D O C U M E N T D E R É F É R E N C E
In Paris, AXA Group Financial Communication Department 25, avenue Matignon — 75008 Paris — France
In New York, AXA Financial Financial Communication Department 1290, avenue of the Americas New York, NY 10104 — USA
AXA Group Individual Shareholder Communications 25, avenue Matignon — 75008 Paris — France
In this Annual Report (referred to herein as the “annual report” or “Annual Report”) unless provided otherwise, the “Company”, “AXA” or “AXA SA” refers to AXA, a Société Anonyme, organized under the laws of France which is the publicly traded parent company of the AXA Group, and “AXA Group”, the “Group” or “we” refers to the Company together with its direct and indirect consolidated subsidiaries. The Company’s ordinary shares are referred to in this annual report as “Shares”, “ordinary shares”, or “AXA ordinary shares”. The principal trading market for the Company’s ordinary shares is the Compartment A of Euronext Paris, which we refer to in this annual report as “Euronext Paris”. The Company’s American Depositary Shares and American Depositary Receipts are referred to in this annual report as “ADSs” and “ADRs”, respectively. The ADSs and ADRs are listed on the New York Stock Exchange (referred to in this annual report as “NYSE”). One ADS represents one ordinary share.
This Annual Report also includes (i) all the components of the Annual Financial Report (Rapport Financier Annuel) referred to in paragraph I of article L.451-1-2 of the French Monetary and Financial Code as well as in article 222-3 of the
AMF General Regulations (the table to be found hereafter on page 476 indicates the relevant sections of this Document de Référence corresponding to the components required under the terms of article 222-3 of the AMF General Regulations), (ii) all the compulsory matters required to be covered in the Management Board’s Report to the Shareholders’ Meeting of April 22, 2008, established pursuant to the articles L.225-100 and L.225-100-2 of the French Commercial Code (the relevant sections of this Document de Référence corresponding to these compulsory matters have been approved by the Management Board and are presented in the table to be found hereafter on page 473) and (iii) all information required under article R.225-86 of the French Commercial Code.
�.3 Cautionary statements ConCerninG the use of non-Gaap measures anD forWarD-looKinG statement
This Annual Report includes certain terms that are used by AXA in analyzing its business operations and, therefore, may not be comparable with terms used by other companies. These terms are defined in the glossary provided at the end of Part II, Section 2.3. of this Annual Report. Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predictions of, or indicate, future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and
— Subsequent events after December 31, 2007 impacting AXA’s liquidity 11�
The historical data set out below is only a summary. You should read it in conjunction with the consolidated financial statements and related notes for the years ended December 31, 2007, 2006 and 2005 included in Part V — “Consolidated Financial Statements” of this Annual Report.
Please note that the AXA Group’s transition date to IFRS was January 1, 2004. The Group prepared its opening IFRS balance sheet at that date. The Group’s IFRS adoption date was January 1, 2005.
(b) Includes investment income net of investment management costs, impairment, net realized investment gains and losses and net unrealized investment gains and losses on assets with financial risk borne by the policyholders and on assets designated as at fair value through profit & loss, including assets backing the UK “With-Profit” business.
(c) (i) The calculation of net income per share is based on the weighted average number of outstanding shares for each period presented, and (ii) shareholders’ equity per share is calculated based on the actual number of outstanding shares at each period-end presented. The calculations deduct shares held by AXA and its subsidiaries (that is, treasury shares) in the calculation of weighted average number of outstanding shares (for net income per share) and outstanding shares (for shareholders’ equity per share). The calculation of basic and diluted net income per share for the three years ended December 31, 2007, 2006 and 2005 is presented in Note 26 “Net Income per Ordinary Share” to AXA’s consolidated financial statements.
(d) The share capital increase with preferential subscription rights launched by AXA on June 14, 2006 to finance part of the acquisition of Winterthur resulted in the issue of 208,265,897 new shares at a price of €19.80 compared to a market price of €24.47. According to IAS 33, share issues carried out at a below-market price may give rise to an adjustment to the average number of shares during the period and in each period presented. As a consequence, the loss of value suffered by existing shares represents the value of the existing shareholders’ theoretical subscription right, and the issue can be regarded as a bonus issue in the amount of the total value of the subscription rights. An adjustment factor (1.019456) equal to the pre-transaction share price divided by the theoretical post-transaction value of the shares is applied to the weighted average number of shares outstanding in each period.
The year-end and average exchange rates used in the preparation of the consolidated financial statements, to translate into Euro the results of operations of the principal subsidiaries that are not denominated in Euro, are set out in the table below.
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
The Euro Noon Buying Rate on December 31, 2007 was €1.00 = USD 1.4603.
AXA determines its dividend policy on the basis of its adjusted earnings minus interest charges on perpetual debt, and, in each of the past several years, has paid aggregate dividends in a general range of 40% to 50% of this amount. While the amount of dividends is subject to change based on a variety of factors, management currently intends to maintain this dividend policy.
(d) As of January 1, 2007 individual shareholders who were residents of France for tax purposes were eligible for a tax relief of 40% on the dividend, i.e. Euro 0.424 per share for fiscal year 2006.
(e) Proposal to be submitted to the Shareholders’ Meeting to be held on April 22, 2008.
AXA is a French “Société Anonyme à Directoire et Conseil de Surveillance” (a form of limited liability company with a Management Board and a Supervisory Board) existing under the laws of France. The Company’s registered office is located at 25 avenue Matignon, 75008 Paris, France and its telephone number is (33) 1 40 75 57 00. For information on the principal trading markets for AXA’s ordinary shares, ADSs and ADrs, please see Part III — “Corporate governance, executive compensation, major shareholders and related matters”, Section 3.5 “The Offer and Listing” included in this Annual report. AXA was incorporated in 1957 but the origin of its activities goes back to 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation, until December 31, 2059. The Company’s number in the Paris Trade registry is 572 093 920 rCS Paris.
In 1�82, les Mutuelles Unies took control of Groupe Drouot and following this transaction, the new Group began operating under the name of AXA.
In 1�88, AXA transferred its insurance businesses to Compagnie du Midi which operated under the name of AXA Midi and subsequently changed its name to AXA.
In 1��2, AXA acquired a controlling interest in The Equitable Companies Incorporated following the demutualization of Equitable Life. The Equitable Companies Incorporated, based in the United States, changed its name in 1999 to AXA Financial, Inc. (“AXA Financial”).
For a description of significant acquisitions and disposals undertaken by AXA please see Part II — 2.3 “Activity report — operating highlights” and Note 5, “Goodwill”, to the consolidated financial statements included under Part V — “Consolidated financial statements” of this Annual report.
The Company is the holding company for the AXA Group, a worldwide leader in financial protection. Based on available information at December 31, 2007, the AXA Group was one of the world’s largest insurance groups, with consolidated gross revenues of €93.6 billion for the year ended December 31, 2007. The AXA Group was also one of the world’s largest asset managers, with total assets under management as at December 31, 2007 of €1,281 billion, including assets managed on behalf of third party clients in an aggregate amount of €659 billion. Based on available information at December 31, 2006 and taking into account banking companies engaged in the asset management business, AXA was the world’s 4th largest asset manager1.
AXA operates primarily in Europe, North America, the Asia Pacific region and, to a lesser extent, in other regions including the Middle East and Africa. AXA has five operating business segments: Life & Savings, Property & Casualty, International Insurance, Asset Management and Banking. In addition, various holding companies within the AXA Group conduct certain non-operating activities.
The diversification of the AXA Group — both by geography and by business — is designed to mutualize and hedge the different types of risks to which the Group is exposed. For example, mortality risks are partly offset by longevity risks, and insurance risks by financial risks. In addition, geographic diversification helps reduce the concentration of risk and volatility of claims experience, which, in turn, helps limit the cost of economic capital needed to support the Group’s solvency position.
table of principal subsidiaries with ownership and voting rights percentages > 2.2 InformatIon on the Company
Set forth below is a simplified organization chart of AXA as at December 31, 2007. For additional information, please see Note 2 “Scope of consolidation” included in Part V “Consolidated Financial Statements” of this Annual report.
(f) Holding company that owns AXA France Vie, AXA France IArD, AVANSSUr, AXA Corporate Solutions Assurance and Juridica. (g) Company owned by AXA Mediterranean Holding, S.A. (Spain).
(h) Holding company that owns AXA Assicurazioni S.p.A. (i) 50% of ownership interest and 50% (+ one voting right) of voting rights. Companies owned by AXA Mediterranean Holding, S.A. (Spain). (j) Holding company that owns AXA Ireland Limited and AXA Insurance Limited. (k) Holding company that owns AXA Versicherung AG, AXA Lebenversicherung AG and AXA ArT Versicherung AG. (l) Holding company that owns DBV-Winterthur Lebensversicherung AG, DBV-Winterthur Krankenversicherung AG and DBV-Winterthur Versicherung AG. (m) Holding company that owns AXA Assurance Luxembourg and AXA Assurance Vie Luxembourg.
(n) Company owned by AXA Mediterranean Holding, S.A. (Spain). (o) New corporate name (formerly AXA Aurora S.A.) — Holding company that owns AXA Aurora Iberica, S.A. de Seguros y reaseguros, AXA Aurora Vida, S.A. de Seguros y reaseguros, Hilo Direct S.A. de Seguros y reaseguros, Winterthur Seguros, S.A. de Seguros y reaseguros, Winterthur Vida, S.A. de Seguros y reaseguros sobre la Vida and Winterthur Service, S.A.
(p) Holding company that owns 66.66% of Winterthur-ArAG. (q) Holding company that owns 100% of AXA Oyak Hayat Sigorta A.S. and 70.96% of AXA Oyak Sigorta A.S. An agreement was signed on February 6, 2008 to buyout Oyak’s 50%
Fitch Ratings AA Stable ratings of the Company’s long term and short term Debt
The ratings set forth above may be subject to revision or withdrawal at any time by the assigning rating agency. None of these ratings are an indication of the historic or potential performance of the ordinary shares, ADSs, ADrs or debt securities and should not be relied upon for purpose of making an investment decision with respect to any of these securities. The Company accepts no responsibility for the accuracy or reliability of the ratings.
Goodwill and other related intangible impacts (106) (24) (24) (13) (13)
(a) restated in full year 2005 means: (i) transfer of the forex impact from adjusted earnings to net income, (ii) following clarification of IFrIC agenda committee following IASB decision, AXA reclassified TSDI instruments (perpetual subordinated debts) into shareholders’ equity with impact on net income, (iii) in line with new accounting FrS27, the reclassification in the United Kingdom of some With-Profit technical reserves to allow for all future terminal bonuses payable to With-Profit policyholders within the allocated policyholder reserves, previously held in the unallocated policyholder bonus reserve, without any impact on earnings, and (iv) the restatement of The Netherlands’ activities as discontinued businesses.
and derivatives related to invested assets (including all impacts of foreign exchange including the ones related to currency options in earnings hedging strategies but excluding derivatives related to insurance contracts evaluated according to the “selective unlocking “accounting policy).
AXA: Assets backing contracts with financial risk borne by policyholders (Unit-linked) 182,827 176,562 141,410
The table below sets forth AXA’s consolidated gross revenues by segment for each of its major geographic markets for the years indicated: breaKDoWn of aXa’s Gross reVenues years ended December 31, segment contribution market contribution to total segment (%)
For additional information on AXA’s revenues by segments, see Note 20 “revenues by segments and net revenues from banking activities” included in “Part V — Consolidated Financial Statements” of this Annual report.
The table below summarizes AXA’s Life & Savings consolidated gross revenues and gross insurance liabilities by geographic region for the periods and at the dates indicated: lIfe & saVInGs seGment: Gross reVenues by Country in Euro million, except percentages
Of which: Fees and charges relating to investment contracts with no participating feature 740 608 509
(a) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales). (b) As described in Note 1.10 of “Part V — Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
breaKDoWn of aXa’s lIfe & saVInGs ape anD nbV in Euro million annualized premium equivalent (a) new business Value (b)
(c) As described in Note 1.10 of “Part V — Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement. (d) In 2005 and 2006, Mediterranean region consisted of Spain, Italy and Portugal. In 2007, also included Morocco and Turkey.
The nature and level of competition vary among the countries in which AXA operates for all the types of individual and group Life & Savings products sold by AXA. Many other insurance companies offer similar products to those offered by AXA, and, in some cases, also use similar marketing techniques.
The principal competitive factors affecting the Life & Savings business include: — size, strength and quality of the distribution channels, in particular the quality of advisors,
— range of product lines and product quality, feature functionality and innovation,
— price, — quality of service, — investment management performance, — historical levels of bonuses with respect to participating contracts, — crediting rates on general account products, — reputation, visibility and recognition of brand, — quality of management, — ratings for financial strength and claims-paying ability
(a) Source: Swiss re, Sigma report 2007 “World Insurance in 2006”. (b) Sources AXA, mainly based on national insurance association data for each specific country in 2006. Excluding Winterthur in all countries except Switzerland. (c) relates to variable annuity products. (d) Based on new business APE.
proDuCts anD serVICes AXA’s Life & Savings products include a broad range of investments and savings, and life and health products marketed to individual and commercial clients. These include both individual and group products. The Life & Savings products offered by AXA include term life, whole life, universal life, endowment, deferred annuities, immediate annuities, and other investment-based products. The health products offered include critical illness and permanent health insurance products. The types and specificities of the products offered by AXA vary from market to market.
— Universal savings, which is the same as universal life but has no significant death benefit component. See below for a description of universal life products.
Life products include: — Term assurance, which provides a death benefit for a limited period of time.
— Universal life products, which are all unbundled products that include a significant death benefit component. Funds can be invested in unit-linked and / or general accounts.
— Endowment products, which pay a level death benefit for a limited period of time or to age 65. An endowment benefit is paid at the end of that period if the insured is still alive.
— Immediate annuity products, which are usually single premium products with no previous accumulation period, which promise regular payments for a fixed period of time or over someone’s lifetime.
