
(in euro millions, except percentages) Yields (a) Amount (c) Yields (a) Amount (c) Yields (a) Amount (c)
Equity in income (loss) of unconsolidated entities 11 6 5 –
Gross premiums from the life and savings operations in the United Kingdom totaled €7,939 million in 2000. Gross premiums attributable to AXA Sun Life were €6,860 million, or a decrease of 4% in 2000 as compared to 1999. Gross premiums attributable to PPP Healthcare were €1,079 million, or an increase of 5% in 2000 as compared to 1999.
The net investment result increased by 11% due to higher net realized gains in 2000 to €1,310 million, an increase of 21% on a constant exchange rate basis. Realized gains on the sale of equity securities were €1,048 million in 2000, primarily due to the reallocation of the UK investment portfolio at the beginning of the year.
Insurance benefits and claims totaled €8,474 million. In 2000, AXA Sun Life established an additional provision of €169 million before policyholder participation for Pension Misselling, as compared to €107 million in 1999 in relation to pension and other contracts.
The growth was due to premium rate increases enacted to ensure the profitability of group business. In individual products, the impact of premium rate increases was partially offset by policy cancellations, resulting in a slight increase in gross premiums of 2.7%.
The claims ratio for all accident years was stable at 82% in 2000 and 1999.
The contribution to AXA’s consolidated net income in 2000 was €34 million, or an increase of €14 million from 1999. This increase was partially due to changes in the scope of operations in 1999 and 2000. On a comparable basis (and on the basis of 56% equity ownership), net income remained stable between 1999 and 2000.
Gross premiums of € 7,205 million included eight months of post-acquisition activity from PPP Healthcare.
For the year ended December 31, 1999 (including the four month period before AXA’s acquisition of GRE), the long term care operations had gross premiums of €1,046 million, or an increase of 8.0 %, primarily due to premium rate increases on individual and group health contracts.
Gross premiums written by the life and savings operations increased by 24.7 % in 1999 as compared to 1998. The increase related primarily to single premium investment contracts, which increased by 36.5% and represented 73 % of the business written. The increase was attributable to the strong performance in the equity markets in 1999. Overall, savings-type contracts increased by 59 %. The new business level was further supported by promotional campaigns on with-profit contracts at the beginning of 1999, and on separate account (unitlinked ) contracts. Single premiums on retirement products increased by 10.8 % in 1999 primarily due to the launch of a new product directed at corporate management. Gross premiums on regular premium contracts increased slightly by 1.4 % in 1999, primarily due to the insurance market waiting for the launch of the new retirement product in the United Kingdom called the “Stakeholder pension”.
The net investment result of €2,334 million included the post-acquisition net investment results of the
In order to optimize the duration period between the assets and the related insurance liabilities, AXA Sun Life reallocated a portion of its fixed maturity portfolio (with a 30-year duration period). Based on the UK methodology for profit allocation to participating policyholders, nearly all of these profits were attributed to the policyholders and, therefore increased insurance benefits.
Insurance benefits and claims totaled €8,310 million, of which €560 million related to the GRE subsidiaries and €7,750 million related to AXA Sun Life. AXA Sun Life’s insurance benefits increased by 24.5% in 1999 as compared to 20.9% in 1998. In 1999, AXA Sun Life reviewed the basis for measuring and deferring acquisition
costs which resulted in an increase in technical charges of €45 million. In addition, AXA Sun Life strengthened its reserve for “Pension Misselling” by €107 million in 1999 compared to €58 million in 1998. In addition, AXA
Sun Life has strengthened reserves specific to certain annuity contracts, as a result of the decline in yields expected on the assets supported by these products (€15 million).
Acquisition costs (before the change in DAC) totaled €645 million, of which €47 million related to GRE
subsidiaries, or increase of 28.4% in 1999 as compared to 1998. Acquisition costs (after the change in DAC)
The ratio of general expenses to insurance reserves was 1.36% in 1999 as compared to 1.33% in 1998.
On a comparable basis, the income tax expense decreased by €20 million in 1999, primarily due to the decrease in the corporate tax rate from 31% to 30 %, effective in April 1999. The contribution to AXA’s consolidated net income was €182 million, of which €23 million related to GRE subsidiaries.
The following table summarizes the net investment results of the life and savings operations in the United
Kingdom for the principal categories of general account 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.
(a) Yields are calculated on a constant structural basis (i.e. excluding GRE investment result for 1999) and on the basis of average beginning and end of period asset carrying value for each asset category. Amounts relating to the fair value of assets allocated to with-profits contracts are included in each asset category.
The financial information below included six-month post-acquisition results in respect of Nippon Dantai following AXA’s acquisition of Nippon Dantai in March 2000. AXA’s existing life and savings operations (AXA Life
The fiscal year end for AXA’s principal operations in the Asia Pacific Region is September 30th.
GROSS PREMIUMS WRITTEN Years ended December 31, (in euro millions) 2000 1999 1998
Gross premiums totaled €3,353 million and included individual and group life insurance products (46%
of the total), retirement products (39%) and health insurance products (14%). AXA Japan is active in the group insurance market, in which it earns 38% of its total written premiums as most of its sales activity is though affinity groups such as the Japanese Chamber of Commerce and its specialized sales force. In July 2000, the life and savings operations began to sell variable life type products, which accounted for 2% of gross premiums written in 2000.
In a market adversely impacted by declining investment yields and lack of consumer confidence in the financial sector, AXA Japan recorded a higher than forecasted surrender level. Nonetheless, more than half of all surrenders concerned unprofitable products.
Net operating income before amortization of goodwill was €56 million. The contribution to AXA’s consolidated net income was €21 million.
in 2000 as compared to 1999. This increase was attributable to 34% growth in retirement savings premiums as a result of a competitive product offering. Retirement savings products accounted for 42% of gross premiums in 2000. Health insurance premiums increased by 9.2%, primarily due to government incentives encouraging consumers to take out private medical insurance.
General expenses increased by €8 million in 2000 due to non-recurring expenses in respect of its transformation project, the Year 2000 project and the enactment of a new tax on goods and services. The ratio of general expenses to gross premiums improved from 16.4% in 1999 to 14.0% in 2000 due to premium growth.
As a result of a tax reform in Australia that changed the method for calculating income tax, there was a favorable tax impact of €19 million in 2000.
The net investment result was adversely impacted by realized losses of €9 million (group share) on AXA
AXA’s consolidated net income. A realized loss of € 9 million was recorded by AXA in 2000 in respect of the sale.
Gross premiums increased by € 68 million due to the success of the savings product launched in March 2000 and offered through the bank distribution channel (€ 56 million). The contribution to AXA’s consolidated net income decreased by € 1 million, primarily due to the reduction in AXA’s ownership of AXA Life Singapore from 100% to 51% following the transfer of this operating unit on October 1, 1999 to AXA Asia Pacific Holdings.
The following commentary related to AXA’s operations in Japan (AXA Life Japan) before the acquisition of Nippon Dantai in 2000.
Gross premiums decreased by 11.2% mainly due to the transfer of activity on the short-term savings products to an external third party, policy terminations and a fall in policy renewals of 51.6% associated with a change in tax regulations on certain types of retirement contracts. Excluding these two factors, gross premiums increased by 2.9%.
On a comparable basis, gross premiums in AXA China Region increased by 3.9 % in 1999 as compared to 1998 primarily due to a 5.6% increase in gross premiums from savings and individual health products, which accounted for 75% of the Hong Kong business. This increase was primarily the result of growth in the portfolio despite a lower volume of new business (a decrease of 13.9%) due to the economic crisis.
On a comparable basis, gross premiums increased by 2.7% in 2000 as compared to 1999. Gross life insurance premiums increased by 1.3% in 2000 and represented 81% of gross premiums. Gross health insurance premiums increased by 9.3%. Growth in the life insurance business, which was driven by the rapid development of separate account products, was partially offset by the decrease in single premiums products as the market awaits for pension reforms scheduled for 2002. The increase in gross health insurance premiums exceeded the 4% growth in the market as a whole.
Acquisition and administrative expenses totaled €366 million reflecting the impact of new business growth, non-recurring expenses in respect of the integration of Albingia (former GRE subsidiary) incurred in 1999, and the positive impact of a change in the compensation of intermediaries on separate account business. The ratio of general expenses to gross premiums improved slightly to 16.1% in 2000 from 16.6% in 1999. The ratio of general expenses to insurance reserves was 1.60% in 2000 as compared to 1.67% in 1999.
This increase was mainly due to the decrease in interest and bonuses credited to policyholders and the tax reform, as well as the increase in AXA’s ownership interest in AXA Colonia, from 86% to 91% at December 31, 2000.
On a comparable basis (excluding Albingia, which was acquired in connection with the GRE acquisition), gross premiums increased by 7.6% in 1999 as compared to 1998. Gross premiums totaled €2,757 million including €2,098 million for life insurance, €494 million for health insurance, and €165 million of gross premiums from
The increase in gross premiums related new business growth, particularly in the second half of 1999 and in response to a German government announcement on tax reforms that reduced the tax advantages on certain insurance policies underwritten after January 1, 2000. These plans were withdrawn by the government in December 1999. Gross health insurance premiums increased by 10.1% in 1999 as a result of premium rate increases that took effect on January 1, 1999.
General expenses totaled €425 million, an increase of €25 million, in 1999 as compared to 1998. This increase was attributable to an increase in acquisition expenses, which was in line with new business volume.
The ratio of general expenses to gross premiums decreased slightly to 16.4% in 1999 as compared to 16.6%
in 1998. The ratio of general expenses to insurance reserves decreased slightly to 2.09% in 1999 as compared
(which are not subject to tax), and (iii) increased dividends, which were subject to a lower tax rate in Germany than unallocated income.
Total General Account assets at year end 24,439 22,902 18,528 Separate Account assets 94 55 24 Investments in companies accounted for under the equity method – – –
(a) Yields are calculated on the basis of average beginning and end of period asset carrying value for each asset category. (b) Includes net investment results for invested assets not detailed in the table above.