AXA’s Life & Savings products may be distinguished between: — participating contracts, in which the policyholders participate in the excess assets over liabilities (the surplus) of — and therefore in the investment return and/or in part
(1) Health products are classified in Life & Savings segment notably when providing savings features or rider options.
of the operating profits earned by — the insurance company issuing the contract by way of the payment of an interest or bonus payment, and
Gross revenues by main product lines Gross insurance liabilities at December 31, 2007 years ended December 31,
Life contracts (including endowment contracts) 18,095 31% 12,837 27% 11,567 27% 144,073
(a) UK “With-Profit” business: A participating contract, specific to the United Kingdom and known as the “With-Profit” contract, was offered by AXA Sun Life until 2002. Under “With-Profit” contracts, the policyholders are entitled to receive a share of the profits arising from the invested policyholders’ premiums which includes regular bonuses and terminal bonuses. The regular bonuses are designed to provide a return to the policyholder through a periodic increase in benefits and are credited to the policyholder. Once credited, regular bonuses are guaranteed to be paid at maturity, death or as otherwise specified in the policy. Terminal bonuses, which are not guaranteed in advance of payment are designed to provide policyholders with their share of total investment performance and other experience of the fund (including expenses, mortality experience and income taxes) over several periods. Terminal bonuses can represent a significant portion of the total amount paid at maturity or upon surrender prior to maturity and are at the discretion of the Board of Directors. Following policyholder and court approvals, in 2001 AXA Equity & Law underwent a financial reorganization whereby the life insurance funds were transferred to AXA Sun Life and fundamentally restructured. A portion of the assets that accumulated over the years (which we refer to in this Annual report as the “inherited estate”) were attributed to AXA as the shareholder, less a portion allocated to the “With-Profit” policyholders in the form of a reorganization bonus, based on the number of eligible policyholders that elected in favor of this plan.
(b) As described in Note 1.10 of “Part V — Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement. (c) Includes revenues from other activities (mainly commissions and related fees on mutual funds sales).
AXA distributes its products through exclusive and nonexclusive channels that vary from country to country. Exclusive channels include exclusive agents, salaried salesforces and direct sales. Non-exclusive channels include brokers, independent financial advisors, aligned distributors or wholesale distributors and partnerships.
Salaried salesforces are salespeople employed by a single insurance company (or an affiliated company) to exclusively sell the company’s products.
Aligned distributors are independent individuals or firms who have chosen AXA to provide them with a full range of dealership services. They negotiate, on behalf of customers, policies of various insurance companies among a range of products selected by AXA.
The split of distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross revenues for the years ended December 31, 2007 and 2006, is presented below: baseD on Gross reVenues In 2007 agents, salaried salesforce and direct sales
The majority of individual Life & Savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual Life & Savings products issued by AXA have front-end charges to the policyholder (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.
Of which: (a) As described in Note 1.10 of “Part V — Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
(1) Some countries classify health activity in the Property & Casualty segment, while other countries classify it in the Life & Savings segment. AXA chooses to follow local classification.
The principal competitive factors are as follows: — Price, — Quality of service, — Distribution network, — Brand recognition, — ratings for financial strength and claims-paying ability
(mainly group business), and — Changes in regulations, which may affect premium rates charged or claims settlement costs paid.
The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross revenues in 2006, along with AXA’s ranking (by market share).
property anD Casualty marKets based on worldwide gross revenues in 2006
(a) As described in Note 1.10 of “Part V — Consolidated Financial Statements”, the contribution of discontinued operations is stated in a separate line of the income statement.
To attract and retain clients, new products are designed to add value for the clients and support cross-selling thus improving client retention.
The split of distribution channel used by AXA’s Property & Casualty operations, based on gross revenues for the year ended December 31, 2007 and 2006, is presented below: baseD on Gross reVenues In 2007
Direct sales and marketing other networks, including coporate partnerships and bank networks baseD on Gross reVenues In 2006
CeDeD reInsuranCe AXA’s Property & Casualty operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks. A growing portion of AXA’s Property &
Casualty insurance exposures are ceded internally to AXA Cessions, which organizes external reinsurance programs. Total gross premiums ceded by AXA’s Property & Casualty operations to third party reinsurers in 2007 amounted to €1,232 million (2006: €1,004 million).
The businesses of the International Insurance activities are described below. The International Insurance segment accounted for €3.6 billion, or 4% of AXA’s consolidated gross revenues for the year ended December 31, 2007 (2006: €3.7 billion or 5%).
aXa Cessions is an intra-group reinsurance company. Most of the companies within the AXA Group cede internally some of their major claims and catastrophic exposure to AXA Cessions which analyses, structures and places reinsurance programs for such risks with third-party reinsurers. It also provides advice in risk management and purchase of reinsurance cover to AXA Group subsidiaries.
aXa assistance provides assistance services including medical aid for travellers, automobile-related road assistance, home assistance and health-related services mainly to banking and insurance companies, tour operators, telecommunication operators, gas, water and electricity utilities and automobile manufacturers. AXA Assistance has also developed its expertise in the market of home services.
aXa liabilities managers is the Group’s specialized unit in charge of managing the AXA Group’s Property & Casualty run-off portfolios. This entity manages the internal run-off portfolios of AXA UK, AXA Germany and AXA Belgium, as well as a number of stand-alone run-off companies of the “Other International Activities” segment. In connection with the disposal of AXA’s reinsurance activities, AXA Liabilities Managers also manages the run-off of AXA rE as noted above.
(a) In 2006, transfer of reinsurance activities formerly led by AXA rE to AXA Liabilities Managers (recorded in “Other International Activities”), following the sale of AXA rE activities to Stone Point Capital.
aXa assistance is one of the three leading worldwide assistance companies2, in a market seeing the emergence of some specialized niche players.
CeDeD reInsuranCe anD retroCessIon aXa Corporate solutions assurance reviews annually its exposure to ensure that the risks underwritten are diversified geographically and by lines of business in order to manage concentration risk. In 2007, AXA Corporate Solutions Assurance ceded €714 million of premiums (2006: €738 million) to third-party reinsurers.
asset manaGement seGment Asset Management is important to AXA, from both a strategic and profitability perspective. The development of Asset Management activities is a key part of AXA’s financial services strategy, which seeks to capitalize on existing strengths and expand its client base. This strategy is based on the belief that its asset management expertise will enable AXA to benefit in the future from the expected growth in savings-related products in the markets in which it operates. The Asset Management segment accounted for €4.9 billion, or 5% of AXA’s consolidated gross revenues for the yearended December 31, 2007 (2006: €4.4 billion or 6%).
AllianceBernstein, is a subsidiary of AXA Financial and is a leading global investment management firm based in the United States. AllianceBernstein provides diversified investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA Financial and its insurance subsidiaries (which collectively are AllianceBernstein’s largest client) as well as unaffiliated entities such as corporate and public employee pension funds, endowment funds, and United States and foreign institutions and governments. AllianceBernstein Holding L.P. is listed on the New York Stock Exchange under the ticker symbol “AB”.
AllianceBernstein provides diversified Asset Management and related services globally to a broad range of clients including: — Diversified investment management services through separately managed accounts, hedge funds, mutual funds, and other investment vehicles to private clients (such as high net worth individuals, trusts and estates, and charitable foundations),
At December 31, 2007, AllianceBernstein had €543 billion of assets under management, including €461 billion of assets managed on behalf of third party clients (2006: €544 billion and €454 billion, respectively).
AXA IM is a significant player in the international Asset Management business, headquartered in France. AXA IM provides its clients with a wide range of global products and expertise via mutual funds and dedicated portfolios. AXA IM’s clients include (i) institutional investors, (ii) individual investors to whom mutual funds are distributed through AXA and external distribution networks, and (iii) AXA’s insurance subsidiaries both for main fund and unit-linked fund backing insurance products.
At December 31, 2007, AXA IM had €548 billion of assets under management, including €197 billion of assets managed on behalf of third party clients (2006: €485 billion and €197 billion respectively).
German banK AXA Bank targets private customers in retail banking, and is an important element of pensions and asset management of AXA Germany. The Bank had approximately 75,000 clients at year-end 2007. The major activities of AXA Bank are mortgage loans and mutual funds (retail portfolio management and custodian services only). These products are sold exclusively through the tied agent network of AXA Germany.
property & Casualty and International Insurance claims reserves > 2.2 InformatIon on the Company establIshment of ClaIms reserVes 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 claims expenses that arise from its Property & Casualty and International Insurance operations.
The first row entitled “Gross reserves for unpaid claims and claims expenses developed initially at the booking date” represents the loss reserves developed in the balance sheet on the reporting date for the year indicated in the column heading. For example, the amount of €31,168 million appearing in the first row of the table in the 2005 column represents all loss reserves developed in all years of occurrence prior to and including 2005, recognized on the company’s balance sheet at December 31, 2005.
The second part of the table entitled “reserves re-estimated” shows, for a given column N, an estimate of the final cost of liabilities carried at December 31 of year N in respect of all years of occurrence prior to and including N, at each future period end. The final cost estimate varies year on year as information relating to losses still outstanding becomes more reliable.
Gross reserves for unpaid claims and claims expenses developed initially at the booking date (d) 20,371 20,�41 26,656 26,�16 28,636 28,465 27,825 2�,128 31,168 41,301 44,020
Gross reserves for unpaid claims and claims expenses developed in 2007 adjusted for changes in exchange rates and scope consolidation (d) 21,132 21,633 23,80� 24,5�2 26,072 26,724 27,556 28,40� 2�,884 42,627 44,020
(c) AXA acquired GrE in May 1999. GrE’s operations have been integrated within AXA. At the time of acquisition, GrE’s gross reserves totaled €5.6 billion. (d) In 2004, AXA Corporate Solutions Assurance US, AXA rE P&C Insurance Company and AXA rE P&C reinsurance were transferred from AXA rE to “other international activities”.
The reserves of AXA Corporate Solutions Assurance US were presented on an occurring year basis and included in the Property & Casualty loss reserve development table. The reserves of AXA rE P&C Insurance Company and AXA rE reinsurance Company were presented on an underwriting year basis and included in the AXA rE loss reserve development table.
(e) In 2006, Winterthur’s operations were integrated within AXA. Total loss reserves developed amounted to €41.3 billion including €8.7 billion in respect of Winterthur (final figure after PGAAP re-opening).
loss reserVe DeVelopment table: aXa re On December 21, 2006, the AXA Group finalized an agreement to sell the AXA rE reinsurance business to Paris ré Holding. Under the terms of the agreement, AXA retains exposure to any changes in the final cost of claims occurring before December 31, 2005. However, the proportional treaty set in place as part of the agreement between AXA rE and Paris ré protects AXA entirely from any claims occurring after January 1, 2006. Consequently, the table below shows the development of loss reserves recognized in AXA rE’s balance sheet at each year-end until December 31, 2005. reserves recognized after that date, which correspond to exposure assumed fully by Paris ré, have not been developed.
(b) represents premiums earned subsequent to the accounting year end and premium reinstatements / experience-rated premiums received and accrued from the ceding insurers as assumed losses were incurred.
(c) In 2001, AXA rE’s claims reserves were adversely affected by the September 11 attacks. (d) In 2004, AXA Corporate Solutions Assurance US, AXA rE P&C Insurance Company and AXA rE P&C reinsurance were transferred from AXA rE to the “other international activities”.
AXA RE (a) — — 4,253 total gross claims and other reserves developed 44,020 43,7�3 35,421
Other reserves non developed (b) 4,734 5,242 2,098 of which AXA RE liabilities 2,562 3,038 —
enVIronmental, asbestos anD other eXposures AXA regularly reviews environmental, asbestos and other related exposures to ensure that loss provisions take into account recent developments and information. Further details are provided in Note 14 “Liabilities arising from insurance and investment contracts” included in “Part V — Consolidated Financial Statements” of this Annual report.
For information relating to certain additional matters that may affect AXA’s business, see the “risk factors” Section included in the Part IV, and the Part V “Consolidated Financial Statements” included in this Annual report.
The EU has also adopted various directives concerning solvency margin requirements for insurers and insurance groups. — A 1998 EU directive, implemented into French law in 2002, requires insurance groups to calculate a consolidated solvency margin. In accordance with this directive, AXA must establish appropriate internal controls to ensure solvency sufficient to cover all of the Group’s insurance liabilities, inform the French insurance regulatory authorities annually of certain intra-group transactions, and calculate on a consolidated basis the capital needed to meet the respective solvency requirements of the Group’s insurance subsidiaries. Similar solvency requirements must be fulfilled by intermediate holding companies that own AXA Group insurance subsidiaries in different EU jurisdictions.
— The European Commission (the “Commission”), jointly with Member States, is carrying out a fundamental review of the regulatory capital regime of the insurance industry (the “Solvency 2” project) that will update the existing life, non-life, reinsurance and insurance groups directives. Its principal objective is to establish a solvency system that is better matched to the true risks of insurers, enabling supervisors to protect policyholders’ interests as effectively as possible and in accordance with common principles across the EU. Solvency 2 is expected to be based on the concept of three pillars-minimum capital requirements, supervisory review of firms’ assessments of risk and enhanced disclosure requirements. Its scope is expected to cover, among other matters, valuations, the treatment of insurance groups, the definition of capital and the overall level of capital requirements. Under Solvency 2, companies will be encouraged to improve their risk management processes and will be permitted to make use of internal economic capital models to enable a better understanding of risks and appropriate adaptation of the model to each insurer’s specific business mix and risks. In 2007, the Commission adopted a draft directive setting forth various policy principles and guidelines that will act as a framework for the development of the Solvency 2 regime. Implementing measures will be adopted by the Commission and the Member States, supplementing this framework, and Solvency 2 is expected to be implemented by 2010.
Several U.S. states, including the state of New York, regulate transactions between an insurer and its affiliates under insurance holding company acts that establish certain reporting requirements and place restrictions on provision of services and on intercompany transactions. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, such regulators determine that the issuing insurer is not maintaining adequate statutory surplus or capital. 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 and that takes into account the risk characteristics of the company’s investments and products. AXA Equitable and AXA’s other U.S. life insurance subsidiaries expect that the statutory surplus will continue to be in excess of the minimum rBC levels required to avoid regulatory action.
On August 25, 1998, AXA, Winterthur Group and certain other European insurers signed a Memorandum of Understanding with certain U.S. insurance regulators and non-governmental Jewish organizations agreeing to the establishment of the
New draft legislation has recently been introduced in the U.S. Congress that would require insurers that issued policies during the Holocaust era to furnish information concerning policies in force during that period to a federal registry maintained by the United States and subject the insurers to certain sanctions if they fail to do so. This proposed legislation would also create a federal private right of action permitting introduction of civil litigation in U.S. federal courts in connection with these matters. This legislation is currently pending and is under review and discussion by a number of interested parties. Management cannot predict with any certainty at this time whether this proposed legislation (or similar legislation) will ultimately be adopted or the magnitude of the potential impact it may have on the AXA Group if adopted.
The other jurisdictions in which AXA operates, including those in the Asia-Pacific region, also have comprehensive regulatory regimes with which AXA must comply. In general, insurance laws and regulations grant supervisory authorities broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations or to revoke an insurer’s license to operate. Consequently, AXA’s insurance subsidiaries operating in the Asia-Pacific region could be subject to regulatory orders limiting, restricting or terminating their regulated business activities in the event they fail to meet local regulatory requirements. 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 constitution of technical reserves and similar regulations may prevent payment of dividends to shareholders and/or repatriation of assets.
LIfe & SAvIngS france1. French Life Insurance market declined by 3% in 2007, especially on Individual lines business (—4%) whereas Group Life business increased by 7%. This negative market evolution can be explained by the impact of new law on inheritance tax enacted in 2007 and by some positive regulatory impacts (Fourgous, PEL…) which explained the exceptional growth in 2006 (+17%). In this context, AXA outperformed the market on individual lines business (+1.5%), in particular with the successful launch of Capital Resources (APE: €23 million). AXA France maintained its market position on Group business with a growth of 1.9% after an exceptional growth in 2006 (especially on retirement). On the total Life market, AXA ranked third.
United States2. In the annuity market, variable annuities were the product of choice with industry sales up 15% through the first nine months of the year, primarily driven by the demand for guaranteed living benefit riders. Industry fixed annuity sales continued to decrease (—8%) over the same period as a result of the continued low interest rate and competition from products such as bank certificates of deposit. In the Life insurance market, total Life industry sales were up 7% for the first nine months of 2007. Strong first half equity market performance, higher universal Life prices, greater tax clarity on some Group Life policies and expansion into other distribution channels buoyed variable Life sales (+8%) through the first three quarters of 2007. Life insurance products, such as universal Life, continued their strong sales in the first nine months of 2007, with industry universal Life sales up 10%. For the same period, fixed whole Life insurance sales increased by 1%, and term insurance sales increased by 7%. AXA gained market share, ranking second in the variable annuity market and ninth in the variable Life market for the first nine months of 2007.
United Kingdom3. New annualized business (new regular premiums plus 10% of single premiums) were 16% higher than the same period in 2006. Despite mild stock market instability, and concern over the proposed changes to capital gains tax announced in the Pre Budget Report, “Wealth Management” markets held up. Popularity of open architecture investment vehicles (Wrap and Self-Invested Personal Pensions) continued. Stock market falls commenced at the end of the period. The positive effects from individuals and corporates reviewing existing pension arrangements resulting from “A Day” Pension Simplification changes continued throughout the period. This also influenced increased activity in drawdown and annuity products. Large numbers of final salary scheme reconstructions also drove Corporate Personal Pensions growth, although the market fell off at the end of the period. The Protection market remained flat as mortgage sales were depressed by the ongoing credit crunch. Within the UK, the traditional IFA and multi-tie channels represented collectively 76% of total market new business. AXA’s market share was 7.8% (as of September 2007).
Japan4. The Life insurance industry faced two main challenges during 2007: (i) the March 2007 announcement of a substantial reduction in the tax deductibility of the Increasing Term product (a key product for a number of insurers) led to most insurers discontinuing the product, and (ii) the regulator mandated retrospective review of all medical claims paid in the past five years which, following most insurers identifying claims which had been unpaid or underpaid, generated significant negative sentiment in the press for the industry. Whilst these conditions impacted many insurers, individual annuity sales sourced from bancassurance distribution channels continued to generate growth for a number of insurers. Changes in deregulation (notably bancassurance and the postal service privatisation), social infrastructure (including a population that is both ageing & declining) and customer sophistication are expected to continue to influence market dynamics. Being one of the most mature insurance markets, Japan continues to be a highly competitive market. AXA is 10th in the market based on the number of inforce policies (3rd for Medical products).
germany5. In 2007, German Life & Savings market was flat. The trend away from traditional products in favour of unitlinked annuity products (+20% in terms of regular premiums and +75% in terms of single premiums) kept going on. 2007 was impacted by the increase in short-term and mediumterm investment products (increase by 26% in terms of single premiums) which competed directly with banking products. The core products of the Retirement Earnings Law (“Alterseinkünftegesetz”), the “Rürup” pensions grew by 100% in terms of regular premiums. “Riester” products decreased by 25% in terms of regular premiums in 2007 due to one-off effect last year as 2006 benefited from fiscal incentives. In the Life market, AXA ranked sixth (2006 figures including DBVWinterthur in terms of gross revenues). German Private Health
insurance market grew by 2.9% impacted by two opposite effects, on the one hand the increases of the premium rates for Public Health insurance which favoured the switch from Public to Private and on the other hand the more stringent rules of the Health reform relating to the income threshold. In the Health market, AXA ranked fifth (2006 figures including DBV-Winterthur in terms of gross revenues).
Switzerland1. The Life market was flat. Switzerland was impacted by a low interest rate level with tighter margins and highly competitive re-investment activities of banks and autonomous pension “foundations”. Estimated Group Life market growth in 2007 of +1.5% was mainly caused by intrinsic drivers such as salary increases and favourable economic environment. Customers benefited from increased pricing competition and enhanced customer retention services. The estimated Individual Life market growth of +1.6% derived from significantly increased unit-linked insurance product sales (+12.9%) and good re-investment opportunities due to large portfolio maturities in traditional insurance business. After the AXA Lausanne integration, AXA Winterthur ranked second both in Group Life and Individual Life.
Belgium2. The Life market returned to a normal trend in 2007 with a growth of approximately 9%, following a 2006 market downturn in Individual Investment and Savings, due to several tax changes. The growth was mainly attributable to non unit-linked market increase, estimated around +23%, whereas the unit-linked market sharp decline was estimated at around –31%. Corporate Life was expected to grow by nearly 13%. AXA ranked 4th 3.
Australia / new Zealand. Regulatory change and complexity, the continuing shift of financial responsibility from government to individuals and the poor savings behaviors of most households drove demand for quality financial advice and, in turn, the need for comprehensive support services for advisers. Growth in the wealth management product markets in Australia and New Zealand continued to be driven by the ageing population, government support for self funded retirement and strong investment markets. Major regulatory changes in both countries in 2006 and 2007 aimed at encouraging retirement savings were expected to maintain momentum with market growth rates forecast of 11% per year8 for the next five years. Financial protection product markets were underpinned by rising incomes, asset appreciation and widespread under-insurance, with expected growth rates of 10% per annum9. Both Australia and New Zealand have open, competitive and relatively concentrated markets. The top 10 companies accounted for around 60% of retail funds under management, 75% of net retail funds flow and close to 90% of new and in-force annual premiums in Australia10. AXA ranked 4th for retail wealth management and 5th in financial protection in Australia. AXA is unique amongst major competitors in operating across the entire wealth management and financial protection value chain — asset management, products, platforms, adviser services and financial advice. With open competition at each stage of the value chain, this end-to-end presence allows AXA to capture more overall margin and be less sensitive to the shifting of margin between different parts of the value chain.
Hong Kong. The economy of Hong Kong continued to be strong in 2007 with GDP growing by 6.2%11 and the Hang Seng index growing by 39.3% in 2007. Hong Kong remained a very attractive Life insurance market, with high profit margins, high savings ratios and moderate Life insurance penetration. Individual Life market new business sales increased by 30%12 for the nine months to September 2007. Life insurance premiums increased over the past few years partly because of growing product options, strong growth in unit-linked savings plan and the entry of banks and new distribution channels in the market. Hong Kong Life insurance market is relatively concentrated, with 53% of individual Life new business sales stemming from the top 5 companies. Following the acquisition of MLC Hong Kong in May 2006 and Winterthur Life (Hong Kong) in April 2007, and strong organic growth, AXA is now number three for inforce premiums and five for new business.
South east Asia & china. Strong economic growth momentum was observed in South East Asia throughout 2007, as GDP of the four middle-income ASeAn countries13 grew by 5.7% in the first and 6.2% in the second half of the year. Neighboring expanded its GDP at an even faster pace (+11.5%) on the back of strong investment, solid consumption and resilient exports14. This strong macroeconomic environment set the stage for continued growth in the South
(7) Source: Hellenic Association of Insurance Companies as of September 2007. (8) Source: Plan for Life as of September 2007.
East Asian Life insurance markets where AXA is currently present. In particular, Indonesia’s Life insurance market returned to strong growth of 48%, with total premium income of €2.03 billion for the nine months ended September 30, 2007 (2006 — €1.37 billion)1. The philippines remained a similarly attractive market with over €0.75 billion in Life insurance premiums and very low Life insurance penetration of 1%. thailand, a market with a relatively low Life insurance penetration of 2.7%2 grew to €3.73 billion3 in annual Life premiums, a 41% increase versus prior year. Last but not least, Singapore — a market that can be characterized by large bank deposits and an affluent but underinsured population — recorded gross life premiums of €3.26 billion4 for the nine months ended September 2007. Likewise, china kept its attractiveness, currently being the fourth largest Asian Life insurance market (after Japan, South Korea and Taiwan) with €36.66 billion5 in annual Life premiums and a low Life insurance penetration rate of 2%.
property & cASUALty france9. In 2007, premiums grew by an estimated 2%. Motor business was estimated to have decreased by 0.5% in 2007 (—1% in 2006) due to a very competitive market with a continuing pressure on prices. Household business is estimated to have increased by 5% due to the high increase of property index. Commercial business is estimated to have increased by 3% mainly thanks to Liability and Construction lines. In the Property and Casualty market, AXA was the second player.
germany12. In 2007, total business decreased by 0.4% (to €55 billion). Personal and Commercial Motor lines fell by 1.8% in 2007 in the context of an intense price competition. Personal and Commercial Liability grew by 0.5%. Personal non-motor lines remained flat (property +0% and Accident +1%) as penetration was already high. Industrial property gross written premiums decreased by 5% due to pressure on prices. In the P&C market, AXA ranked fourth (2006 figures including DBV-Winterthur).
(1) Indonesia Life Insurance Industry (AAJI). (2) Thai Life Assurance Association (TLAA).
(3) Thai Life Assurance Association (TLAA). (4) Singapore Life Insurance Association.
(5) CIRC publication, 2006 (www.circ.gov.cn). (6) Polish Financial Supervision Authority site.
(11) Based on data from Irish Insurance Federation 2006 fact files. (12) Please note that the full year figures are preliminary estimations. Source: GDV. (13) Based on a report by Swiss Re. (14) Derived from the nine months ended September 30, 2007 figures (source: Assuralia Belgian Professional Union of Insurance companies). (15) ICEA source. (16) IAMA source.
policies without mandatory notification, which increased cancellations and new business. Greece remained as one of the European insurance markets with a low penetration rate, and its P&C segment grew in 2007 by 8.5%1. The Turkish economy maintained a fast growth. Thus, Turkish P&C segment increased by 17%2. In Morocco, the penetration rate was still very low. In Spain, AXA ranked 2nd in the non-life market; in Italy, it ranked 8th in the market; in Portugal, AXA ranked 2nd; in Greece, it ranked 10th; in Turkey, AXA ranked 2nd; in Morocco, AXA ranked 3rd (combining both Property & Casualty and Life & Segment segments).
South Korea6. The Property & Casualty market increased by 16.5% in 2007. Motor premiums increased by 13%, following tariff rises after several years of continuing pressure on prices. Premiums for Long-term products (which include all contracts with a maturity above 3 years, in particular Health, Medical and Accident) grew significantly by 21.4%. They are now representing 54% of the total Property & Casualty market. Kyobo AXA ranked 1st in the Direct Motor insurance market, or 6th (up from 8th in 2006) in the total Motor market with a 4.4% market share. In the total P&C market, Kyobo AXA ranked 12th.
(5) Source: Insurance Services Malaysia Bhd. (6) Source: General Insurance Association of Korea.
After a difficult start to the year for government bonds, the mounting worries and the change in monetary policy created the conditions for a much more positive situation. In fact, US government bonds were one of the year’s big winners, outperforming their European counterparts. The US 10-year T-bond ended the year at 4%, a decline of nearly 70bps compared with the beginning of the year, while the Bund yield rose by nearly 30bps to 4.33%. The yield curve underwent a major steepening, with the spread between the yield on 2 and 10 year bonds surpassing 90bps in the United States. A similar phenomenon was observed in the United Kingdom. Credit spreads widened with the iTRAXX Main (Investment Grade) moving from 23.4bps to 50.0bps in 2007 while the iTRAXX Crossover (Below Investment Grade) increased from 219.5bps to 338.8bps.
On an average rate basis, the Dollar lost 9% against the Euro (from 1.26$ over 2006 to 1.37$ over 2007), whereas the Yen lost 11% against the Euro at September 2007 (from 142.9 yens for the twelve months to September 2006 used for Full Year accounts to 158.3 yens for the twelve months to September 2007). The Pound Sterling lost 0.3% against the Euro (from 0.682£ over 2006 to 0.684£ at the end of December 2007). The Swiss Franc lost 4% against the Euro (from 1.57CHF over 2006 to 1.64CHF at the end of December 2007).
On January 12, 2007 (closing date), AXA U.K. announced that it had reached an agreement with insurance brokers Stuart Alexander and Layton Blackham to acquire both businesses. AXA U.K. acquired both firms through its subsidiary Venture Preference Ltd, (VPL) which already owned 38.9% of Layton Blackham. The two companies are to be combined and will have considerable autonomy to develop the business and will maintain independent broking status. Quality accounts with current insurers will be maintained and grown. The total cash consideration paid for 61.1% of Layton Blackham and 100% of Stuart Alexander amounted to £58.5 million.
On February 7, 2007, AXA U.K. announced that it was to acquire the U.K.’s only 100% online insurer, Swiftcover, jointly owned by international insurer Primary Group and Swiftcover’s management. The transaction was closed on March 22, 2007. Swiftcover is a business on the U.K. Personal direct market, with net inflows of 120,000 policies in 2006. The upfront cash consideration for Swiftcover amounted to £75 million, with an additional potential earn-out of £195 million maximum over the next 4 years, based on policy volume and combined ratio level.