The net investment result increased by €7 million in 2000 as compared to 1999. Investment income from fixed maturity investments increased by €19 million in 2000 due to an increase in fixed maturity investments.
in 2000 as compared to 1.96% in 1999 (excluding the restructuring provision). The ratio of general expenses to gross premiums was 15.6% in 2000 as compared to 17.7% in 1999.
(which are taxable), as compared to realized gains on equity securities in 1999 (which are non-taxable in Belgium).
The contribution to AXA’s consolidated net income in 2000 decreased by €36 million, primarily due to the exceptionally high level of realized gains on equities in 1999.
Within the context of the corporate reorganization, the net investment income remained significant at €580 million even though the net realized gains were €314 million lower compared to 1998. 1998 was marked by high level of realized gains due to the sale of stock associated with purchase of the minority interests in Royale
The 1998 operating result was affected by a high level of net realized gains on the sale of equity securities, which was partially offset by provision for restructuring and an exceptional amortization on VBI of €142 million
(group share). After eliminating these items, AXA Royale Belge’s contribution increased in 1999 as compared to 1998 because of an increase in AXA’s ownership interest in AXA Royale Belge (99.8% as of December 31, 1999, compared to 47.6% for the first seven months and 98.7% for the last five months of fiscal 1998).
The following table summarizes the net investment results of the life and savings operations in Belgium in the principal categories of general account 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.
The following tables present the operating results for the other life and savings operations of AXA, which include the Netherlands, Italy, Spain, Portugal, Austria, Hungary, Luxembourg, Switzerland, Canada, Morocco and Turkey, for the years indicated.
The Netherlands. Gross life insurance premiums rose by 5.6% due to premium rate increases in health insurance and the introduction of a new single premium universal life insurance product.
The contribution to AXA’s consolidated net income in 2000 increased by €15 million from 1999. The contribution specific to the life insurance business was €52 million or an increase of €3 million in 2000 as compared to 1999. The underwriting margin deteriorated by €11 million, primarily due to lower surrender penalties levied on mortgage products (decrease of €4 million) and higher mortality experience on traditional savings products
and higher fees on separate account products (€8 million) due to growth in separate account assets.
The health insurance business contribution was €3 million in 2000, up €12 million from 1999, of which some non-recurring events accounted for €5 million (after tax). Some of these non-recurring events (the sale of the unprofitable line of business, an audit of claims files and the resolution of administrative backlogs, and the 11% increase in premium rates implemented at the beginning of 2000 are in line with the company’s recovery objectives.
Italy. Gross premiums increased by 13.8% in 2000 due to strong growth in separate account product sales, which accounted for 50% of all gross premiums in 2000.
The contribution to AXA’s consolidated net income increased by €19 million (€23 million, on a comparable basis, that is, excluding the impact of the deconsolidation of Eurovita). The increase was primarily due to an improvement in the underwriting margin (€20 million, group share) due to (i) the release of a provision for interest rate risks established in 1999 and (ii) growth in new business (€6 million). The net investment result decreased by €4 million, with the €5 million increase in realized gains on equity investments in 2000 not sufficient to offset the positive impact in 1999 from the release of an impairment provision established on South American government bonds.
Spain. Net income increased by €11 million in 2000. In 1999, a non-recurring expense of €12 million related to changes in the mortality tables used to calculate insurance reserves for annuities.
The Netherlands. On a comparable basis, gross premiums for the life and health insurance operations in the Netherlands increased by 1.5% in 1999. The level of activity in the life insurance operations declined by 3.9% as a result of the termination of certain products offered to customers at January 1, 1999. On a comparable basis, gross premiums on health insurance products increased by 14.1% due to an increase in premium rates in line with market trends. After eliminating disability income posted in 1998 under property and casualty insurance and taking into account AXA’s increase in ownership interest, the contribution to AXA’s consolidated net income of €40 million in 1999 represented a small decrease of €5 million compared to 1998. The life insurance business contribution to net income of €49 million. The health insurance business contribution had a net loss of €9 million because of continued underwriting losses despite an increase in premium rates, which became effective in the beginning of 1999.
Italy. Growth in gross premiums increased by 24.2% primarily due to new distribution networks (financial advisors and bank distribution arrangements). This growth principally related to the separate account (unit-linked)
Spain. Gross premiums increased by 6.0% due to the success of a new separate account (unit-linked)
product launched in June 1999. Separate Account products accounted for 16.5% of gross premiums in 1999.
The contribution to AXA’s consolidated net income (excluding the impact of exceptional operations) decreased by €260 million in 2000 due to the strengthening of insurance reserves in the United Kingdom, lower net income from Belgium (which had significant realized gains in 1999), and a decrease in net income from the other property and casualty operations as a result of strengthening of insurance reserves in Italy and Ireland, and a valuation allowance established in Morocco. The German property and casualty operations had a significant increase in the net income contribution largely due to the positive impact of tax reform in 2000. The French property and casualty operations had a higher net income contribution in 2000 due to an improved claims ratio, despite the increased insurance cost in 2000 from the December 1999 storms in Western Europe.
The following two footnotes apply to all tables that present the operating results of operations within the Property and Casualty Segment and the International Insurance sub- sections. (a) Includes investment income, net of investment expenses and interest expense on short-term and long-term debt, and net realized investment gains or losses. (b) Includes the net result of premiums, insurance benefits and claims and commissions ceded under reinsurance contracts.
Gross premiums written increased by 2.0% in 2000 and were stable on a comparable basis as compared to 19991. Gross premiums written on personal automobile insurance increased by only 0.2% and accounted for 34% of gross premiums. Gross premiums written on commercial automobile insurance increased by 1.3%
The net investment result decreased by €58 million due to the decline in realized gains on the sale of equity securities (€323 million in 2000 as compared to €473 million in 1999). In 1999, exceptional gains were realized on Paribas and Elf equity securities tendered in public offers of exchange of €386 million (€299 million after tax). In 2000, among other things, a gain of €75 million (€60 million after tax) was realized on the sale of ordinary shares of AXA held by the subsidiary. The pursuit of the real estate disposal program and the recovery in the property market led to realized gains of €19 million as compared to realized losses of €33 million in 1999.
(1) Including the elimination of e 85 million in gross premiums transferred from the AXA Corporate Solutions Insurance portfolio.
The following table presents the operating results for the property and casualty operations in France for the years indicated.
The portfolio transfer from AXA Corporate Solutions Insurance increased insurance claims by €67 million in 2000.
Excluding these events, insurance claims (gross of reinsurance) decreased by €70 million in 2000 due to (i) an improvement in the claims ratio for the current accident year by 20 basis points (excluding the storms) to 78.5%
in 2000 as compared to 78.7% in 1999, and (ii) to favorable loss reserve development (€45 million in 2000 as compared to €16 million in 1999).
The net reinsurance ceded result decreased by €310 million, primarily due to the reinsured amount of claims related to the December 1999 storms (€449 million in 1999 and €229 million in 2000). Consequently, the insurance cost of these storms for the French property and casualty operations was €143 million in 1999 and €65 million in 2000. The net reinsurance ceded result was also adversely impacted in 2000 by changes in the price of natural catastrophe reinsurance cover as compared to 1999. Taken together, these items resulted in a deterioration in the claims ratio1 for all accident years to 81.6% in 2000 as compared to 79.5% in 1999.
Excluding the impact of the December 1999 storms and equalization reserves, the combined ratio was 105.1%
(1) Claims ratio: The ratio of incurred claims and claims handling expenses to premiums earned, net of reinsurance ceded. (2) Expense ratio: The ratio of property and casualty operating expenses (acquisition and administrative) to premiums earned, net of reinsurance ceded. (3) Combined ratio: The sum of claims ratio and the expense ratio, both of which are net of reinsurance ceded.
December 31, 1999, the total equalization reserve was €88 million. Excluding the December 1999 storms, the 1999 claims ratio would have been 75.7%, which would constitute an improvement of 170 basis points largely due to a reduction in the reserve for claims handling expense after more refined methods were adopted for calculating the reserve.
Net income increased by €82 million, primarily due to the increase in net investment results attributable to realized gains on securities tendered in the Paribas and Elf public offers of exchange. This increase was offset partly by the establishment of a provision to cover costs in connection with the strategic change program and the December 1999 storms.
Fixed maturity investments: Net realized gains (losses) – – (0.3%) (12) 1.1% 43
Equity in income (loss) of unconsolidated entities 1 2 2 1
The net investment result decreased by €77 million due to a lower level of dividends received in respect of “special fund” investments.
The decrease in the net reinsurance ceded result was due to fewer large claims in 2000 as compared to 1999, which included the impact of the December 1999 storms in Western Europe. It also reflects the realignment of Albingia’s reinsurance contracts with non-proportional treaties.
The net decrease in income tax expense was attributable to the reduction in the tax rate from 49% to
Year Ended December 31, 1999 compared to Year Ended December 31, 1998
The 1999 gross premiums written included €352 million from Albingia for the post-acquisition period, as it was acquired in connection with the GRE acquisition in May 1999. Excluding Albingia, gross premiums written decreased by 0.8% on a comparable basis. Intense competitive pressures, particularly in automobile and commercial risk insurance (which accounted for 27 % and 5% of gross property and casualty premiums, respectively), combined with a difficult economic market, continued to exert downward pressure on premium rates. Gross premiums written by the direct marketing insurance subsidiary Sicher Direct totaled €80 million, or an increase
Excluding Albingia, income tax expense remained constant in 1999 as compared to 1998, after the exclusion of non-recurring items, which reduced income tax expense by €23 million in 1998.
Net income totaled €42 million and included a €35 million from the direct marketing insurance operations as these operations are still in the development phase, and a loss of €3 million from Albingia for the post-acquisition period as it included goodwill amortization of €8 million. Overall, the net income was affected adversely by the underwriting results.
Germany 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.
The following table presents the operating results for the property and casualty operations in the United
The change in the unearned premium reserve was primarily due to the decrease in gross premiums on business that has been put into run-off.
The claims ratio for all accident years deteriorated by 1,340 basis points1 to 90.5% in 2000, due to a €395 million pre-tax increase in insurance reserves (€277 million after tax). The increase included €95 million
(€67 million after tax) in respect of business written by former GRE subsidiaries prior to its acquisition by AXA
in 1999. The €67 million was charged against shareholders’ equity as a purchase accounting adjustment. The remaining increase in the insurance reserves was primarily due to the deterioration in the automobile and casualty claims experience in the UK market and a review of the insurance risks in the portfolios, which reduced net income by €125 million (group share). The claims ratio for all accident years was also impacted by a series of floods that occurred in the fourth quarter 2000 of €79 million, net of reinsurance and before tax (€55 million net group share).
(an information technology services company), which increased the expense ratio by 100 basis points.
The combined ratio increased from 112.6% in 1999 to 128% in 2000 (116% excluding reserve strengthening).
(1) Changes in ratios are based on 1999 pro forma information and, therefore, included 12 months of operations the former GRE subsidiaries.
Insurance claims included €799 million from GRE subsidiaries, whose claims ratio for all accident years was 80.8%, primarily due to negative underwriting results on automobile insurance policies sold through automobile dealerships. In 1999, Guardian Insurance ceased underwriting new business from this source and substantially increased premium rates on renewals. The AXA Insurance claims ratio for all accident years was 74.1%, an improvement of 180 basis points in 1999 as compared to 1998. The low claims ratio in respect of Thomas Cook travel insurance business offset the deterioration in the automobile claims ratio for all accident years due to the higher average cost of bodily injury claims. Excluding the Thomas Cook contract, the claims ratio for all accident years increased by 60 basis points to 76.5% in 1999.
This improvement was due primarily to the negotiation of more favorable terms in 1999 and higher retention on excess of loss treaties.
Acquisition expenses and administrative expenses were €363 million for AXA Insurance and €320 million for GRE subsidiaries. They included restructuring costs incurred in connection with the operational integration of GRE subsidiaries (€38 million, of which €35 million was charged to AXA Insurance). Excluding these restructuring costs, the expense ratio for AXA Insurance increased by 160 basis points to 32.2% in 1999 as compared to 1998, primarily due to high commissions paid on the Thomas Cook contract. Excluding the impact of this contract, the expense ratio improved by 70 basis points to 29.9% in 1999. Excluding restructuring costs, the 1999 combined ratio of AXA Insurance and the GRE subsidiaries was 106.3% and 114.0%, respectively.
Fixed maturity investments: Related assets at year end 1,968 2,035 737
(a) Yields are calculated on a constant structural basis (that is, excluding GRE investment result for 1999) and on the basis of average beginning and end of period asset carrying value for each asset category.
The following table presents the operating results for the property and casualty operations in Belgium for the years indicated.
The net investment result decreased by €38 million, of which €6 million was due to lower returns on real estate assets following an internal restructuring of the investment portfolio completed in 1999 and the decision to increase holdings in equity investments. The level of realized gains decreased overall by €34 million in 2000, with realized gains on equity securities totaling €77 million, or a decrease of €120 million in 2000 as compared to the exceptionally high level recorded in 1999. This decrease was partially offset by non-recurring realized gains of €73 million on real estate assets and by realized gains of €10 million on fixed maturities.
The contribution to AXA’s consolidated net income decreased by €54 million in 2000 due to the exceptionally high level of realized gains recorded in 1999.
On a comparable basis, gross premiums written decreased by 1.6% in 1999 as compared to 1998. Gross premiums written on individual household insurance premiums remained constant and accounted for 17% of gross property and casualty premiums, with a 2% loss of contracts inforce offset by higher average premiums.
The net investment result decreased by €122 million due to an exceptionally high level of net realized gains in 1998. Investment income decreased by €20 million, primarily due to the sale of assets to fund the dividends paid.
On a comparable basis, the claims ratio for all accident years was 83.7%, or an improvement of 260 basis points in 1999 as compared to 1998. In 1998, the claims ratio was affected by the strengthening of annuity reserves in connection with changes to mortality tables for workers’ compensation benefits (€14 million), and the strengthening of the claims reserves attributable to legal protection cover associated with automobile insurance of €22 million. Despite the increase in claims frequency in personal automobile cover, the claims experience improved by approximately 100 basis points due to a decline in large claims in workers’ compensation insurance and the reduction in claims frequency in the personal household insurance.
Acquisition expenses and administrative expenses of €409 million, or a decrease of €116 million, in 1999 as compared to 1998. In 1998, a provision of €127 million was recorded to cover the cost of restructuring the property and casualty operations in Belgium. Excluding this provision, the expense ratio was 31.6% in 1999 as compared to 31.4% in 1998.
Goodwill related to the acquisition of Royale Belge minority interests at the end of July 1998. The amortization charge in 1999 of €11 million reflected a charge for the full year as compared to 1998, which included a charge for the five-month post-acquisition period.
at December 31, 1999, as compared to 47.6% through July 1998 and 98.7% at December 31, 1998). On a constant structural basis, the improvement in net income in 1999 as compared to 1998 was due to the restructuring reserve recorded in 1998, and to the improvement in the claims experience that was partly offset by the decline in realized gains in 1999.
The following table summarizes the net investment results of the property and casualty operations in
Italy, Spain, Canada, Ireland, the Netherlands, and Morocco, as well as its operations in Portugal, Austria, Hungary,
(a) Established on the basis of 12 months of operations for former GRE subsidiary in Ireland, acquired in 1999.
Conversely, the net investment result decreased by €10 million (group share) in 2000 as compared to 1999, a year in which several large gains were realized on real estate assets.
Canada. On a comparable basis, gross premiums written decreased by 0.9% in 2000 as compared to 1999, primarily due to AXA Canada’s decision to gradually discontinue its unprofitable business. On a comparable basis, the contribution to AXA’s consolidated net income was stable in 2000 as compared to 1999. The net investment result improved by €7 million due to higher gains realized on the sale of equity securities in a positive financial market environment. The claims ratio for all accident years remained unchanged at 69.5%. General expenses increased in 2000 due to the release of a €6 million provision in 1999. Excluding this item, the expense ratio improved by 100 basis points to 35.9% in 2000, reflecting lower expenditure on information technology and staff reductions.
Gross premiums written in 2000 increased by 8.9% as compared to 1999, primarily due to growth in automobile insurance, which accounted for 82% of gross property and casualty premiums. This increase was attributable to premium rate increases in the personal lines that came into effect in the beginning of 2000 and growth in the commercial lines.
The claims ratio for all accident years increased by 175 basis points to 102.2% in 2000 as compared to 1999. This deterioration was due to a €120 million increase in insurance reserves (€96 million after tax), including €63 million (€50 million after tax) for business written prior to AXA’s acquisition of the company in
The contribution to AXA’s consolidated net income decreased by €28 million. On a constant structural basis (and on the basis of 56% ownership), the contribution to net income decreased by €27 million in 2000, primarily due to a higher claims ratio and an increase in general expenses.
The Netherlands. Gross premiums written increased by 10.6% in 2000 as compared to 1999 due to higher sales on automobile insurance products generated by the network of authorized agents. Net loss from the property and casualty insurance business was €4 million in 2000, stable as compared to 1999. The net investment result increased by €4 million due to a higher level of realized gains. The claims ratio for all accident years (net of reinsurance) deteriorated by 100 basis points to 71.6%. Net loss from the brokerage business was €2 million in 2000, or a decrease of €8 million as compared to 1999, primarily due to full amortization in 2000 of €8 million relating to the acquisition of three new brokers in that year.
Austria and Hungary. The €4 million contribution to AXA’s consolidated net income in 2000 represented a €4 million decrease in 2000 as compared to 1999, attributable to a decrease in the underwriting results. The underwriting results were adversely impacted by premium rates, which are still too low. In addition, goodwill of €2 million in relation to the acquisition of a Hungarian pension fund was fully amortized in the year 2000.
Japan. Most of the net loss of €58 million of AXA Direct Japan was due to costs related to the start-up and promotion of its direct marketing operations. Since July 1999, AXA Direct has sold more than 42,000 contracts, of which 40% were sold over the Internet.
Hong Kong and Singapore. The increase in the net income contribution of both subsidiaries was primarily due to the fact that 2000 included a full-year of operating results as compared to 1999, which included only the post-acquisition results of the former GRE operations. The €6 million contributed by Hong Kong was due to favorable loss reserve development in the property insurance portfolio and a reduction in general expenses.
Turkey. The €3 million increase in the contribution to AXA’s consolidated net income to €7 million in 2000 was mainly due to strong growth in gross premiums and a 1,430 basis point improvement in the claims ratio, particularly in respect of automobile insurance.
increase in automobile insurance, which accounted for 63% of gross property and casualty premiums. The average premium rate increased by 7%, but that increase was largely offset by the reduction in the portfolio following the closure of unprofitable agencies and the impact of a lower volume of new automobile sales in 1999, as compared to 1998, following the expiration of incentives designed to support the automobile market.
(ii) reserve strengthening effected in 1998, and (iii) the 2.5% reduction in the expense ratio (to 26.3%) due to operating cost efficiencies.
Spain. Gross premiums written in AXA Aurora totaled €690 million in 1999, or 7.4% increase as compared to 1998, while Direct Seguros, which began operations in 1997, recorded gross premiums of €39 million. The increase in gross premiums recorded by AXA Aurora was primarily due to an increase in premium rates on automobile insurance, which accounted for 60% of gross property and casualty premiums. Excluding direct marketing insurance, net income of €4 million increased by €1 million as compared to 1998, due to realized gains of €30 million, offset by the deterioration in the claims ratio for all accident years that affected the market as a whole. The claims ratio for all accident years was 86.5% in 1999, a 710 basis point deterioration as compared to 1998, due to exceptional loss development for prior accident years in 1998. However, the claims ratio for the current accident year was stable overall, and improved significantly in automobile insurance due to the implementation of a more selective underwriting policy. The net loss recorded by Direct Seguros was €7 million.