On March 17, 2007, AXA Holdings Belgium S.A. reached an agreement with ELLA Holdings S.A. and its main shareholder Royalton Capital Investors to acquire 100% of the Hungarian retail bank eLLA and its affiliates. Originally specialized in online banking and today the fastest growing bank in Hungary in terms of volume and number of mortgage loans, ELLA is the 6th largest supplier of mortgage loans in the country with total assets of €375 million at the end of 2006. The combination of AXA Hungary’s operations, the 5th largest company in the pensions market, with those of ELLA Bank is intended to emulate the successful business model of AXA in Belgium. The transaction was closed on July 27, 2007 and the purchase price amounted to €123 million.
On April 23, 2007 (closing date), AXA U.K. announced the acquisition of a leading independent commercial broker, Smart & cook. The purchase of Smart & Cook completed a trio of acquisitions in recent months by AXA as it realized a strategic intent to become a national force in commercial broking.
AXA U.K. bought the entire share capital of Smart & Cook through its subsidiary Venture Preference Ltd (VPL) which also houses recently acquired Stuart Alexander and Layton Blackham, purchased in January 2007. The three companies will operate under the same structure, retaining independent broking status. The enlarged business will operate from 40 offices employing some 1,200 people.
On September 12, 2007, AXA and Bao Minh Insurance corporation (“Bao Minh”) announced that they reached an agreement to establish a strategic partnership in the Vietnamese insurance market. As part of this agreement, AXA would acquire a 16.6% stake of the share capital of Bao Minh for a total amount of VND 1,194 billion (€54 million). Bao Minh is the 2nd largest player in the Vietnamese non-Life insurance market with a 21% market share. It is well positioned in all business lines and has a strong and diversified distribution network. As part of the partnership, and in order to fully benefit from the growth prospects of the Vietnamese market, Bao Minh would have access to the technical expertise of AXA’s global and regional platforms. The transaction was closed on September 26, 2007.
On November 9, 2007, in the context of its strategic partnership with BMpS, AXA announced that it held a strategic interest equal to 2.052% of BMPS’s total outstanding share capital. The acquisition of this interest was designed to reinforce the long-term relationship between the two companies and to demonstrate AXA’s full support for BMPS’s proposed acquisition of Banca Antonveneta. AXA would subscribe to its full allocation of BMPS shares as part of the rights issue contemplated by BMPS in connection with this acquisition. In line with the agreement between AXA and BMPS announced in March 2007, the bancassurance agreement between BMPS and AXA-MPS should be extended to Banca Antonveneta, significantly reinforcing AXA-MPS’s competitive position on the Italian insurance market. The legal and financial conditions for this extension of the bancassurance agreement are subject to the closing of the acquisition of Banca Antonveneta by BMPS.
On December 21, 2007, AXA announced that it had reached an agreement with reso garantia’s (“reSo”) shareholders to acquire a 36.7% stake in the company for a total cash consideration of around €810 million. As part of this agreement, AXA will have the option to buy out the remaining stake through calls exercisable in 2010 and 2011. AXA and RESO’s shareholders also agreed to form a joint venture to develop an operation on Russia’s emerging Life & Savings market. Founded in 1991, RESO has built one of the leading P&C insurance franchises in Russia (7% market share), notably focused on retail Motor, and supported by a network of 18,000 agents, the 2nd largest in Russia. Under the terms of the agreement, RESO’s current management team will continue to run the company and roll-out its successful strategy. AXA will have management control of the Life joint venture. With this acquisition, AXA will further reinforce its growth profile and increase its exposure to emerging insurance markets. This transaction is expected to be completed during the first half of 2008. As part of the agreement, AXA granted a 6-year $1 billion credit facility to RESO’s main shareholder, fully secured by its shareholding in the company.
On May 15, 2006, AXA announced the squeeze-out of the minority shareholders of its german subsidiary AXA Konzern AG, whereby it would acquire the 3.2% of AXA Konzern shares it did not already own at a price of €134.54 per ordinary share and preference share. The resolution of the squeeze-out was endorsed at the Annual General Meeting of AXA Konzern on July 20, 2006. As announced on December 21, 2005, AXA made a voluntary public offer between January 9, 2006 and February 27, 2006 to purchase the minority shares of its German subsidiary AXA Konzern Ag (“AXA Konzern”) from minority shareholders at a price of €129.30 per ordinary and preference share. AXA reached a direct and indirect holding of 96.8% of the share capital of AXA Konzern as of the end of the offer period, thereby exceeding the 95% threshold that is a condition to launching a minority squeeze-out. Under the terms of the voluntary public offer, shareholders who tendered their shares to AXA at €129.30 per share during the offer
period would also benefit from the higher squeeze-out price of €134.54 per share. At the end of December 2006, the corresponding ownership rate of the Group in the German subsidiaries amounted to 96.84% generating an additional goodwill of €92 million. AXA proceeded with a squeeze-out of the 0.44% minority shareholding in Kölnische Verwaltungs-Aktiengesellschaft für Versicherungswerte AG (“KVAG”) at a price of €2,042.01 per ordinary share. The principal asset of KVAG was a 25.6% stake in AXA Konzern’s share capital. The resolution of the squeeze-out was endorsed at the annual general meeting of KVAG, held on July 21, 2006. The total investment to reach a 100% ownership in both Axa Konzern and KVAG starting from the situation as at January 1, 2006 amounted to €309 million. A part of this amount remained to be paid in 2007 as the registration of the squeeze-out is subject to various procedures according to German law. In order to further streamline the organization in Germany, AXA Konzern launched in parallel the squeeze-out of the minority shareholders of its listed life insurance subsidiaries. Upon the completion of these transactions, AXA would own directly or indirectly 100% of all its German subsidiaries.
AXA announced on June 14, 2006, that it had entered into a definitive agreement with Crédit Suisse Group under which AXA would acquire 100% of Winterthur for CHF12.3 billion (€7.9 billion) paid in cash. In addition, AXA refinanced CHF1.1 billion (€0.7 billion) of internal loans redeemed to Crédit Suisse as of the closing date. AXA secured the total financing of the acquisition of Winterthur through: — €4.1 billion capital increase resulting in the issue of 208,265,897 new shares, — €3.8 billion of perpetual deeply subordinated note issues, — €0.7 billion financed through internal resources.
On October 23, 2006, AXA UK announced that it had reached an agreement with the Board and two main institutional shareholders of Thinc Destini to acquire the entire share capital of thinc destini. AXA UK acquired Thinc Destini using a newly created company, Advisory Services Limited (“ASL”). Under the terms of the agreement with the two main institutional shareholders and the Offer, the shareholders of Thinc Destini shared up to £70 million based primarily on the financial performance of the business during 2009. The maximum amount was subject to certain deductions as detailed in the terms of the Offer. AXA UK had also agreed to fund the repayment of Thinc Destini’s existing indebtedness, which arose primarily due to Thinc Destini’s acquisition of a number of IFA businesses, and provide further working capital to the Thinc Destini Group, up to an aggregate amount of £30 million. The transaction which was subject to the satisfaction or waiver of certain conditions, including the Offer being accepted by Thinc Destini ordinary shareholders holding at least 90 per cent of the issued Thinc Destini ordinary shares closed on November 10, 2006.
On December 14, 2006, ONA and AXA entered into an agreement for the buy-out of ONA’s 49% share in the capital of AXA-onA (the holding company of AXA Assurance Maroc). The transaction valued AXA-ONA at MAD 6,382 billion (€573 million with December 31, 2006 exchange rate) for 100% of its share capital and was financed locally. Closing of this transaction was subject to regulatory approvals. AXA Assurance Maroc is 100% controlled by AXA. The transaction closed on March 19, 2007.
On October 31, 2005, AXA Investment Managers (AXA IM) completed the purchase of the framlington group Limited. Framlington is an investment management boutique with an emphasis on specialist, high-performance and high-valueadded equity investments, and has a significant market position within the UK retail market segment. The purchase price amounted to €303 million, with a related goodwill of €142 million and an intangible asset of €132 million (net of tax).
On January 4, 2007, AXA reached an agreement with QBE Insurance Group for the sale of Winterthur’s U.S. operations for US$1,156 million (€920 million taking into account hedges put in place by AXA for this transaction at 1 Euro = 1.26 US$), and successfully completed the sale on May 31, 2007.
On June 4, 2007, AXA announced that it had entered into a memorandum of understanding with SNS Reaal with a view to finalizing discussions on the sale of its Dutch operations, comprising 100% of AXA netherlands, Winterthur netherlands and dBv netherlands, for a total cash consideration of €1,750 million, after consultation with trade unions and workers’ councils.
AXA contemplated exiting the Dutch insurance market given the limited possibilities to reach a leading position through organic growth in the foreseeable future as this market is highly competitive and dominated by large local players.
AXA’s Dutch operations concerned by this proposed transaction were treated as discontinued operations (held for sale) in AXA’s 2007 consolidated financial statements. As a consequence, their earnings until closing were accounted for in net income for all reported years. Their contribution in 2007 amounted to €480 million (of which €406 million gains on disposal and €74 million result up to the closing date), which was accounted in net income. The transaction was closed on September 5, 2007.
AXA initiated in 2006 a strategic review regarding the future of its reinsurance activity, currently underwritten by AXA re and reported in the “International Insurance” segment. Following the receipt of a binding offer on April 6, 2006 and consultation with the relevant workers’ councils, AXA announced on June 6, 2006 the signing of a definitive agreement to cede the business of AXA re to Paris Re Holdings Limited.
For AXA shareholders, these transactions resulted in the elimination, from an economic point of view, of the potential dilutive impact of the 2014 and 2017 convertible bonds (i.e. a maximum of 65.8 million shares). The total cash consideration paid by AXA amounted to €245 million.
On July 1, 2007, 50 free shares were allocated to each AXA employee worldwide. More than 100,000 AXA Group employees in 54 countries, will become shareholders and — depending on the country — will own the shares after two years (with a two year holding period) or after four years (without any holding period), providing they are still employed by AXA. Approved by AXA’s shareholders during the annual shareholders’ meeting on May 14, 2007, the resolution pertaining to the “AXA Miles” program allowed the Management Board to distribute free AXA shares to all AXA employees, representing up to 0.7% of AXA’s share capital. This allocation of 50 free shares constitutes the first step in the “AXA Miles” program which is one of several key human resources initiatives of AXA’s company-wide project “Ambition 2012”.
For several years, the AXA Group has been offering to its employees in and outside of France, the opportunity to subscribe for shares issued by way of a capital increase reserved for employees. In 2007, employees invested a total of €552 million leading to a total of 22.1 million newly issued shares. Employee (including agents) shareholders represented 5.23% of the outstanding share capital as of the end of 2007.
On October 10, 2007, AXA announced the creation of a €100 million global AXA reSeArcH fUnd to be launched in early 2008. AXA believes that the private sector can, and should, play an important role in promoting meaningful academic research consistent with its larger social responsibilities. In this context, the AXA Group decided to launch the AXA RESEARCH FUND managed by a Scientific Board chaired by Ezra Suleiman, professor of political science at Princeton University, and independent member of the AXA Supervisory Board. AXA committed a total of €100 million to the Fund over 5 years. The Fund will support academic research institutions and individuals involved in post doctorate research programs and will support academic research projects in different areas associated with AXA’s business of Financial Protection.
In the United Kingdom, from January 31, 2008, a temporary deferral period of up to six months was introduced for certain transactions involving the AXA Life property fund (£1.2 billion or e1.7 billion at December 31, 2007) and AXA pension property fund (£0.9 billion or e1.3 billion at December 31, 2007), which is allowed under the terms of the customer’s policy. The transactions affected by the deferral are fund switches out, surrenders and transfers out of the fund. The deferred transaction will take place at the unit prices at the time the transaction is processed. The deferral period runs from the date the request is received by AXA. The imposition of this deferral period, consistent with policy terms, comes at a time when the demand for commercial property investment in the United Kingdom has been declining in recent months and when AXA has seen a significant increase in the level of withdrawals from these two Funds which invest in the United Kingdom commercial property. The contractual deferral period is designed to provide the funds’ managers with sufficient time to liquidate properties in an orderly fashion and at fair prices in order to protect the interests of all investors in the fund. Customers invested in the funds have been notified along with their advisers. AXA is monitoring the liquidity situation of these funds closely. In the event that sufficient liquidity to honor all outstanding withdrawal requests by the end of the deferral period cannot be generated through sale of properties held by the funds and other sources of liquidity available to the funds, AXA U.K., as sponsor of the funds, will be required to provide the funds with sufficient liquidity to honor these withdrawal requests.
On February 6, 2008, AXA announced it had entered into an agreement to acquire OYAK’s (50%) share in AXA oyAK Holding A.̧S. (“AXA oyAK”), a company established by AXA and OYAK in 1999. Under the terms of the agreement, AXA will pay a purchase price of $525 million (approximately €355 million) in cash for OYAK’s 50% share in AXA OYAK (in addition, according to the same agreement, AXA OYAK Holding will be buying, for $15 million (approximately €10 million), the 1.5% share that Mais Motors, an OYAK joint venture company, holds in AXA OYAK’s non-Life subsidiary). AXA OYAK enjoys a leading position (10% total market share1) on the fastgrowing Turkish insurance market. Mainly focused on nonLife, especially motor and property, the company experienced strong top-line growth in the past years and is one of the most profitable players in the market. The transaction, which was subject to local regulatory approval, is expected to close by early spring of 2008. Following closing, the parties have agreed that AXA OYAK and its subsidiaries will no longer use the OYAK name or trademark.
(a) Net of intercompany eliminations. (b) Excluding net realized capital gains and change in fair value of assets under fair value option and derivatives, net banking revenues and total consolidated revenues would respectively amount to €320 million and €93,617 million for the period of December 31, 2007. (c) Restated means the restatement of The Netherlands’ activities as discontinued businesses. (d) Includes notably CDOs and real estate companies.
On a comparable basis means that the data for the current year period were restated using the prevailing foreign currency exchange rates for the same period of prior year (constant exchange rate basis). It also means that data in one of the two periods being compared were restated for the results of acquisitions, disposals and business transfers (constant structural basis) and for changes in accounting principles (constant methodological basis). In particular, comparable basis for revenues and APE in this document means including Winterthur and net of intercompany transactions in both periods.
Taking into account the restatements to comparable basis, mainly the impact of restating 2006 for Winterthur (€13,401 million or —18.1 points) and the appreciation of the Euro against other currencies (€2,830 million or +3.6 points, mainly from the Japanese Yen and US Dollar), gross consolidated revenues were up 5% on a comparable basis.
total Life & Savings new Business Ape1 reached €7,694 million, up 24% compared to 2006. On a comparable basis, New Business APE increased by 8%, mainly driven by the United States and the United Kingdom, partly offset by Japan and the Mediterranean Region.
Japan APE decreased by 17% to €567 million as certain Term products no longer benefit from a favorable tax environment. The lower Term product sales were partly offset by strong
Hong Kong APE was up 12% to €139 million, reflecting strong growth in individual unit-linked regular premiums and group retirement sales and encouraging results from the new Citibank bancassurance agreement (signed in July 2007).
property & casualty gross revenues were up 28% to €25,016 million, or +4% on a comparable basis mainly driven by United Kingdom & Ireland (+8% to €5,076 million), Mediterranean region (+5% to €5,276 million), France (+3% to €5,330 million), and Germany (+2% to €3,506 million).
personal lines (60% of p&c premiums) were up 5% on a comparable basis, stemming from both Motor (+5%) and Non-Motor (+5%).
Motor revenues were up 2%, with strong growth (i) in Germany (+5%) due to a higher number of vehicles in the existing fleets, (ii) in France (+2%) following increase in tariffs and (iii) in the United Kingdom & Ireland (+5%), partly offset by (iv) Mediterranean region (—4%) due to a lower contribution from former Winterthur fleet rental business further to a strategic decision, and (v) Belgium (—2%).
International Insurance revenues were down 4% or up 7% on a comparable basis to €3,568 million attributable to both AXA Corporate Solutions Assurance and AXA Assistance.
United Kingdom APE was up 6% to €1,588 million. Wealth management was up 7% due to (i) individual pension business (up 14%) reflecting the strength of the combined AXA/Winterthur Individual pension offering as well as (ii) strong performance in the Offshore Estate Planning Bond (up 68%), partly offset by (iii) a drop in Offshore Bonds cash sales (—36%) resulting from a change in the tax environment for these products in 1Q07 and affecting negatively AXA U.K.’s APE growth momentum in 2H07. Protection business was up 27% driven by new distribution contracts and improved propositions to IFAs as well as effective direct marketing campaigns. Group pension was up 2%.
germany APE was stable at €457 million principally due to (i) a strong growth in Investment & Savings (+12%), with notably the “TwinStar” Accumulator-type product (€84 million) (ii) the non recurrence of 2006 large cases in Life Group business and (iii) the negative impact of traditional Riester products (notably in Winterthur’s portfolio) which had benefited in 2006 from strong inflows as a result of a fiscal incentive. share of total APE was 38%.
Switzerland APE increased by 2% to €222 million with (i) Individual Life & Savings up 16% reflecting the continuous increase in sales of new Unit-linked products (+148%) which were launched in October 2006 (WinLife Variant) and May 2007 (AXA Comfort), partly offset by (ii) Group Life down 3%. Unit-linked share of total APE increased to 8%.
central & eastern europe APE was up 59% to €107 million, mainly driven by Life and Savings business (+128% to €48 million), benefiting from strong unit-linked sales (+128% to €44 million) and gains in market share in the Pension Fund business (+27% to €59 million). Main countries contributing to the growth were Czech Republic (+82% to €37 million) and Poland (+56% to €49 million).
AXA corporate Solutions Assurance revenues were up 7% both on reported and comparable bases to €1,805 million, driven by portfolio developments in Marine, Property, Motor and Construction.
AXA Assistance revenues were up 13% both on reported and comparable bases to €699 million mainly due to Home Serve business in the United Kingdom, and increased premiums in Travel business in Germany.
Asset Management revenues increased by 10% or +17% on a comparable basis to €4,863 million driven by higher average Assets under Management (+21% on a comparable basis) and business mix improvement.
net banking revenues in Banking segment were down 10% or —4% on a comparable basis to €339 million, mainly attributable to AXA Bank Belgium (—15% on a comparable basis to €216 million) in the context of an unfavourable yield curve and higher refinancing costs following higher short term interest rates.
Net revenues from banking activities 320 393 393 408 408 change in unearned premium reserves net of unearned revenues and fees (609) (474) (498) (491) (502)
Net income from investments in affiliates and associates 29 21 21 20 20 operAtIng IncoMe groSS of tAX eXpenSe 7,545 6,293 6,423 4,688 4,651
(b) Restated in full year 2005 means: (i) transfer of the forex impact from adjusted earnings to net income, (ii) following clarification of IFRIC agenda committee following IASB decision, AXA reclassified TSDI instruments (perpetual subordinated debts) into shareholders’ equity with impact on net income, (iii) in line with new accounting FRS27, the reclassification in the United Kingdom of some With-Profit technical reserves to allow for all future terminal bonuses payable to With-Profit policyholders within the allocated policyholder reserves, previously held in the unallocated policyholder bonus reserve, without any impact on earnings, and (iv) the restatement of The Netherlands’ activities as discontinued businesses.
2005 published transfer of foreign exchange impact from adjusted earnings to net income tSdI reclassification impact the netherlands restatement 2005 restated (a)
Profit or loss on financial assets (under fair value option) & derivatives 149 (94) 66 — 121
(a) Restated means: (i) transfer of the forex impact from adjusted earnings to net income, (ii) following clarification of IFRIC agenda committee following IASB decision, AXA reclassified TSDI instruments (perpetual subordinated debts) into shareholders’ equity with impact on net income, and (iii) the restatement of The Netherlands’ activities as discontinued businesses. Please note that FRS 27 impact on the statement of income (underlying basis) are not detailed as they are not significant.
(a) Restated means the restatement of The Netherlands’ activities as discontinued businesses.
Excluding the contribution of Winterthur and on a constant exchange rate basis, underlying earnings increased by €230 million mainly resulting from: (i) An improved investment margin (€+84 million), primarily in France (€+48 million broadly in line with asset base evolution), the United Kingdom (€+46 million largely driven by Shareholders’ participation in higher With-Profit bonuses as a result of high levels of With-Profit surrenders in 2007), Belgium (€+43 million mainly due to a decrease of the credited rates driven by the increased share of lower guaranteed rate products while the average rate of return of the assets increased slightly), partly compensated by the United States (€—90 million primarily driven by lower net investment income reflecting lower General Account asset levels and lower prepayments from mortgages and fixed maturity refinancing).
(ii) Higher fees and revenues (€+927 million) principally due to the United States (€+322 million mainly due to higher fees earned on separate account business resulting from positive net cash flows, the impact of the market appreciation on separate account balances and higher fee structure), the United Kingdom (€+222 million principally due to the Thinc Group fees and revenues, an increase in Loadings on account balances, and an increase in deferred loadings amortization related to previously deferred income on short term offshore cash deals business largely written in Q4 2006 and Q1 2007, which is offset in the expense margin by amortization of previously deferred commissions), France (€+118 million mainly resulting from higher revenues on unit-linked account balance and higher sales on Life & Health products), Australia / New Zealand (€+98 million reflecting higher inflows and growth of funds under management and administration, following strong domestic market performance fuelled by changes in superannuation legislation), and Japan (€+66 million mainly driven by loadings on higher medical premiums).
(iii) Lower tax and minority interests (€+10 million) as the €25 million reduction in income tax expense mainly attributable to the United Kingdom (€+159 million due primarily to the non recurring 2006 net negative impact of €107 million due to reassessment of the likelihood of a future distribution from the attributed Inherited Estate), partly offset by France (€—67 million reflecting notably the increase of taxable income) and the United States (€—63 million principally due to the non recurrence of a €92 million favorable tax settlement in 2006, partially offset by a €36 million release of tax reserves in 2007), was offset by the €15 million increase in minority interests (€14 million attributable to Hong Kong following the increase in earnings).
(vi) A higher level of vBI amortization (€—32 million) mainly attributable to the United Kingdom (€—38 million mainly as a result of higher lapses on Pension business).
property & casualty underlying earnings amounted to €1,863 million. Excluding the contribution of Winterthur (€340 million) and on a constant exchange rate basis, Property and Casualty underlying earnings increased by €111 million (+8%) driven by almost all countries except the United Kingdom (€—124 million): (i) Higher net technical result (€+135 million), with an all year loss ratio increasing by 1.0 point to 69.5% of which 2.3 points related to major losses.
(ii) Higher investment result (€+159 million) mainly driven by the United Kingdom (€+43 million), the Mediterranean region (€+43 million), and France (€+32 million).
As a consequence, excluding Winterthur, the combined ratio increased by 1.0 point to 97.9%.
Banking’ underlying earnings increased by €18 million (+100%) to €36 million, mainly attributable to AXA Bank Belgium (notably due to an increase in commercial margin).
Holdings and other companies’ underlying earnings amounted to €—414 million. Excluding the contribution of Winterthur (€—36 million) and on a constant exchange rate basis, holdings underlying earnings increased by €36 million due to: (i) The United Kingdom Holding (€+84 million) mainly due to the non recurring release in 2007 of a €66 million deferred tax provision held against un-remitted earnings.
(iv) AXA France Assurance (€—10 million) as a result of mainly due to higher tax expenses resulting from higher dividends (eliminated in consolidation) received from operational entities.
(iii) Higher charges on goodwill and other related intangible: €—82 million (or €—30 million excluding Winterthur and on a constant exchange rate basis) to €—106 million, of which €—54 million at Winterthur related to amortization of customer intangible and €—52 million at AXA mainly attributable to the United Kingdom of customer intangible amortization related to brokers’ acquisition and the United States following impairment of intangibles related to the wind down of USFL.
(iv) Higher exceptional operations result including discontinued operations: €+171 million (or €+166 million excluding Winterthur and on a constant exchange rate basis) to €482 million: — Following the June 4, 2007 announcement of the Dutch activities’ sale to SNS REAAL, the Group has classified The Netherlands as a discontinued operation, i.e. impacting net income only, with a retroactive application. The contribution of The Netherlands in 2007 amounted to €480 million (of which €406 million gains on disposal and €74 million result up to the closing date), compared to e123 million in 2006.
mainly related to (i) €86 million dilution gains in AllianceBernstein and €4 million related to sale of Alliance Cash Management business, (ii) Tax refund related to the sale of DLJ (€43 million), release of
conSoLIdAted SHAreHoLderS’ eqUIty As of December 31, 2007, consolidated shareholders’ equity totaled €45.6 billion. The movements in shareholders’ equity since December 31, 2006 are presented in the table below: (in Euro million)
Basic fully diluted Basic fully diluted Basic fully diluted Basic fully diluted Basic fully diluted Basic fully diluted
Weighted average number of shares (c) 2,042.7 2,060.8 1,947.8 2,031.7 1,947.8 2,031.7 1,917.5 1,991.0 1,880.9 1,954.4 net income (euro per Share) 2.77 2.75 2.61 2.56 2.61 2.56 2.25 2.22 2.22 2.19 6.2% 7.4%
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income attributable to AXA’s Life & Savings segment for the periods indicated: LIfe & SAvIngS SegMent (a) (in Euro million)
Fees and revenues from investment contracts without participating feature 740 608 608 509 509
net investment result excluding financing expenses (b) 21,857 28,198 28,656 28,315 28,946
IncoMe froM operAtIng ActIvItIeS, groSS of tAX eXpenSe 3,855 3,430 3,509 2,558 2,613
(a) Before intercompany transactions. (b) For the periods ended December 31, 2007, December 31, 2006, and December 31, 2005, the change in fair value of assets backing contracts with financial risk borne by policyholders impacted the net investment result for respectively €7,468 million, €15,158 million and €13,589 million, and benefits and claims by the offsetting amounts respectively. (c) Restated in full year 2006 means the restatement of The Netherlands’ activities as discontinued businesses. (d) Restated in full year 2005 means: (i) transfer of the forex impact from adjusted earnings to net income, (ii) in line with new accounting FRS27, the reclassification in the United
Profit or loss on financial assets (under fair value option) & derivatives (237) 48 49 18 50
(a) Restated in full year 2006 means the restatement of The Netherlands’ activities as discontinued businesses. (b) Restated in full year 2005 means: (i) transfer of the forex impact from adjusted earnings to net income, and (ii) the restatement of The Netherlands’ activities as discontinued businesses. (c) Mediterranean Region includes Italy, Spain, Portugal, Greece, Turkey and Morocco.
Profit or loss on financial assets (under fair value option) & derivatives (91) 110 52 90
(a) Restated means : transfer of the forex impact from adjusted earnings to net income.
Investment margin increased by €48 million (+5%) to €937 million broadly in line with the increase in asset base.
fees & revenues were up €118 million (+9%) to €1,463 million mainly resulting from higher revenues on unit-linked account balance (€+61 million) and higher sales of Life & Health products (€+43 million).
net technical margin rose by €177 million to €265 million due to (i) €97 million charges reclassified from technical margin to commission expenses in the context of the renewal of some group Life contracts, (ii) the positive impact resulting from higher discount rates used for Life and Health Group Annuity reserves (€+23 million), and (iii) the non recurrence of 2006 negative additional annuity reserves in Savings following change in regulatory mortality tables (€+21 million) and additional reserves in individual disability business (€+24 million).
expenses increased by €230 million to €—1,911 million due to (i) the €97 million impact of charges that were reclassified from technical items to commissions in the context of the renewal of some Group Life contracts, (ii) higher commissions
Amortization of vBI decreased by €25 million (—37%) to €—43 million mainly due to a 2006 exceptional impact of UAP portfolio segment amortization (acquired in 1999).
Income tax expenses increased by €67 million to €—178 million reflecting the increase of taxable income and an exceptionally low tax rate (€+15 million) in 2006.
Net capital gains or losses attributable to shareholders net of income tax (32) 30 5
net income group share 863 1,020 872 gross revenues increased by €854 million (+6%) to €16,244 million on a reported basis. On a comparable basis, gross revenues increased by €2,323 million (+15%). — Variable Annuity premiums increased by 19%. First year
Variable Annuity premiums increased by 22%, with Wholesale channel Variable Annuity sales up 27%.