Canada. Gross premiums written in 1999 increased 2.7% on a constant exchange rate basis due partly to partnership agreements initiated by AXA Canada with new brokers. Net income decreased by €10 million in 1999 as compared to 1998, mainly due to a reduction in the level of realized gains on the sale of equity securities, which was high in 1998, and to a 200 basis point deterioration in the claims ratio for all accident years. The deterioration reflected the impact of some significant commercial risk claims and bad weather conditions in Quebec in June and July of 1999. Excluding the impact of the freezing rainstorms in 1998, the claims ratio for all accident years deteriorated by 440 basis points.
(generally U.S. companies) that did not exclude Year 2000-related risks from their coverage and were not members of the Millennium pool.
In 1999, the claims ratio for all accident years and the combined ratio (excluding broker-related business)
On a comparable basis, net income totaled €23 million (net group share), an improvement of €10 million in 1999 as compared to 1998. The improvement was primarily due to the fact that the 1998 net income was affected by provisions totaling €23 million (group share) established in that year: €19 million (group share) for membership in a Dutch insurance pool for commercial risks related to Year 2000 and €4 million for risks underwritten in the London market.
Morocco. In 1999, gross premiums written included €31 million from Compagnie Africaine d’Assurances, consolidated as of July 1, 1999, being the date of acquisition. On a comparable basis, gross premiums decreased by 6.9% in 1999 as compared to 1998, primarily due to the cancellation of large contracts, particularly in the automobile, fire, illness/accident and transport lines of business.
The €7 million increase in net income in 1999 as compared to 1998 was due primarily to the increase in net investment results (an increase of €25 million), partially offset by a 452 basis point deterioration in the claims ratio for all accident years to 108.4% in 1999 as compared to 1998. The deterioration in the claims ratio was mainly due to the strengthening of claims reserves which, in compliance with regulations, were calculated on the rate of settlements, which increased significantly in 1999. In addition, a mandatory change in estimates used to calculate workers’ compensation benefits in 1998 led to significant favorable loss development. Excluding these non-recurring items, the claims ratio for the current accident year was stable.
Other countries. Gross premiums increased in most other countries, particularly in Austria and Hungary, and Switzerland (an increase of 9.6% and 6.4%, respectively). In Portugal, excluding gross premiums recorded by GRE’s Portuguese branch (€29 million in 1999), gross premiums increased by 4.7%, outperforming the market as a whole. On a constant exchange rate and structural basis, and amidst a general economic slowdown, gross property and casualty insurance premiums recorded in the Asia/Pacific region decreased by 10.6% due to a more restrictive underwriting policy. Turkey, consolidated for the first time in 1999, contributed €139 million to gross premiums.
INTERNATIONAL INSURANCE SEGMENT In 2000 and 1999, the International Insurance Segment accounted for 5% of AXA’s gross revenues. The net income generated by the International Insurance Segment represented 6% of AXA’s consolidated net income as compared to (3)% in 1999.
The following tables set forth certain summarized financial information for the International Insurance
The following table presents the operating results of AXA Corporate Solutions Reinsurance (formerly AXA
As a result of the turnaround in the world reinsurance market observed since the end of 1999, gross premiums written increased by 53.4% to €473 million in 2000 as compared to 1999, or 34.1% on a comparable basis. Property insurance premiums increased by 38% and accounted for 92% of gross premiums. This increase was mainly due to the launch of a new program on natural catastrophe coverage in the United States and to an active presence in the retrocession market. Gross life reinsurance premiums increased by 24% in 2000 as compared to 1999, and accounted for 5% of gross premiums. This increase was due to growth in asset-based reinsurance products (coverage on a portfolio of separate account contracts).
The change in the unearned premium reserve of €80 million was in line with the increase in gross premiums.
Acquisition expenses increased by 50% in 2000 as compared to 1999 in line with the increase in gross premiums. Administrative expenses increased by €22 million, primarily due to the costs associated with the creation of AXA Corporate Solutions, the development of new information systems and the acquisition of expertise in the new strategic businesses of AXA Corporate Solutions.
The international reinsurance market remained highly competitive and, as a result, gross premiums earned decreased by 13.7% in 1999 as compared to 1998 and on a comparable basis. Gross property reinsurance premiums decreased by 13% in 1999 as compared to 1998, which accounted for 89% of gross premiums in 1999. The decrease was due to unacceptably low premium rates on certain contracts and the impact of the decision not to offer coverage for Year 2000-related risks that was only partly offset by an increase from the underwriting and renewal of several large reinsurance treaties in the United States. Gross life reinsurance premiums totaled €68 million in 1999, a decrease of 23% as compared to 1998.
Net investment results increased by €27 million in 1999, attributable to stable investment income and a sustained level of realized gains (€202 million in 1999 as compared to €185 million in 1998) against a backdrop of strong financial market performance.
Insurance claims remained stable in 1999 as compared to 1998. Insurance costs related to natural catastrophes decreased to €99 million in 1999 as compared to €267 million in 1998. However, the claims ratio for the current accident year deteriorated sharply as the downward cycle in the world reinsurance market continued.
Hurricane Floyd resulted in insurance costs before retrocessions of €70 million in 1999. Unfavorable loss reserve development in respect of prior accident years was €10 million in 1999, primarily due to reserve strengthening mainly in connection with Hurricane George. There was favorable loss reserve development in respect of prior accident years of €36 million in 1998.
dollar, which is the currency of choice in retrocession cover programs, the cost of such programs remained unchanged. The claims ratio for all accident years in 1999 deteriorated by 700 basis points as compared to 1998.
Gross premiums written decreased by 21.6% in 2000 as compared to 1999, or 15.6% on a comparable basis. Higher premium rates were offset by the impact of the change in the underwriting policy implemented at the end of 1999.
On a comparable basis, gross premiums written by the French operating unit decreased by 4.9% in 1999, which accounted for 89% of gross premiums. This decrease was primarily due to the decision to cease writing new business in unprofitable lines (including financial risks business, which generated gross premiums of €76 million in 1999) and certain automobile insurance contracts (which generated gross premiums of €10 million in 1999).
resulted in a €16 million increase in the net investment result.
The claims ratio for all accident years was 109.8% in 2000 and corresponded to a 870 basis point improvement as compared to 1999, primarily due to the occurrence of a number of large corporate and natural catastrophe losses in 1999 (€150 million). In 2000, a €43 million insurance reserve was recorded in respect of financial guarantees. Improved pricing methods and a more selective underwriting policy, which had been in place for several years, contributed to a 700 basis point improvement in the current accident year claims ratio
Acquisition and administrative expenses decreased by €55 million in 2000, primarily due to the transfer of staff to AXA Courtage (within the French property and casualty operations) in connection with the portfolio redistribution between the two operating units.
On a comparable basis, gross premiums written increased by 9.5% in 1999 as compared to 1998. This increase was primarily due to an increase in business underwritten through AXA subsidiaries and the sharp rise in international program business underwritten.
The claims ratio for all accident years increased to 118.5% in 1999 from 105.5% in 1998. The increase was attributable to a deterioration in the claims ratio for the current accident year caused by the high frequency of large commercial risks claims at a cost (net of reinsurance) of €70 million, and the occurrence of several natural catastrophes (earthquakes in Taiwan, Turkey and Greece, Hurricane Floyd and severe storms in France) at a cost of €80 million. The loss reserve development for prior accident years improved by €87 million as a result of a
lower level of reserve strengthening required in 1999 as compared to 1998. In 1998, the insurance reserves were strengthened for prior period claims and for construction and liability lines of business, or by €112 million, which was net of favorable loss reserve development on property and casualty reinsurance due to the sale of
GIE Réunion Aérienne. The reserve strengthening in 1998 was attributable to overall deterioration in claims experience.
Acquisition expenses and administrative expenses increased by €40 million in 1999 as cmpared to 1998, primarily due to the establishment of a restructuring provision (€18 million) to cover the costs of integrating
2000 compared to 1999. The €22 million improvement in AXA Cessions’ net income was primarily due to a significant increase in the net investment result (€13 million) related to asset management optimization and the investment of cash surpluses received following the December 1999 storms.
1999 compared to 1998. AXA Cessions had a net loss of €7 million in 1999, which was largely attributable to an adverse impact of certain natural catastrophes (€20 million after tax, particularly in Australia and Taiwan).
NET INCOME Years ended December 31, Including Minority Interests Group Share
C. Bernstein contributed €263 million to total revenues, including €61 million in respect of third-party research services, a new source of revenue for Alliance Capital. On a comparable basis (specifically excluding Sanford
Excluding the impact of this acquisition, assets under management decreased by €5 billion as a result of market depreciation of €37 billion, particularly during fourth quarter 2000, primarily offset by the positive net inflow of €32 billion. The net income impact of financial market depreciation was nevertheless limited.
The contribution to AXA’s consolidated net income increased by €56 million in 2000 as compared to 1999. Excluding the impact of foreign currency fluctuations, net income increased by €39 million. The increase in net income was primarily due to an increase in revenues resulting from growth in average assets under management and an improvement in the ratio of general expenses to net revenues, from 63% in 1999 to 59%
Sanford C. Bernstein contributed net income of €2 million (net group share). Operating income of €25 million (net group share) was partly offset by the amortization of goodwill recorded in connection with the acquisition
On a constant exchange rate basis, Alliance Capital Management’s 1999 revenues increased by 42.2%.
Net income was €143 million in 1999, or an increase of €55 million as compared to 1998. Excluding the impact of appreciation of the U.S. dollar (€6 million), net income increased by 55.6% (on a constant exchange rate basis), due to (i) growth in the factors described above impacting revenues, (ii) strong growth in performancebased fees (€152 million in 1999 as compared to €48 million in 1998), and (iii) general improvement in the ratio of general expenses to net revenue, which decreased from 66% in 1998 to 63% in 1999.