— Life premiums increased by 7%, including a 34% increase in first year Life premiums driven by strong Wholesale channel growth due to strong Fixed Universal Life sales.
— Other revenues (mainly from mutual funds) were up 18% due primarily to higher Asset Management fees.
Investment margin decreased by €154 million to €704 million. On a constant exchange rate basis, investment margin decreased by €90 million (—11%). Investment income decreased by €68 million reflecting lower General Account asset levels and lower prepayments from mortgages and fixed maturity refinancing, partially offset by higher income from Alternative Investments. Interest and bonus credited increased by €23 million as lower account asset levels were more than offset by the non recurrence of a 2006 reserve release on discontinued operations as well as higher interest credited on pre-demutualization participating annuity business.
fees & revenues increased by €160 million to €1,792 million. On a constant exchange rate basis, fees & revenues increased by €322 million (+20%), mainly due to higher fees earned on separate account business resulting from positive net cash flows, the impact of the market appreciation on separate account balances and higher fee structure.
Underlying earnings decreased by €116 million to €883 million. On a constant exchange rate basis, underlying earnings decreased by €37 million (—4%).
net income decreased by €157 million to €863 million. On a constant exchange rate basis, net income decreased by €79 million (—8%), primarily due to the decrease in adjusted earnings, a €13 million impairment of intangibles related to the wind down of USFL and €8 million in restructuring charges associated with the transfer of the Enterprise retail mutual funds to Goldman Sachs, partially offset by a €44 million increase in the mark to market impact mainly on derivatives not eligible to hedge accounting due to lower interest rates in the U.S.
Profit or loss on financial assets (under fair value option) & derivatives 21 (27) (48) (54)
gross revenues increased by €336 million (+8%) to €4,628 million on a reported basis, of which €73 million was due to the inclusion of Thinc Group (formerly Thinc Destini, a financial intermediary business). On a comparable basis, including Winterthur in both periods and excluding Thinc Group in 2007, gross revenues increased by €26 million (+1%): — Investment & Savings (80% of gross revenues) were down 2% largely due to lower volumes of Onshore Bond business and Offshore cash sales.
— Life Insurance Premiums (20% of gross revenues) increased by 13% due to increased volumes of Creditor Insurance single premiums and higher AXA Protection Account and direct business volumes.
Investment margin increased by €59 million on a reported basis to €258 million. Excluding Winterthur and on a constant exchange rate basis, investment margin increased by €46 million (+23%) largely driven by Shareholders’ participation in higher
With-Profit bonuses (annual and Terminal bonuses) as a result of high levels of With-Profit surrenders in 2007. Winterthur contribution amounted to €15 million.
fees & revenues increased by €297 million on a reported basis. Excluding Winterthur and on a constant exchange rate basis, fees & revenues increased by €222 million (+38%) driven by: — the Thinc Group fees & revenues of €73 million; — an increase of €82 million in Loadings on account balances, largely due to positive net new money into unit-linked funds; — a decrease of €13 million in Loadings on premiums reflecting lower initial margins on unit-linked new business; — an increase of €91 million in deferred loadings amortization related to previously deferred income on short term offshore cash deals business largely written in Q4 2006 and Q1 2007, which is offset in the expense margin by the amortization of previously deferred commissions.
expenses net of policyholder allocation1 increased by €322 million to €—967 million on a reported basis. Excluding Winterthur and on a constant exchange rate basis, expenses increased by €241 million (+37%) as a result of (i) the inclusion of the Thinc Group expenses (€92 million), (ii) amortization of €91 million of previously deferred expenses on short term offshore cash deals largely written in Q4 2006 and Q1 2007, (iii) higher administrative expenses (€54 million) including costs of direct marketing campaigns and the development of a new Wrap platform and (iv) higher commissions net of DAC/DOC capitalization (€12 million) reflecting growth in new business. Winterthur contribution amounted to €—85 million.
Adjusted earnings increased by €64 million to €229 million on a reported basis. Excluding Winterthur and on a constant exchange rate basis, adjusted earnings increased by €42 million (+26%) reflecting the increase in underlying earnings reduced by impairments (€10 million) mainly attributable to Northern Rock depreciation (€9 million) and net realized losses on corporate bonds (€19 million) in 2007. Winterthur contribution amounted to €23 million.
net income increased by €78 million to €216 million on a reported basis. Excluding Winterthur and on a constant exchange rate basis, net income increased by €61 million (+44%) including a €+51 million favorable impact due to the decrease in undiscounted tax adjustment on unrealized gains attributable to policyholders in Unit-linked Life funds2 offset by €22 million of costs in respect of the integration of Winterthur and Thinc Group, and €7 million of Thinc Group customer intangible amortization. Winterthur contribution amounted to €18 million.
(€—88 million) to €2,140 million driven by lower Endowment, Whole Life, Group Life and LTPA regular premiums (€—120 million), partially offset by higher Increasing Term revenue (€+35 million) reflecting the inforce block growth following strong sales until its discontinuation in March 2007.
— Health (26% of gross revenues): Revenues increased by 18% (€+215 million) to €1,299 million due to higher conversions following a one time 1Q07 program which upgraded selected old Medical Whole Life policies to more recent product generations (€+78 million), and the move from lower margin Term products to more profitable medical products (€+68 million). Winterthur’s revenues increased by €68 million mainly driven by Cancer sales.
— Investment & Savings (32% of gross revenues excluding group pension transfers): Revenues increased by 8% (€+127 million) to €1,631 million with higher revenues from the launch of the Accumulator type products (€+540 million) and strong sales of other variable annuity products (€+55 million) being partially offset by (i) €—316 million lower SPA revenues (US dollar-denominated variable annuity product) following strong “post-launch” salaried salesforce sales in Q1-2006 and (ii) lower regular premium individual fixed annuities (€—132 million), this product being no longer actively promoted as part of Bancassurance’s transition to higher margin variable annuity products.
net technical margin increased by €5 million (+4%) on a reported basis to €135 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, net technical margin decreased by €2 million (—2%): — Mortality margin increased by €41 million to €121 million mainly due to the change in assumptions on the annuity portfolio (€—14 million in 2006 compared to €+31 million in 2007).
expenses increased by €37 million (+6%) on a reported basis to €—641 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, expenses increased by €57 million (+9%) driven mainly by: — €26 million (+7%) higher commissions as a result of variable annuity and medical sales growth combined with the business mix shift towards more profitable and higher commission-paying medical products.
The Underlying cost income ratio increased from 59.9% to 63.4% on a reported basis. Excluding the contribution of Winterthur, the underlying cost income ratio increased from 59.9% to 62.9% as higher fees & revenues were more than offset by higher expenses, lower technical margin, and higher VBI amortization.
Income tax expenses declined by €10 million on a reported basis to €—154 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, income tax expenses declined by €9 million (—5%) following a decline in taxable income. Winterthur contribution amounted to €—14 million reflecting taxable income of €36 million.
Underlying earnings declined slightly by €2 million (—1%) on a reported basis to €254 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, underlying earnings remained flat. Winterthur contribution amounted to €22 million.
net income declined by €38 million (—15%) on a reported basis to €219 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, net income declined by €35 million (—13%) as the €+36 million higher adjusted earnings were more than offset by losses arising from derivatives notably following the adverse yen to Euro/US dollar exchange rate movement (€—38 million) and the change of fair value of assets designated at fair value through P&L mostly invested in fixed income (€—32 million). Winterthur contribution amounted to €18 million including €—2 million integration costs.
Net capital gains or losses attributable to shareholders net of income tax (1) 6 2
Profit or loss on financial assets (under fair value option) & derivatives 3 6 4
net income group share 179 81 36 gross revenues increased by €2,520 million (+68%) to €6,201 million on a reported basis. On a comparable basis, revenues decreased by €51 million (—1%) mainly due to lower traditional endowment business and lower Group business resulting from reduced share in medical councils as well as high single premium business in 2006. The decline was partly offset by Investment & Savings both unitlinked (especially “Twinstar” products) and non unit-linked premiums (“WinCash” product) as well as continuous growth in Health.
Investment margin increased by €43 million to €139 million. Excluding Winterthur, investment margin increased by €17 million (+18%) mainly driven by higher investment income due to equity dividends and fixed income yields (increases in duration and spread) as well as higher asset base mainly due to portfolio growth in Health, supported by lower policyholder participation rate. Winterthur contribution amounted to €26 million.
expenses increased by €44 million to €—136 million. Excluding Winterthur, expenses increased by €18 million (+19%) mainly due to higher DAC amortization as well as lower policyholders’ participation rates on expenses. Winterthur contribution amounted to €—26 million.
vBI amortization increased by €14 million to €—23 million. Excluding Winterthur, VBI amortization increased by €3 million (+34%). Winterthur contribution amounted to €—11 million.
Income tax expenses increased by €35 million to €—134 million. Excluding Winterthur, income tax expenses increased by €3 million (+3%) as a €28 million favourable impact of the new income tax rate (32% versus 40%, applicable on current income from 2008) on deferred tax liabilities partly offset the higher taxable income. Winterthur contribution amounted to €—31 million, benefiting from an additional €28 million positive impact of the new income tax rate on the deferred tax liabilities.
Underlying earnings increased by €113 million to €182 million. Excluding Winterthur, underlying earnings increased by €50 million (+73%). Winterthur contribution amounted to €63 million.
net income increased by €97 million to €179 million. Excluding Winterthur, net income increased by €47 million (+58%) including integration costs (€—3 million) and the change in fair value on financial assets and derivatives under fair value option (€—7 million). Winterthur contribution amounted to €50 million including integration costs (€—2 million).
(a) AXA Switzerland was not in the scope of APE in 2006, nor in 2005. Starting 2007, and as a result of Winterthur acquisition AXA Switzerland is in the scope of APE.
Ape increased by €4 million (+2%) on a comparable basis to €222 million with Individual Life & Savings up 16% reflecting the continuous increase in sales of new Unit-Linked products (+148%) which were launched in October 2006 (WinLife Variant) and May 2007 (AXA Comfort), partly offset by Group Life down 3%. Unit-linked share of total APE increased to 8%.
fees & revenues (mainly loadings on premiums) amounted to €212 million, including €100 million in Group Life and €112 million in Individual Life (of which €11 million on UnitLinked products).
net technical margin reached €137 million, showing a strong contribution of mortality and disability technical result. Individual Life technical margin amounted to €81 million and Group Life technical margin amounted to €57 million net of policyholder bonus distributed under the Swiss legal quote rule.
As a result and taking into account a vBI amortization of €—29 million (of which €—12 million in Group Life and €—17 million in Individual Life), Underlying cost income ratio was 47.8%.
net income amounted to €135 million including adjusted earnings of €149 million and realized gains resulting from the sale of Winplan (€+7 million), offset by a change in fair value of assets under fair value option and derivatives (€—10 million), amortization of Winterthur customer intangible (€—5 million), and Winterthur integration costs (€—7 million).
net income group share 191 310 131 gross revenues increased by €563 million (+22%) to €3,075 million on a reported basis. On a comparable basis, gross revenues increased by €315 million (+11%) due to the increase in both Individual Life (+9%) and Group Life (+22%). — Individual Life and Savings revenues increased by 9%
to €2,453 million driven by the growth of unit-linked products (+48% to €432 million) with the reclassification of AXA Life Invest products from investment to insurance products and the launch of TwinStar in September 2007, and non unit-linked products (mainly Crest 40) by 5% to €1,707 million. Traditional Life products decreased by 4% to €313 million.
Investment margin increased by €57 million to €143 million on a reported basis. Excluding Winterthur, investment margin increased by €43 million (+50%) mainly due to a decrease of the credited rate driven by the increased share of lower guaranteed rate products (Crest 30 and Crest 40) while the average rate of return of the assets increased slightly. Winterthur Investment margin amounted to €13 million.
fees & revenues increased by €16 million to €162 million on a reported basis. Excluding the contribution of Winterthur, fees and revenues increased by €3 million (+2%). Winterthur contribution amounted to €13 million.
net technical margin increased by €1 million to €57 million on a reported basis. Excluding the contribution of Winterthur, the net technical margin slightly decreased by €3 million (—5%) mainly due to a less favorable mortality experience in 2007. Winterthur contribution amounted to €4 million.
Income tax expenses decreased by €5 million to €—17 million on a reported basis. Excluding the contribution of Winterthur, income tax expenses decreased by €7 million (—32%) including the €26 million positive contribution resulting from the favorable court decision from insurance companies on RDT (“Revenus Définitivement Taxés”: tax exemption on 95% of dividends on equities newly extended to insurance companies). Winterthur contribution amounted to €—2 million.
Adjusted earnings decreased by €24 million (—7%) to €297 million on a reported basis. Excluding the contribution of Winterthur, adjusted earnings decreased by €21 million (—6%) due to lower net realized capital gains following a high level in 2006 (€255 million) partly offset by the increase in underlying earnings (€+22 million). Winterthur contribution amounted to €—3 million.
net income decreased by €120 million to €191 million on a reported basis. Excluding the contribution of Winterthur, net income decreased by €91 million (—29%), including €—9 million integration costs and unfavourable change in fair value on fixed income mutual funds under fair value option due to interest rate increase. Winterthur contribution amounted to €—28 million including €—4 million integration costs.
Profit or loss on financial assets (under fair value option) & derivatives — — 3 3
Ape increased by 44% to €206 million on a reported basis. On a comparable basis, APE decreased by 5% as a result of a drop in Group business (down 28%) due to the non recurrence of a 2006 outsourcing of pension fund contract in Winterthur. This was partly offset by the increase in individual business (+2%) notably driven by the contribution of Accumulator product (€13 million). Unit-linked share in total APE was 18%.
expenses increased by €76 million on a reported basis to €—205 million. Excluding Winterthur and on a constant exchange rate basis, expenses increased by €40 million or 31%. Excluding the contribution of Alpha Insurance (€27 million), expenses increased by €13 million (+10%) due to higher non-commission general expenses (€+6 million), mainly driven by the launch of Accumulator, and higher commissions driven by a more profitable business mix (€+5 million). Winterthur contribution amounted to €36 million.
Underlying cost income ratio increased by 7.9 points on a reported basis to 68.2%. Excluding Winterthur and on a constant exchange rate basis, underlying cost income ratio increased by 4.7 points to 64.9% of which +3.2 points impact of Alpha Insurance.
Underlying earnings increased by €16 million (+29%) on a reported basis to €73 million. Excluding Winterthur and on a constant exchange rate basis, underlying earnings increased by €10 million. Excluding Alpha Insurance’s contribution
(€+2 million) and the acquisition of the minority shares in Morocco (€+4 million), underlying earnings increased by €4 million. Winterthur contribution amounted to €7 million.
LIfe & SAvIngS operAtIonS — otHer coUntrIeS The following tables present the operating results for the other Life & Savings operations of AXA.
Profit or loss on financial assets (under fair value option) & derivatives (10) 6 7 2 3
gross revenues were up €131 million to €1,384 million (+7% on a comparable basis), given: — Revenues from mutual fund and advice business increased by €94 million (+23% on a comparable basis) to €367 million due to continuing growth in funds under management.
Mutual fund retail net sales increased by €750 million (+38% on a comparable basis) to €2,609 million. This is a key area of growth in Australia and reflects continued strong inflows into the mezzanine “global equity fund” as well as into Personal superannuation sold through Summit and Generations platforms. Furthermore, recent legislative changes in Australia led to a one-time spike in superannuation (1) AXA interest in AXA Asia Pacific Holdings is 53.86% broken down into 53.00% direct interest holding and an additional 0.86% owned by the AAPH Executive plan trust.
Ape was up 25% to €545 million mainly driven by continued strong inflows into Global Equity Value fund and ipac wholesale products, in addition to strong Personal superannuation flows into Summit & Generations platforms.
Underlying earnings were up €14 million (+17%) on a constant exchange rate basis to €99 million. On a 100% ownership basis, the evolution of underlying earnings was as follows: — Investment margin was up €6 million to €29 million mainly due to increasing bond yields and higher dividend income on assets backing policy liabilities.
— fees & revenues were up €98 million to €732 million, reflecting higher inflows and growth of funds under management and administration, following strong domestic market performance.
— net technical margin was down €17 million to €6 million, due to less favourable claims termination experience in individual Life as well as non-recurring refinements in the group risk business.
— expenses (including amortization of VBI) were up €51 million to €—561 million, reflecting higher commissions associated with increased fees & revenues.
— tax expense was up €13 million to €—23 million mainly due to the increase in underlying earnings.
Overall, the underlying cost to income ratio improved from 74.9% to 73.1% as a result of higher fees & revenues.
Hong Kong1 gross revenues were up €216 million (+21%) to €1,257 million on a reported basis. This included €110 million from MLC and €236 million from Winterthur. On a comparable basis — excluding the impact of MLC but including Winterthur in both periods and at constant exchange rates — gross revenues were up 4% reflecting the successful launch of a new unitlinked investment & savings type product for which only fee income rather than premium contributions are accounted for in gross revenues.
Ape was up 39% to €139 million on a reported basis, with a contribution of the Winterthur business of €28 million and a full year impact of former MLC agents (€+3 million; company acquired in May and consolidated only 8 months in 2006). On a comparable basis, APE grew by 12%, reflecting strong growth in individual unit-linked regular premiums and group retirement sales and encouraging results from the new Citibank bancassurance agreement (signed in July 2007). Unit-linked share increased to 53%.
Underlying earnings increased by €15 million (+13%) to €126 million. Excluding Winterthur and on a constant exchange rate basis, underlying earnings increased by €22 million (+20%) mainly due to an increase in the investment margin driven by higher income, an increase in fees and revenues as a consequence of strong sales and in-force portfolio growth as well as a full year of earnings from former MLC business. MLC and Winterthur contributions amounted to €14 million and €5 million, respectively.
The underlying cost income ratio improved from 38.7% to 35.9%, or to 34.4% excluding Winterthur. This improvement reflected higher underlying earnings and lower expenses driven by a one-off recovery for a final settlement of a legal case as well as lower VBI amortization.
Adjusted earnings amounted to €1 million, driven by underlying earnings and €2 million capital gains attributable to shareholders.
(1) AXA interest in AXA Asia Pacific Holdings is 53.86% broken down into 53.00% direct interest holding and an additional 0.86% owned by the AAPH Executive plan trust.
(1) Indonesia, Singapore (both fully consolidated, except for AXA Mandiri JV), Thailand and Philippines (both equity consolidated). (2) All SEA entities reported APE for the first time in 2007. (3) Indonesia, Thailand, Philippines and China only reported 9 months of earnings in 2006. (4) China was consolidated for the first time in 2007 using the equity method.
canada gross revenues increased by €11 million to €122 million on a constant exchange rate basis mainly due to the growth in Group Health (€6 million) and Individual Life & Savings (€4 million).
change in unearned premium reserves net of unearned revenues and fees (362) (139) (142) (272) (269)
net investment result excluding financing expenses 2,057 1,564 1,594 1,433 1,461
Technical charges relating to insurance activities (16,702) (12,697) (12,841) (12,187) (12,347)
Net income from investments in affiliates and associates 5 9 9 3 3 operAtIng IncoMe groSS of tAX eXpenSe 2,639 2,163 2,214 1,854 1,882
Goodwill and other related intangible impacts (67) (2) (2) (1) (1)
2005 published contribution to consolidated gross revenues 25,016 19,510 19,793 18,600 18,874
Net capital gains or losses attributable to shareholders net of income tax 93 70 85 57
Profit or loss on financial assets (under fair value option) & derivatives 34 64 17 45
gross revenues amounted to €5,377 million. On a comparable basis, gross revenues increased by 3%: — Personal lines (60% of gross revenues) increased by 1% to €3,185 million, mainly reflecting (i) positive net inflows in Household (+40K new contracts) combined with an increase in the average premium and (ii) positive net inflows in Motor (+99K new contracts) offset by lower average premium in the context of a still very competitive market.
— Commercial lines (40% of gross revenues) increased by 6% to €2,145 million driven by Construction following positive portfolio development.
expense ratio increased slightly by 0.2 point to 24.2% following higher tied agents commissions and a 0.1 point non commission ratio increase due to higher cost of buildings lease, taxes and advertising costs.
net investment result improved by €32 million to €495 million driven by higher income from fixed maturities resulting from a higher asset base.
Income tax expenses were up €20 million to €—230 million in line with increased taxable income.
net income increased by €38 million (+7%) to €553 million under the combined effect of (i) higher adjusted earnings (€+68 million) partly offset by an unfavourable change in fair value of assets under fair value option (€—59 million), due to negative impacts on fixed maturity mutual funds, and (ii) change in fair value on derivatives (€+31 million) explained by positive impacts on equity swaps.
Net capital gains or losses attributable to shareholders net of income tax 71 75 62 64
— The all accident year loss ratio increased by 4.6 points to 66.4%, as the adverse current accident year loss ratio was partially offset by favorable development in prior years reserves development (€268 million in 2007).
expense ratio deteriorated by 0.3 point to 35.0%, with the acquisition ratio down 0.2 point due to the favourable impact from lower profit commissions resulting from adverse weather events, more than offset by +0.5 point in administrative expenses due to +0.3 point for the brokers and +0.2 point to support volume growth in PPP Health business.
As a result, the combined ratio amounted to 101.4%, a deterioration of 4.9 points from 96.5% in 2006.
net income decreased by €144 million to €307 million on a reported basis, or €143 million (—32%) on a constant exchange rate basis, in line with the adjusted earnings evolution and €17 million of customer intangible amortization related to brokers’ acquisition.
Net capital gains or losses attributable to shareholders net of income tax 92 77 87 80
Profit or loss on financial assets (under fair value option) & derivatives 29 26 30 37
— The all accident year loss ratio increased by 1.2 point to 69.0%. Excluding Winterthur, the all accident year loss ratio increased by 1.8 point to 69.5%, due to the higher current accident year loss ratio, partly offset by a non recurring increase in claim handling costs reserve in 2006.
Winterthur net technical result amounted to €236 million with an all accident year loss ratio of 66.7%.
As a result, combined ratio amounted to 98.2% including the “Kyrill” impact of 1.8 point. Excluding Winterthur, the combined ratio deteriorated by 0.7 point to 98.8%. Winterthur combined ratio amounted to 95.9%.
Profit or loss on financial assets (under fair value option) & derivatives (29) (6) 1
net technical result increased by €181 million to €693 million. Excluding the contribution of Winterthur, net technical result decreased by €27 million to €485 million. Winterthur net technical result amounted to €207 million. — The current accident year loss ratio decreased by 0.4 point to 77.6%. Excluding the contribution of Winterthur, the current accident year loss ratio increased by 1.2 point to 79.2%, mainly due to the Kyrill storm (2.1 points impact).
Winterthur current accident loss ratio amounted to 73.4% (0.8 point Kyrill impact).
net investment result increased by €57 million to €235 million. Excluding the contribution of Winterthur, net investment result increased by €5 million (+3%) to €183 million. Winterthur contribution amounted to €52 million.
Income tax expenses decreased by €24 million to €—73 million. Excluding the contribution of Winterthur, income tax expenses decreased by €61 million (—62.5%) including a €10 million positive contribution resulting from the favorable court decision from insurance companies on RDT (“Revenus Définitivement Taxés”: tax exemption on 95% of dividends on equities newly extended to insurance companies). Winterthur contribution amounted to €—37 million.
Profit or loss on financial assets (under fair value option) & derivatives (16) (1) 1 2
gross revenues increased by 38% on reported basis to €5,298 million. On a comparable basis (including Winterthur in Spain and Alpha Insurance in Greece for both periods), revenues increased by 5%: — Personal lines (71% of the P&C premiums) increased by 8% to €3,789 million. Motor business (+8%) benefited from higher volumes (+419 K contracts) driven by the strong success of the new products and tariffs. Average premium remained stable as the higher weight of “fullcover ” policies (especially in Spain and Turkey) was offset by the strong market competition and the higher weight of motorbike policies. Non-motor lines (+6%) were driven by Property lines (+7%) and Health (+6%).
— Commercial lines (28% of the P&C premiums) were up 1% to €1,508 million driven by non motor lines (+2%), especially Health and Workers’ Compensation, partly offset by Motor (—4%) due to a lower contribution from former Winterthur fleet rental business, and low profitable Mechanical guarantees (—76%).
(—0.7 point). Excluding Winterthur, it deteriorated by 0.8 point to 78.0%, mainly driven by an increase in motor personal lines (+2.0 points) following the strong new business impact and the stable average premium (as compared to a 4% average weighed inflation rate).
Underlying earnings increased by €188 million on a reported basis to €362 million. Excluding Winterthur and on a constant exchange rate basis, underlying earnings increased by €86 million (+49%). Excluding the acquisition of Greece and Morocco minority shares, underlying earnings increased by €68 million (+36%). Winterthur contribution amounted to €103 million.
net income increased by €198 million on a reported basis to €428 million. Excluding Winterthur and on a constant exchange rate basis, net income increased by €148 million (+64%) including integration costs in AXA Spain (€—25 million) and the decrease in fair value of invested assets under fair value option through P&L (€—19 million). Winterthur contribution amounted to €51 million including €—35 million integration costs.
Net capital gains or losses attributable to shareholders net of income tax (6) 2 1
net income group share 84 9 3 gross revenues amounted to €1,981 million. On a comparable basis, gross revenues were stable both on Motor (the acquisition of new clients offsetting the impact of tariff reduction), and non-Motor (the impact of tariff increase in Workers’ compensation and Property offsetting a decrease in Health and Transport reflecting fierce competition).
2006 and 2005 numbers are related to AXA Switzerland before the Winterthur acquisition. As this acquisition increased dramatically the size of AXA in Switzerland, the following comments focus only on overall Switzerland numbers in 2007 without comparison to 2006.
net technical result reached €490 million: — The current accident year loss ratio stood at 77.6 % with a claim experience characterized by a very substantial level of large losses (notably flood and hail events impacting both Motor and Property lines of business).
property & cASUALty operAtIonS — otHer coUntrIeS conSoLIdAted groSS revenUeS (in Euro million)
(a) Restated means the restatement of The Netherlands’ activities as discontinued businesses. (b) Includes Hong Kong, Singapore and Malaysia (Malaysia has been fully consolidated for the first time in 2007).
(a) Restated in full year 2005 means: (i) transfer of the forex impact from adjusted earnings to net income, and (ii) the restatement of The Netherlands’ activities as discontinued businesses.
canada gross revenues amounted to €1,085 million. On a comparable basis, gross revenues increased by €57 million (+5%) as a result of a €+34 million impact of the 24 month policies first launched in 2005 and a €+23 million growth in premiums mainly reflecting increased volume during the second half of the year.
Underlying earnings amounted to €125 million. On a constant exchange rate basis, underlying earnings increased by €16 million mainly resulting from 1.2 point improvement
(excluding restructuring costs in 2006 related to Citadel) in the combined ratio to 89.0% and higher investment income (€+5 million) driven by an increased investment base.
net income increased by €19 million on a constant exchange rate basis to €134 million, as a result of higher adjusted
Japan gross written premiums increased by 17% on a constant exchange rate basis to €167 million, mainly driven by Motor business growth. Motor revenues accounted for 96% of the total and rose by 18%.
Adjusted earnings and net income were in line with underlying earnings.
Underlying earnings decreased by €1 million on a constant exchange rate basis to €8 million, mainly attributable to the lower underwriting results (€2 million) due to worsening Motor claims experience. The combined ratio increased from 90.2% to 93.7%.
Underlying earnings decreased by €3 million on a constant exchange rate basis to €5 million, due to a worsening claims experience with several large claims, which led to an increase in the combined ratio from 95.2% to 99.6%.
Underlying earnings remained stable on a constant exchange rate basis to €5 million, a slight increase of the combined ratio (from 81.4% to 83.5%) being offset by a higher investment income.
poland gross revenues increased to €12 million mainly reflecting the positive development of the activity in Motor with 43 K new contracts.
Kyobo Auto is a newly acquired entity that contributed 6 months to earnings in 2007.
net income was €0 million, including the impact of the acquired portfolio amortization.