Contribution to consolidated operating result: Financial services revenues (b) 383 227 133
an increase in separate account products, which command higher fees, and (iv) a more profitable asset mix.
The increase in administrative expenses was due to increase in the level of commissions paid to intermediaries resulting from business growth, and to the cost of finalizing the establishment of the holding company created to support and coordinate AXA IM’s business development strategy. The contribution to AXA’s consolidated net income was €383 million in 2000, or an increase of 34.2% as compared to 1999 and on a comparable basis.
The increase included the following items: • the recording of tax savings of €15 million related to tax consolidations in France and the United Kingdom in 2000; and
Revenues totaled €430 million, or an increase of 37% on a comparable basis. This increase was attributable to growth in assets under management of €33 billion (or 14.7% on a comparable basis, of which 39% was due to the addition of new accounts, and 61% was due to growth in the financial markets), and a change in asset mix that impacted the fees earned. Assets under management on behalf of third parties, which generate higher asset management fees, increased by 34.5%. In addition, performance-based fees increased significantly from €2 million in 1998 to €30 million in 1999. Excluding inter-group transactions and on a comparable basis, revenues increased by 36% to €227 million.
AXA Rosenberg recorded asset management revenue of €51 million. This entity was consolidated from date of acquisition in January 1999.
General expenses increased by €141 million, principally from the significant growth of the holding company that will coordinate AXA IM growth in the new markets by centralizing certain functions such as strategy, equity research, interest rate research, marketing and information technology systems.
The contribution to AXA’s consolidated net income decreased by €26 million in 1999 as compared to 1998, or 41% on a comparable basis). This decrease was due to goodwill amortization on the newly acquired companies (€13 million mainly related to AXA Rosenberg) and an increase in net losses of €22 million (group share) attributable to the holding company relating to an increase in administrative costs, compared to €4 million
OTHER FINANCIAL SERVICES SEGMENT The tables below present the revenues and net income for the Other Financial Services Segment for the years indicated.
In 2000, the Other Financial Services Segment accounted for 15% of AXA’s revenues as compared to 16% in 1999. In both 2000 and 1999, DLJ accounted for approximately 90% of the total revenue for this segment.
Despite the positive impact of foreign currency fluctuations, the contribution of DLJ to AXA’s consolidated net income decreased significantly in 2000 as it was sold on November 3, 2000. Consequently, its net income contribution reflects only nine months of operation in 2000. On a constant exchange rate basis, net income for the nine months ended September 30, 2000 was €160 million, or an increase of 10.4%, reflecting strong financial market performance in first quarter 2000 followed by a marked slowdown that began in April 2000.
Revenue increased 23.6% as a result of a 27% increase in stock market transactions, which for the second year running set a new record in the financial market, and an increase in fees on mergers and acquisitions and revenues earned on equity portfolio transactions. This was in contrast to the second-half of 1998 which was marked by volatility in the financial markets and, therefore, affected revenues from equity portfolio transactions and stock issues. Within a favorable market context, all of DLJ’s activities recorded good results.
Net income from the other financial and real estate companies decreased by € 65 million in 2000 as discussed below.
Net income from AXA Bank Belgium (formerly IPPA and ANHYP) decreased by €9 million in 2000 to €24 million due to a decrease in margins on credit transactions resulting from the policy aimed at reducing surplus shareholders’ equity, and to the sale of its commercial banking portfolio in 1999.
recorded in 2000 a provision of €80 million (after tax) in respect of guarantees given in connection with the memorandum of understanding concluded on February 6, 2001 concerning the sale of Banque Worms.
Net income from the other financial and real estate companies decreased in 1999 as compared to 1998.
The net loss from Banque Worms included principally (i) integration of 1997 and 1998 operating losses of €12 million, (ii) amortization of the goodwill in the opening balance sheet on acquisition of the UAP group of €35 million, as the operations are currently loss making, and (iii) a charge of €69 million (€43 million group share) recorded by the various shareholders of the bank (being AXA subsidiaries) in relation to the costs of providing guarantees to the bank relating to doubtful debts.
TOTAL excluding impact of exceptional operations 11 (9) (107) 55 (40) (79)
• In 1999: The net income contributed by AXA (the Company) included €428 derived primarily from a realized gain that was recorded as a result of a decrease in the ownership interest in AXA UK Holdings (formerly Sun
Life & Provincial Holdings), as AXA UK Holdings issued ordinary shares to partly finance the acquisition of GRE
UK Holdings recorded an exceptional amortization of goodwill of €259 million (group share) against income relating to inadequacies in the technical reserves in connection with British and Irish property and casualty operations acquire (excluded from (e) in the table above).
• In addition, the contribution provided by some of the intermediary holding companies for the years ended
The commentary provided below for the holding companies relates to net income excluding the impact of exceptional operations.
• a €30 million increase in interest expense relating to the financing of certain acquisitions.
AXA UK Holdings (formerly Sun Life & Provincial Holdings). The stability in the net income contribution was due to the combined effect of the decrease in the investment result and the release of tax provisions deemed no longer necessary.
Other foreign holding companies. The contribution of other foreign holding companies to AXA’s consolidated net income decreased by €8 million in 2000, primarily due a decrease in investment income in
Belgium. The 2000 tax reform in Germany resulted in an increase of €17 million (group share) in the net income of German holding companies.
AXA France Assurance. A significant realized gain of €101 million (after tax) on the sale of equity securities in BNP was recorded in 1999 (as compared to €82 million in 1998). This was partially offset by a provision of €19 million (after tax) for the write-down of shares in the property and casualty insurance subsidiary in Australia which is not consolidated.
Other French holdings. The 1998 net income included a capital gain of €93 million (after tax) on the sale by Colisée Excellence of stock held in treasury, which did not exist in 1999.
AXA UK Holdings (formerly Sun Life & Provincial Holdings). In 1998, the results of SLPH included a tax charge of €54 million (group share) on the sale of AXA Leven to AXA Nederland.
and the methods for compensating unpaid individual Holocaust-era life insurance policies have been essentially finalized.
The totality of complaints concerning the German market are covered under an intergovernmental agreement between Germany and the United States and, consequently, AXA’s potential exposure through its
German affiliates has been entirely covered. For the other countries, essentially France and Belgium, a global settlement agreement is in the course of being negotiated. In addition to AXA’s participation in ICHEIC, AXA’s
On December 31, 2001, the period of transition relating to the changeover to euro (1999 – 2001) will end. All of AXA’s European subsidiaries are currently preparing for the advent of the euro, and will have completed the changeover of all processes, systems and products by January 10, 2002.
In early 2000, the Euro Steering Committee formed in 1997 to coordinate the preparations of AXA subsidiaries for the first phase of the Euro switchover on January 1, 1999 stepped up its efforts to ensure the readiness of all European business units for the definitive changeover.
Throughout 2000, AXA’s operating units have conducted a detailed analysis of the impacts and consequences of the definitive adoption of the euro (documents, prices, claims process, etc.) and have updated action plans, budgets and resource allocations.
The Euro Group Center was established to monitor the status of changeover plans, help operating units with project management, and to share best practices. On a regular basis, a detailed status report on the euro project is remitted by all subsidiaries to provide AXA with a global view of the situation. Indicators available at
AXA, the holding company and each of its major operating subsidiaries are responsible for financing their operations. AXA, as the holding company for the group AXA, will from time to time, however, arrange for and participate in financing the operations of subsidiaries. Certain of AXA’s subsidiaries, including AXA
France Assurances, AXA Financial , AXA Asia Pacific Holdings, Sun Life & Provincial Holdings (subsequently renamed AXA UK Holding) are also holding companies and are dependent on dividends from their own subsidiaries for funds to meet their obligations. In addition, certain of our principal subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to AXA, the holding company, and its affiliates (see note 19 to the consolidated financial statements included elsewhere herein this annual report). AXA does not believe that such restrictions constitute a material limitation on its ability to meet its obligations or pay dividends.
• In respect of AXA’s Life and Savings Segment, the liquidity needs can also be affected by fluctuations in the level of surrenders and withdrawals (see “ Item 4 – Information on the Company -Life and Savings
• In respect of AXA’s Property and Casualty Segment and International Insurance Segment, the liquidity needs can be affected by actual claims experience if significantly different from the estimated claims experience.
AXA’s asset management and financial services operations. The principal sources of liquidity relating to these operations are operating cash flows, proceeds from the issuance of ordinary shares (where applicable), lines of credit and other borrowings from credit institutions. The financing needs primarily relate to the asset management operations and include, funds to support commissions paid on back-end load mutual fund sales, distributions to Unitholders (Alliance Capital), capital expenditures requirements and general working capital needs.
As at December 31, 2000 and 1999, AXA’s consolidated balance sheet included cash and equivalents of €26 billion and €14 billion, respectively. AXA, the holding company, had cash and equivalents in the amount of €3,910 million and €183 million as at December 31, 2000 and 1999, respectively, or an increase of €3,727 million. The increase was due to funds set aside at year-end to finance the completion of the AXA Financial minority buyout, which occurred in January 2001.
At December 31, 2000, the potential number of ordinary shares which would be issued upon conversion of AXA’s total outstanding subordinated convertible debt and 4.5% mandatorily convertible notes was approximately 23.2 million ordinary shares in accordance with the terms and conditions of the debt and notes (1999: 20.4 million). The 4.5% mandatorily convertible notes, which were issued in 1995, matured in January 2001, see
• On November 17, 2000 AXA filed a registration statement on Form F-3 (Registration No. 333-12872) with the U.S. SEC registering $3.0 billion of debt securities that may be issued from time to time: this amount was increased to $5.0 billion on November 30, 2000. In connection with this registration statement and to partly finance the acquisition of the outstanding minority interests in AXA Financial, on December 15, 2000 AXA issued an aggregate of US$1,940 million (€2,138 million using year-end exchange rates) of dated subordinated notes denominated in three currencies; U.S. dollar, Euro and pound sterling.
• For the purpose of financing the acquisition of Nippon Dantai and the buyout of AXA China Region’s minority interests, AXA, the holding company, issued the following subordinated debt, (i) €1.1 billion of 3.75%
• In July 2000, AXA Financial, Inc. issued $480 million of 7.75% senior notes due 2010. Substantially all of the net proceeds of $473 million was used to repay a portion of the promissory note from which proceeds were used to purchase new Alliance Capital Units incurred with the acquisition of Sanford C. Bernstein, Inc.
• AXA, the holding company, also maintains a €3.0 billion French commercial paper program and a €1.5 billion French medium-term note program (compared to €1.5 billion for each at December 31, 1999). At
December 31, 2000, approximately €2,076 million of commercial paper was outstanding with an average maturity of 26 days and approximately €202 million of medium term notes were outstanding with an average maturity of 4.7 years.
Of AXA’s total outstanding financing debt at December 31, 2000 and 1999, the amount related to short term debt was €2,738 million and €2,129 million, of which €2,262 million and €1,859 million related to AXA
The decrease in 2000 was attributable to the following items: • a decrease of €6,214 million relating to the disposal of Donaldson, Lufkin & Jenrette on November 3, 2000 ; • a decrease in debt relating to AXA Bank Belgium of €1,686 million ; and
• an increase in debt relating to Alliance Capital and AXA Banque of €445 million and € 455 million, respectively.
Of the total outstanding operating debt at December 31, 2000 and 1999, the amount related to short term debt totaled €3,910 million and €6,863 million (or €5,062 million excluding Donaldson, Lufkin & Jenrette).
For further information see in note 8 to the consolidated financial statements.
The issuance of ordinary shares of AXA during 2000 primarily related to the following activities: • In connection with the acquisition of the outstanding minority interests of AXA Financial, AXA completed its offer of the outstanding minority shareholders on December 29, 2000. Upon completion of the exchange offer AXA issued 20.9 million ordinary shares in the form of AXA ADSs to the minority shareholders of AXA
Financial. Upon completion of the subsequent merger on January 2, 2001 between AXA Merger Corp.
(a wholly owned subsidiary of AXA) and AXA Financial an additional 4.9 million of AXA ordinary shares were issued. Consequently, AXA’s total ordinary shares in issue increased by 25.8 million corresponding to an increase in shareholders’ equity of €3.9 billion (that is, € 149.9 per share). Of these total newly issued ordinary shares of AXA, the 4.9 million of ordinary shares issued in January 2001 will not be reflected in
Sun Life & Provincial Holdings (subsequently renamed AXA UK Holdings). These shares were issued with preferential subscription rights and, accordingly, the number of shares relating to convertible debt and outstanding stock options (where the shareholders or optionholders have such rights) also increased.
Dividends paid to AXA, the holding company, from its affiliates were approximately €1,520 million (1999: €1,438 million and 1998: €1,036 million). These dividends were received principally from AXA’s French, Belgian and other European insurance subsidiaries. In 2000, cash dividends received by AXA, the holding company, in currencies other than the Euro amounted to approximately €350 million (1999: €264 million and 1998: €163 million). The increase in dividends received in 2000 related to the former Guardian Royal Exchange operations of €273 million (pre-tax of €136 million relating to the sale of the former Guardian Royal Exchange operations in South Africa and pre-tax of €137 million from its Guernsey operations).
• acquisition of: – Nippon Dantai (Japan) and subsequent additional cash investment that in the aggregate totaled Yen 212 billion (approximately €2.0 billion), funded primarily through subordinated debt securities; and
In respect of AXA, the holding company, interest expense for 2000 was €267 million (1999: €214 million and 1998: €157 million). Annual interest expense is expected to be approximately €500 million during each of the next three years, assuming no additional repurchases or early redemption of outstanding borrowings or mezzanine capital. On a consolidated basis, total interest expense for 2000 was €1,111 million (1999: €559 million and 1998: €492 million).
Dividends paid to AXA shareholders in 2000 totaled €713 million (€2.00 per ordinary share) in respect of the 1999 financial year and in 1999 of €595 million (€1.70 ordinary share) in respect of the 1998 financial year. All dividends in respect of financial years ended in 1999 and 1998 were paid in cash.
The solvency and capital adequacy margins in general are calculated based on a formula which contains variables for expenses, inflation, investment earnings, death, disability claims, surrenders, premium dormancy and policyholder options, distribution of assets among investment categories, and the matching of specific categories of assets and liabilities.
On January 1, 2001, the outstanding 4.5% mandatory convertible bonds matured. At such time, the debt was converted into 7.2 million ordinary shares of AXA, of which 2.8 million ordinary shares are owned by subsidiaries of AXA. This increased shareholders’ equity by €320 million and decreased mezzanine capital by €192 million (€128 million of debt was held by AXA affiliates and, therefore, eliminated on consolidation in prior periods).
In February 2001, AXA increased the amount of debt issued under its $5.0 billion U.S. debt shelf registration by $770 million (approximately €827 million at transaction date), which are denominated in two currencies: U.S. dollar and Euro. In the aggregate, the amounts issued under this debt shelf registration have increased to $1,250 million, €1,100 million and £325 million.
– Mezzanine Capital”) denominated in Swiss francs. At the end of February 2001, the outstanding balance on the three-year term loan totaled $1,810 million and denominated in U.S. dollars.
Inherited Estate, it is anticipated that a payment of approximately £230 million will be made to the U.K. withprofit policyholders.
Net cash provided by operating activities (excluding net realized gains) totaled €15.8 billion for the year ended December 31, 2000, which is attributable to growth in the life and savings business (1999: €33.8 billion).
(nearly €3.6 billion) and AXA Financial (nearly €6.6 billion), the acquisitions of Nippon Dantai (approximately €2.0 billion) and Sanford C. Bernstein, Inc. (approximately €1.7 billion); and
Net cash provided from financing activities totaled €11.7 billion for the year ended December 31, 2000
• net cash proceeds of approximately €7.2 billion from the issuance of subordinated debt and other long term borrowings, which was used primarily to fund the buyout of minority interests in AXA China Region and AXA Financial and the acquisitions of Nippon Dantai and Sanford C. Bernstein, Inc.
The net impact of foreign exchange was approximately €1.0 billion increase in net cash for the year ended December 31, 2000 (1999: increase of €0.8 billion). The net change is due to foreign currency exchange rate impact of the U.S. dollar, Australian dollar and Japanese Yen to the Euro in 2000.
Net cash provided by operating activities was €33.8 billion for the year ended December 31, 1999 (1998: €12.9 billion). The increase in net cash provided by operations was mainly attributable to the increase in cash flows resulting from operating activities carried by AXA’s financial services operations.
Net cash provided from financing activities amounted to €2.2 billion in 1999 (1998: € 0.1 billion). The increase in net cash provided by financing activities in 1999 was primarily due to the absence of repayments of long-term debt in 1999.
Total consolidated cash and equivalents amounted to €14 billion at December 31, 1999 (1998: €10 billion).
Consolidated net income in accordance with U.S. GAAP, except for adjustment for the change in unrealized investments gains and losses on assets allocated to UK with-profit contracts 2,771 2,239 1,456
CONSOLIDATED NET INCOME IN ACCORDANCE WITH U.S. GAAP 3,248 1,209 748
Amounts in accordance with U.S. GAAP, except for change in unrealized investment gains and losses on assets allocated to UK with-profit contracts
• Shares issued by subsidiaries. Under both French GAAP and U.S. GAAP, in the event a subsidiary issues shares, the ownership interest held by the parent company decreases and a realized gain or loss is recorded.
(subsequently renamed AXA UK Holdings) to acquire GRE in 1999 (2000 and 1998: nil).
• Catastrophe equalization reserves. These reserves are recorded under French GAAP pursuant to local statutory regulations in the countries of operations whereas under U.S.GAAP such reserves are not established until the loss event occurs. As a consequence, the adjustment to U.S. GAAP net income was a decrease of €246 million in 2000 (1999: decrease of €141 million and 1998: increase of €40 million), and was attributable to both AXA’s Property and Casualty Segment and International Insurance Segment.
The information contained in this Item 6 is on a pre-split basis and does not reflect the corresponding ratio change between the AXA ADS and ordinary shares.
Company in transactions with third parties. Any limitation on powers of the Management Board is not enforceable against third parties, who may bring legal action against the Company to enforce commitments made in its name by the Chairman of the Management Board or any other member granted the same authority to represent the Company, provided that the necessary publicity requirements with respect to the power of these persons to represent the Company have been met.
Members of the Management Board may, with the approval of the Supervisory Board, assign among themselves specific tasks and positions in relation to the management of the Company. Despite any such allocation of tasks, members of the Management Board are still under an obligation to meet regularly to discuss essential management issues related to the Company and to exercise the requisite due diligence in managing the business and affairs of the Company.
The Management Board may at its discretion entrust one or more of its members or any non-member with special assignments, whether of a permanent or temporary nature, and grant the necessary powers to allow the assignee to perform his or her task.
Claude Tendil (55) Vice-Chairman of the Management Board; Chief Executive Officer of AXA France Assurance
The members of the Management Board are appointed by the Supervisory Board for a period of three years. The current members of the Management Board were appointed by AXA’s Supervisory Board on January 19, 2000. The members of the Management Board need not be shareholders; however, they must be individuals.
Management Board. In connection with this management transition, Mr. Miller will resign from the Company’s
Management Board and become a member of the Supervisory Board. Mr. Miller will also become a senior adviser to Henri de Castries, Chairman of the Company’s Management Board. It is currently anticipated that these management changes will become effective in July 2001.
Board or any of its members and may not be performed in a way that precludes the Management Board from performing its managerial duties.
In accordance with applicable French laws and regulations, specified transactions, such as the sale of real property and the granting of collateral, warrants or guarantees must be approved by the Supervisory Board.
The Supervisory Board sets its own internal operating procedures which are communicated to the
The Supervisory Board may consist of no less than three and no more than twenty-four members. French company law provides that in particular circumstances, such as in the event of a merger, the Supervisory Board may temporarily consist of up to 30 members for a period of up to three years. The members of the Supervisory
Board are appointed by a majority of the shareholders at the annual general meeting. French company law does not allow for cumulative voting.
Members of the Supervisory Board are generally appointed for a four year-term. The Supervisory Board appoints a Chairman and a Vice-Chairman from among its members. The Chairman calls and presides over the meetings of the Supervisory Board.
Chairman of the Supervisory Board of Thomsom SA, Thomson Multimedia and Université de Technologie de Troyes; Director or Supervisory Board Member of Bouygues Telecom, CNES, Dexia, la Poste; Rhodia, and Schneider Electric.
Chairman of Parande Développement (Groupe Euris); Senior Advisor to Lazard Frères; Director or Supervisory Board Member of Lazard Frères Banque, Casino and Club Méditerranée.
Vice-Chairman of the Supervisory Board of BNP Paribas; President of BNP Paribas (Suisse); Vice Chairman of Pargesa Holding (Suisse); Director or Supervisory Board Member of Schneider Electric, LVMH, TotalFinaElf and Eridania BeghinSay.
Chairman of AXA UK plc and Fox-Pitt, Kelton Group (UK); Director of AXA Financial, Inc. and Supervisory Board Member of Eldon Capital Management.
Chairman of the Supervisory Board of Credit Suisse Hottinguer and EMBA NV; Vice Chairman and Executive Officer of Financière Hottinguer; Director of Finaxa and Intercom.
Senior advisor of Credit Suisse First Boston; Director of the Duke Endowment, Harvard University.
Chairman and Chief Executive Officer of Schneider Electric; Director or Supervisory Board Member of Vivendi, CNRS and A.N.S.A.
Chairman and Chief Executive Officer of BNP Paribas; Director or Supervisory Board Member of Galeries Lafayette, Saint Gobain, TotalFinaElf, Lafarge; Permanent Representative of BNP Paribas on the Supervisory Boards of Renault and Dresdner Bank.
Executive committee member of Lazard Frères; Senior manager of Lazard Paris; Chief Executive Officer of AZEO; Director or Supervisory Board Member of SaintGobain, Thalès, Sofina and Cap Gemini Ernst & Young.
EXECUTIVE OFFICERS The table below sets forth the names of the executive officers of the Company, their principal position within the AXA Group and the years of their initial designation as executive officers of the Company.
Vice-Chairman of the Management Board; President and Chief Executive Officer of AXA Financial, Inc., Executive Officer responsible for AXA group information systems and e-business
Vice-Chairman of the Management Board; Chief Executive Officer of AXA France Assurance
SUPERVISORY BOARD COMMITTEES The Supervisory Board has established four sub-committees: the Audit Committee, the Finance Committee, the Compensation Committee and the Selection Committee.
Reports on committee findings are delivered by Committee Chairmen at the ensuing Supervisory Board meeting.
The Audit Committee is composed of the following six members: Jacques Calvet (Chairman), David
Thierry Breton, Jacques Calvet, Michel François-Poncet, Gérard Mestrallet, Alfred von Oppenheim, Michel Pébereau.
The Finance Committee reviews proposed sales of securities, assets or real estate when the sale price exceeds the authority delegated to the Management Board by the Supervisory Board.
In addition, the Finance Committee examines all proposed material financial transactions involving AXA
The Compensation Committee is also informed by the Management Board of compensation levels set by the Boards of Directors of the Company’s subsidiaries.
The Selection Committee is composed of the following five members : Jean-René Fourtou (Chairman),
The Selection Committee is kept informed of appointments of AXA’s principal executives and officers, and, in particular, the executive officers.
The continuity agreements cover three "tiers" of executives: Tier I, Tier II and Tier III. Mr. Miller was one of three
AXA Financial executives categorized as a Tier I executive. Mr. Miller’s continuity agreement generally provides for cash severance payments and other benefits if his employment is terminated by AXA Financial, at any time within two (2) years after December 22, 2000 (the expiration of the initial offer period) for any reason other than the executive's death, disability, retirement or for cause (all as defined in the agreements), or if he resigns for good reason. Generally, the agreements define "good reason" to include a reduction in the executive's base salary, the material and adverse diminution of the executive's duties and responsibilities, the assignment of duties materially inconsistent with the level of duties performed by the executive prior to the expiration of AXA’s initial offer, in either this case or the immediately preceding case, as a direct result of the offer and the merger, or the attempted relocation of the executive's employment more than 50 miles from its current location. Mr. Miller’s agreement also provides for a special voluntary termination right, in that he can claim a "good reason" resignation with or without any reason given by him during the fifteenth (15th) month following the month in which the offer was consummated
Miller would not be required to mitigate the amount of any payment provided for under the agreement. In addition to other benefits provided, medical, dental, vision and life insurance coverage would also be continued for the relevant for a period ending three years after the relevant termination date.
Personnel of non-consolidated companies or companies accounted for using the equity method are not included in the above table. Personnel of companies proportionally consolidated are included, pro rata, in accordance with the percentage of consolidation. (a) The personnel at January 1, 2000 are included on a constant structural basis in relation to the personnel at December 31, 2000, taking into account the principal transactions effected during 2000: the sale of DLJ and Dongbu Life as well as the acquisition of Nippon Dantaï and Sanford Bernstein.
The aggregate compensation of the members of the Supervisory Board of the Company as directors'
The broad outlines of AXA’s executive compensation policy have been submitted to the Compensation
Committee of the AXA Supervisory Board, and the Supervisory Board is regularly informed of implementation status. This policy applies to all executive officers of the Company. The policy is adapted to local regulations and practices under the supervision of the Boards of Directors of the company’s subsidiaries.
Executive compensation consists of both a fixed and a variable component. The fixed component is based on local market conditions and is generally targeted to be within the top quartile range. The variable component is linked to AXA’s global financial performance, local company performance, and individual performance, weighted to take into account individual levels of responsibility. The portion of the variable component tied to AXA’s global financial performance is based on net earnings per share and AXA’s share price trend. The portion of the variable component tied to individual performance objectives is adjusted to comprise the principal component of annual compensation, in such a way that compensation levels of AXA executives are generally situated within the upper range of the going market rate.
AXA’s acquisition of the minority interest in SLPH, the Long Term Incentive Plan of Sun Life was terminated and, in connection therewith, M. Wood received €848,813. M. Wood left the AXA group in February 2001.
Company beneficially owns one percent or more of the Company’s total outstanding ordinary shares as of the date of this annual report. The following table presents the ordinary shares of AXA and Finaxa owned by the members of AXA’s Management Board.
SHARES OWNED BY THE MANAGEMENT BOARD MEMBERS AT DECEMBER 31, 20001
(1) Excludes interests in AXA Actionnariat, an employee investment plan investing in AXA ordinary shares in which certain members of the Management Board participate, and AXA ordinary shares subject to options, which are set forth in the table below. Finaxa is a holding company the assets of which consist principally of AXA ordinary shares.
The following table presents the ordinary shares of AXA owned by the members of AXA’s Supervisory
(1) Excludes interests in AXA Actionnariat and AXA ordinary shares subject to options held by certain Supervisory Board Members.
SHARE OPTIONS At December 31, 2000, options to purchase a total of 8,793,004 ordinary shares of the Company had been granted by the Company and were outstanding, representing 1.9% of the Company’s total outstanding share capital at that date. In addition, at December 31, 2000, 1,755,000 options to purchase shares of MOFIPAR
(20 persons in total) held options on (i) 2,347,801 ordinary shares of the Company (ii) 1,645,238 ADSs and (iii)
(1) Options granted and not yet exercised as of December 31, 2000. (2) As part of AXA’s acquisition of the minority interest in AXA Financial, Inc., outstanding options on AXA Financial common shares were converted into options on AXA ADSs on January 2, 2001.
Mr. Owen as part of AXA’s acquisition of the minority interest in SLPH in July 2000. (8) S. Tulin became a member of the Executive Committee in December 2000. (9) 7704 options on AXA ordinary shares held by M. Wood were obtained through conversion of options on SLPH shares previously held by
The following diagram sets forth the ownership structure of the Company at March 15, 2001 (numbers in parenthesis represent the percentage of total voting power held while numbers not in parenthesis represent the percentage of total outstanding ordinary shares held): MUTUELLES AXA
Finaxa is a holding company which is listed on the ParisBourse. The ordinary shares of Finaxa not owned by the Mutuelles AXA or BNP Paribas are publicly traded.
Over the past three years, the direct and indirect percentage of AXA’s total outstanding ordinary shares held by the Mutuelles AXA has decreased from 23.9% at December 31, 1998 to 21.0% at December 31, 2000.
• Mutuelles AXA (as a group, shares held directly and indirectly) 23.9% 23.5% 21.0%
Substantially all of the AXA ADSs were held by U.S. residents. As of February 6, 2001, to the best of AXA’s knowledge based on the information available to it, approximately 14% of AXA’s total outstanding ordinary shares were held by U.S. residents.
Mutuelle, AXA Courtage Assurances Mutuelle, and AXA Conseil Vie Assurances Mutuelle. The Mutuelles AXA do not have shares outstanding and the business of each Mutuelle is supervised by a board of directors elected by delegates representing policyholders. As of March 15, 2001, the Mutuelles AXA, acting as a group, owned, directly and indirectly through intermediate holding companies (including Finaxa), approximately 21.0% of the issued ordinary shares representing approximately 33.6% of the voting power of the Company.
present, is Claude Bébéar, who is also Chairman of AXA’s Supervisory Board. The strategy committee is generally consulted on all significant matters relating to Finaxa. Under these agreements, each of the Mutuelles AXA has also granted a right of first refusal to the other Mutuelles AXA in the event of any sale or other disposition of shares of Finaxa (or subscription or other rights or options relating thereto) and agreed not to purchase additional shares of Finaxa without the prior consent of the strategy committee.
Most of the costs and expenses of operating the life and savings business and the property and casualty business in AXA’s French insurance subsidiaries (other than commissions) are shared by the relevant members of the AXA group and the Mutuelles AXA and allocated among them through Groupements d’Intérêt
Mutuelle, a property and casualty insurance Mutuelle AXA, allocate between them the underwriting results of the property and casualty insurance business generated in France by insurance brokers. This allocation is achieved through a co-insurance agreement implemented through a GIE.
To the best of AXA’s knowledge based on information currently available to it, there are no existing arrangements that management believes are likely to result in a change of control of the Company.
Since January 1, 2000, AXA has been party to the following transactions which may be deemed to have been either material to AXA or the related party in question or unusual in their nature or conditions which involved goods, services, or tangible or intangible assets:
AXA/Finaxa Trademark License. The name “AXA” and the AXA trademark are owned by Finaxa. On
The non-exclusive license grants AXA the right, subject to the prior written approval of Finaxa, to grant sublicenses to such companies or partnerships. Finaxa has no obligation to grant any such approval. Over the past several years, a number of AXA’s principal subsidiaries around the world have begun to use the AXA name pursuant to sublicenses granted by AXA. AXA is obligated to pay Finaxa pursuant to the licensing agreement an annual fee of €762,245 as well as 50% of any net royalties received from sublicensees. AXA’s non-exclusive license may be terminated at any time by either party, three months after delivery to the other party of a written notice of termination. Finaxa has, however, agreed not to exercise its right to terminate the license so long as Finaxa is
Corporation, a wholly-owned special purpose subsidiary of AXA created specifically for purposes of effecting that transaction. As part of this intragroup financing arrangement, AXA Financial: (i) sold 6.5 million shares of Credit Suisse Group (received by AXA Financial in connection with the sale of DLJ)
Vice Chairman and Chief Financial Officer of AXA Financial and an Executive Officer of AXA. For further information concerning this transaction, please see the Registration Statement on Form F-4 filed by AXA with the U.S. Securities and Exchange Commission on November 21, 2000 (registration no. 333-50438) and note 6 to the consolidated financial statements included elsewhere in this annual report.
Acquisition of the Minority Interest in Sun Life & Provincial Holdings (SLPH). In July 2000, AXA
completed the acquisition of the outstanding minority interests in SLPH for approximately £2.3 billion (€3.7 billion based on the exchange rate as of July 12, 2000, the date on which the acquisition was declared fully unconditional).
This acquisition was financed primarily with the net cash proceeds of approximately €3.7 billion from an offering of 30.2 million newly issued AXA ordinary shares. In connection with that transaction, AXA offered SLPH shareholders a choice between cash and an AXA loan note, which is an AXA debt obligation. For additional information on this transaction, please see note 6 to the consolidated financial statements included elsewhere in this annual report.
and the additional capital injections were funded primarily by subordinated debt securities issued by AXA in February and March 2000.
For information on other transactions between AXA and its subsidiaries, please see notes 6 and 21 to the consolidated financial statements included elsewhere in this annual report.
See note 18 to the consolidated financial statements for the year ended December 31, 2000, included elsewhere in this annual report.
DIVIDEND POLICY AXA has paid dividends on the AXA ordinary shares in each year for at least the past five years. AXA pays dividends in Euro. Future dividends will depend on AXA’s earnings, financial condition and other factors. Proposals for dividend payments are made by the Management Board, subject to prior approval by the Supervisory Board, and are submitted for final approval to AXA’s shareholders at an ordinary general meeting of shareholders. For further information on the dividends declared and paid in the most recent five years and on AXA’s dividend policy, see “Item 3 – Key Information- Dividends”, and “Item 10 – Additional Information – Dividends”.
representing one-half of an ordinary share to one ADS representing one ordinary share. The pro-forma impact on net income per ordinary share (and per ADS) is presented in note 27 to the consolidated financial statements included elsewhere in this annual report.
October 27, 2000 and is a self regulatory organization responsible for supervision of trading in listed securities in France. The AXA ordinary shares are also quoted on the Stock Exchange Automatic Quotations International
System (SEAQ International). The AXA ADSs are listed on the NYSE.
(a) The annual high and low closing prices. (b) The Euro was not in existence during these periods and, consequently market prices were not quoted in Euro. The Euro amounts shown have been calculated by converting the historic French franc amounts to Euro at the legal rate of conversion of FF 6.55957 per 1.00, established in connection with the launch of the Euro on January 1, 1999.
Official trading of listed securities on the ParisBourse, including the AXA ordinary shares, is transacted through French stockbrokers (sociétés de bourse) and other authorized financial intermediaries, and takes place continuously on each business day from 9:00 a.m. to 5:30 p.m. with a pre-opening session from 7:45 a.m. to 9:00 a.m. during which transactions are recorded but not executed, and a post-closing session from 5:30 p.m. to 5:35 p.m. The ParisBourse has introduced continuous trading by computer during exchange hours for most listed securities, including the AXA ordinary shares. Listed securities may generally be traded at any time outside the ParisBourse. Any trade effected after the close of a stock exchange session will be recorded on the next ParisBourse trading day at the closing price for the relevant security at the end of the previous trading day’s session. The ParisBourse publishes a daily Official Price List which includes price information on each listed security.
Shares listed on the ParisBourse are placed in one of several categories depending on the volume of trading transactions. With effect as of September 25, 2000, AXA’s ordinary shares are listed in the category known as continu A, which includes the most actively traded shares (i.e., a minimum daily trading volume of 250,000 shares or twenty trades).
Trading as well as clearance and settlement procedures are the same for all markets on the ParisBourse, with cash settlement the general rule. However, a Deferred Settlement Service (Service de Règlement Différé)
is offered by intermediaries for selective securities meeting capitalization and liquidity criteria, regardless of the market on which they are listed. To be eligible for clearance and settlement through the Deferred Settlement
Service, a share must either be included in the SBF 120 index, a benchmark index which comprises the stocks in the CAC 40 index and an additional 80 of the most actively traded stocks listed on the ParisBourse, or show market capitalization of at least €1 billion and daily trading averaging at least €1 million on the ParisBourse.
With a deferred settlement instruction, the purchaser may elect not to pay and not to receive the securities until the end of the month. The transfer of ownership of equity securities traded on the ParisBourse pursuant to a deferred settlement instruction takes place the last business day of the month. The purchaser may decide, five days before the end of the calendar month (the determination date), either (i) to settle the trade no later than on the last trading day of such month or (ii) upon payment of an additional fee, to extend settlement to the determination date of the following month with the option either to settle no later than the last trading day of that month or to further postpone settlement until the next determination date. The purchaser may maintain that option on each subsequent determination date upon payment of an additional fee.
The table below sets forth, for the periods indicated, the reported high and low closing prices in U.S.
dollars for the AXA ADSs on the NYSE: Price per AXA ADS Calendar Period High ($) Low ($)
AXA cannot assure you of the market price of AXA ordinary shares or ADSs and urges you to obtain current market quotations for these securities.
MEMORANDUM AND ARTICLES OF ASSOCIATION The Company is a holding company organized under the laws of France as a société anonyme (a form of limited liability company), with a Supervisory Board and a Management Board. AXA’s principal office is located at 25, Avenue Matignon, 75008 Paris, France and AXA is registered under the number: 572 093 920 in the
Paris Trade and Company Register. References to “AXA” in this Item 10 are references to the Company, unless otherwise indicated.
AXA’s objects and purposes, as set forth in article 3 of its memorandum and articles of association (“statuts”)
• acquire, manage and/or dispose of all listed or unlisted shares or other securities, real and/or personal property, as well as rights and listed or unlisted securities related to such assets, and
In addition, agreements entered into between the Company and entities that are wholly-owned by, or in unlimited partnership with, any members of the Supervisory or Management Board (or in which the members of the Management or Supervisory Board are directors or officers) are also subject to the prior approval of the Supervisory Board. Any such agreement may be declared void if it is not submitted to the Supervisory
The Supervisory Board of the Company fixes the amount and terms of compensation for each of the members of the Management Board. Members of the Supervisory Board receive a fixed annual fee, the amount of which is determined by the shareholders at their annual meeting. The Supervisory Board may compensate its members for the performance of special tasks or assignments in accordance with the provisions of French company law.
Decisions of the Supervisory Board in that respect may be passed only if at least half of its members are present.
This extension may not be for more than a three-year period. Members of the Supervisory Board may not stay in office past the age of seventy. However, this rule may be waived by the Supervisory Board for up to onethird of the members of the Supervisory Board (individuals or representatives of legal entities). Members of the
Members of the Management Board need not be shareholders of AXA while members of the Supervisory
For additional information concerning the respective powers of the Management and Supervisory Boards, please see Item 6 of this annual report.
Pursuant to the statuts of AXA and French law, the share capital of AXA may be increased only with the approval of a majority representing 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,
shareholders may also delegate to the Management Board the powers required to effect any decrease in share capital previously authorized by them. Such a decision is subject to the prior authorization of the Supervisory Board.
If the reduction is not attributable to losses incurred by AXA, each shareholder will be offered an opportunity to participate in the share capital reduction, except in the case of a share repurchase program. The number of outstanding ordinary shares may be reduced, either by an exchange of ordinary shares or by the repurchase and cancellation by AXA of its ordinary shares. If, as a consequence of losses, the net assets (capitaux propres)
of AXA are reduced below one-half of its share capital, the
Management Board must, within four months from the approval of the accounts showing this loss, convene an extraordinary general meeting of shareholders in order to decide whether AXA ought to be dissolved before the end of its statutory term. If the dissolution is not declared, the share capital must be reduced, subject to the legal provisions concerning the minimum capital of sociétés anonymes, by an amount at least equal to the losses which could not be charged against reserves if, by the end of the second fiscal year following the fiscal year during which the accounts showing the losses have been approved, the net assets of the company have not been restored up to an amount at least equal to one-half of the share capital.
AXA may not cancel more than 10% of its outstanding share capital over any 24-month period. In addition,