AXA Corporate Solutions Assurance 1,823 1,697 1,614 contribution to consolidated gross revenues 3,568 3,716 3,813
Net realized capital gains or losses attributable to shareholders 23 60 88 94
Current accident year loss ratio (net) (a) 94.1% 88.7% 88.9% 88.9%
Net capital gains or losses attributable to shareholders net of income tax 27 32 20 30
— The prior accident year net technical result increased by €87 million to €115 million due to positive reserve developments in Marine, Property and Aviation.
expenses increased by €14 million to €220 million resulting from a commission increase (€+17 million to €106 million) following both (i) an activity growth and an exceptional impact in 2006 (the non-renewal of a large motor contract with high commission rate), and (ii) a slight general expenses decrease (€—3 million).
Income tax expenses increased by €4 million to €—63 million with the effective tax rate decreasing by 1.9 point mainly due to the activation of past years tax deficits in Germany.
As a consequence, underlying earnings increased by €13 million to €97 million.
AXA ceSSIonS Underlying earnings decreased by €1 million to €13 million mainly as a result of Kyrill storm (€—3 million impact).
Adjusted earnings and net income decreased by €3 million to €19 million in line with underlying earnings evolution.
otHer InternAtIonAL ActIvItIeS Underlying earnings increased by €78 million to €89 million. Excluding the contribution of Winterthur and on a constant exchange rate basis, underlying earnings increased by €61 million mainly due to (i) the continuous favourable loss reserve development on some run-off portfolios in 2007 (€117 million pre-tax including AXA RE run-off), (ii) lower reserve strengthening on Asbestos, and (iii) €19 million improvement in Life run-off portfolio fully explained by the cost of fully hedging the remaining exposure of this portfolio in 2006.
Adjusted earnings increased by €45 million to €84 million. Excluding Winterthur contribution and on a constant exchange rate basis, adjusted earnings increased by €28 million (+72%) reflecting the underlying positive impact (€+61 million), partly offset by lower net realized gains (€—32 million). Winterthur contribution amounted to €19 million.
The following tables present the consolidated gross revenues, underlying earnings, adjusted earnings and net income for the Asset Management Segment for the periods indicated.
Net realized capital gains or losses attributable to shareholders 1 1 6 5
(a) Restated means the transfer of the forex impact from adjusted earnings to net income.
Net capital gains or losses attributable to shareholders net of income tax 1 1 6
Profit or loss on financial assets (under fair value option) & derivatives — — —
Assets under management (“AUM”) decreased by €0.7 billion to €543 billion, as the strong global net inflows of €23 billion across all client categories (€13 billion from institutional clients, €4 billion from retail clients and €6 billion from private clients) and the €37 billion market appreciation were offset by a negative €62 billion exchange rate impact.
gross revenues increased by 15% on a comparable basis to €3,277 million, largely due to higher base fees (+25%, with +28% in institutional clients, +20% in retail clients and +24% in private clients) driven by higher average assets under management (+21%) partly offset by lower performance fees (—66%), especially on hedge funds. Other revenues (mainly distribution fees, institutional research and other fees) were up 10%.
general expenses increased by €102 million to €—2,306 million. On a constant exchange rate basis, general expenses increased by €310 million (+14%), mainly due to higher compensation expenses (€+228 million) from higher headcount, increased occupancy from expansion of offices in New York and overseas (€+25 million) and higher technology costs (€+29 million), offset by lower professional fees (€—14 million).
Income tax expenses increased by €53 million to €—313 million. On a constant exchange rate basis, income tax expenses increased by €81 million (+31%) due to +15% higher pre taxearnings and a higher effective tax rate resulting from increased earnings from foreign subsidiaries. As a result of the acquisition of 8.16 million private units in February 2007, AXA Financial’s ownership interest in AllianceBernstein increased 3 points from approximately 60.3% at December 31, 2006 to 63.2% at December 31, 2007.
net income decreased by €80 million to €313 million. On a constant exchange rate basis, net income decreased by €52 million (—13%) as higher underlying earnings were more than offset by the non-recurrence of 2006 one-time items of €85 million, mainly dilution gain from the issuance of AllianceBernstein Holding units and related reversal of deferred tax Liability from prior period (€81 million).
Net income from investment in affiliates and associates — — — —
gross revenues increased by €327 million (+19%) to €2,006 million on a reported basis. On a comparable basis, gross revenues increased by 21% mainly due to higher average assets under management. The favorable client and product mix evolution was offset by a slight decrease in performance fees.
Underlying cost income ratio improved by 0.7 point from 68.3% to 67.6%.
Underlying and adjusted earnings increased by €70 million to €276 million on a reported basis.
(1) On July 23, 2007, AXA Investment Managers (AXA IM) announced that, based on the assessment that the U.S. Mortgage-Backed and Structured Securities’ markets were experiencing a liquidity crisis, AXA IM had taken exceptional and temporary steps in order to ensure that redemptions incurred by the U.S Libor plus strategy would not induce further pressure, by ensuring liquidity in the funds. In particular, AXA IM agreed to match all redemptions that will be carried out by clients in these funds in subscribing a number of shares equal to the number redeemed at the prevailing NAV, and that up until market liquidity gets back to normal. At December 31, 2007, AXA IM marked-to-market investment in Libor Plus funds was €305 million.
Profit or loss on financial assets (under fair value option) & derivatives — (15) 8
AXA BAnK (BeLgIUM) net banking revenues were down €—60 million or 20% to €246 million. On a comparable basis (since the first half year 2007, commissions paid on deposit accounts and current accounts are included in commercial margin and not anymore in Distribution commissions), net banking revenues were down €—38 million or 15%, in the context of an unfavourable yield curve and higher refinancing costs following higher short term interest rates.
Adjusted earnings increased by €6 million to €35 million notably driven by the increase in underlying earnings (€+19 million) partly offset by a decrease in capital gains on equities (€—6 million) and an impairment charge of €7 million.
net income increased by €14 million to €—4 million, reflecting a €14 million less negative impact of the change in fair value of macro-hedge derivatives instruments (from €—17 million to €—4 million).
Underlying earnings, adjusted earnings and net income decreased by €4 million to €—2 million due to lower revenues and higher expenses.
Holdings, AXA United Kingdom Holdings, AXA Germany Holdings, AXA Belgium Holdings, CDOs and real estate companies.
AXA1 Underlying earnings decreased by €4 million to €—224 million mainly due to: — €+77 million profit linked to foreign currency options hedging
— and €—108 million due to the non-recurrence of 2006 positive items of which (i) €69 million financial income on proceeds from Winterthur financing (capital increase and Perpetual Deeply Subordinated Debts issues) and (ii) €39 million tax benefit.
Underlying earnings decreased by €10 million to €—23 million mainly due to higher tax expenses (€+12 million) resulting from higher dividends (eliminated in consolidation) received from operational entities.
Underlying earnings increased by €30 million (+22%) to €—105 million. On a constant exchange rate basis, underlying earnings increased by €21 million (+16%) due to a €23 million decrease in stock based compensation, partially offset by higher interest expense on new intercompany borrowings from AXA in 2007.
net income decreased by €36 million (—47%) to €—112 million. On a constant exchange rate basis, net income decreased €46 million (—60%) reflecting the non-recurrence of an after-tax gain related to the sale of Advest and an exceptional adjustment to taxes, both in 2006, and a negative impact from the mark to market on interest rate swaps, partially offset by an after-tax gain on the sale of Frontier Trust in 2007.
Adjusted earnings and net income decreased by €57 million to €—38 million. Excluding Winterthur, adjusted earnings and net income decreased by €20 million (—104%) in line with the underlying earnings evolution, partly offset by the nonrecurrence of a €10 million impairment on a participation in 2006.
outlook > 2.3 ActIvIty report 2008 has started in a less favorable environment with very volatile and bearish equity markets, a continuation of the liquidity crisis, concerns about a slowdown of the world economic growth, lower interest rates and high credit spreads.
— Our Property & Casualty and International businesses (39% of earnings1) should continue to benefit from our strong and growing market positions as well as from a gradual positive turn of the cycle in some of AXA’s markets.
— Asset Management (11% of earnings1) mix of assets, tight expense management and long term track record should partly offset the negative impact from equity markets.
(ii) Goodwill and other related intangible impacts, and (iii) Profit and loss on financial assets accounted for under fair value option (excluding assets backing contract liabilities for which the financial risk is borne by the policyholder) and derivatives related to invested assets (including all impacts of foreign exchange in particular the ones related to currency options in earnings hedging strategies, but excluding derivatives related to insurance contracts evaluated according to the “selective unlocking“ accounting policy).
Underlying earnings correspond to adjusted earnings excluding net realized capital gains attributable to shareholders. Net realized gains or losses attributable to shareholders include: — realized gains and losses (on assets not designated under fair value option or trading assets) and change in impairment valuation allowance, net of tax,
— related impact on policyholder participation net of tax (Life business),
There are certain material differences between the detailed line-by-line presentation in the Statement of Income and the components of Margin Analysis as set out below. — For insurance contracts and investment contracts with
Discretionary Participation Features (DPF): (i) Gross premiums (net of deposits), fees and other revenues are allocated in the Margin Analysis based on the nature of the revenue between “Fees and Revenues” and “Net Technical Margin”.
(ii) Policyholders’ interest in participating contracts is reflected as a change in insurance benefits in the Statement of Income. In the Margin Analysis, it is allocated to the related margin, that is primarily the “Investment Margin” and the “Net Technical Margin”.
(ii) Change in UFR (Unearned Fees Reserve– capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin Analysis.
(iii) Loading on (or contractual charges included in) premiums / deposits received on all non unit-linked product lines,
(v) Other fee revenues, e.g., fees received on financial planning or sales of third-party products.
(ii) Capitalization of acquisition expenses linked to new business: Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF.
(iii) Amortization of acquisition expenses on current year and prior year new business, including the impact of interest capitalized: amortization charge for Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF.
Underlying vBI amortization includes VBI (Value of Purchased Life Business In-force) amortization related to underlying margins, as well as amortization of other intangibles related to the inforce business.
Underlying expense ratio is the ratio of: (i) Underlying expenses (excluding claims handling costs), to (ii) Earned revenues, gross of reinsurance.
Underlying expenses include two components: expenses (including commissions) related to acquisition of contracts (with the related acquisition ratio) and all other expenses (with the related administrative expense ratio). Underlying expenses excludes customer intangible amortization and integration costs related to newly acquired company.
The underlying combined ratio is the sum of (i) the underlying expense ratio and (ii) the loss ratio (all accident years).
Information in this section should be read in conjunction with note 4 to the Consolidated Financial Statements included in Part V of this Annual Report and is covered by the Statutory Auditor’s Report on the Consolidated Financial Statements.
The Company and each of its major operating subsidiaries are responsible for financing their operations. The Company, as the holding company for the AXA Group, coordinates these activities and, in this role, participates in financing the operations of certain subsidiaries. Certain of AXA’s subsidiaries, including AXA France Assurance, AXA Financial Inc., AXA Asia Pacific Holdings and AXA UK Plc. are also holding companies and are dependent on dividends received from their own subsidiaries to meet their obligations. Operating entities have to meet multiple regulatory constraints, in particular, a minimum solvency ratio. The level of internal dividends paid by operating entities to the Company (or other Group companies) must therefore take into account these constraints as well as potential future regulatory changes. However, based on the information currently available, AXA does not believe that such restrictions constitute a material limitation on its ability to meet its obligations or pay dividends.
Liquidity needs can be affected by actual claims experience if significantly different from the estimated claims experience (see Note 14.6 of Part V — Consolidated Financial Statements).
Insurance cash flows are generally positive but can be negative in the case of exceptional events. A portion of these cash flows is invested in liquid, short-term bonds and other listed securities in order to manage the liquidity risk that may arise from such events.
These subsidiaries’ principal sources of liquidity are operating cash flows, proceeds from the issuance of ordinary shares (where applicable), drawings on credit facilities, repository agreements, and other borrowings from credit institutions.
As part of its risk control system, AXA has for a number of years paid close attention to contractual clauses, particularly those that may lead to early redemption of securities issued by it. A large portion of AXA’s debts consists of subordinated bonds with no early redemption clauses, except in the event of liquidation. Early redemption clauses for debts are in general avoided by AXA. AXA is not currently exposed to early redemption clauses that could have a significant impact on its financial structure. Furthermore, AXA has no ratings triggers in its bank facilities.
On a consolidated basis, subordinated debt (including derivative instruments) totaled €6,146 million after taking into account all intra-group eliminations and excluding perpetual debts (TSS / TSDI, which are included in shareholders’ equity, as described in Note 1.11.2 of Part V — Consolidated Financial Statements), compared to €5,563 million at December 31, 2006.
Movements in these items are described in Note 16 of Part V — “Consolidated Financial Statements”.
The contractual maturities of financing debts are detailed in Note 16.4 of Part V — “Consolidated Financial Statements”.
On a consolidated basis, AXA’s total financing debt instruments issued amounted to €4,535 million at December 31, 2007, an increase of €847 million from €3,688 million at the end of 2006. On a constant exchange rate basis, the increase was €1,001 million (exchange rate movements had an impact of €155 million), mainly due to AXA SA issues of commercial paper (€961 million).
At December 31, 2007, the amount of debt owed by AXA and its subsidiaries to credit institutions was €175 million versus €95 million at the end of 2006. The increase of €82 million on constant exchange rate basis was mainly due to a new debt in Morocco to finance the minority interests’ buyout of AXA ONA (€127 million), and the consolidation of MPS Vita and Danni (€50 million), partially offset by a decrease of €85 million following the sale of the Netherlands, and the repayment of a €10 million debt in Switzerland.
At December 31, 2007, other debts owed to credit institutions totaled €4,700 million (including €1,493 million of bank overdrafts), up €704 million compared to €3,996 million at the end of 2006 (including €1,338 million of bank overdrafts). The increase was €745 million on a constant exchange rate basis, and was attributable primarily to the following items: — a €529 million increase in Hungary due to the consolidation of ELLA Bank, — a €193 million increase in bank overdrafts, — a €164 million increase in deposits under AXA SA’s collateral agreements, — a first-time consolidation of real estate companies
Partly offset by: — a €324 million decrease in AXA Bank Belgium term accounts in relation with the interbanking activity slowdown,
— a €126 million decrease of AXA Sun Life’s other debt owed to credit institutions.
Movements in this item are described in Note 17 of Part V — Consolidated Financial Statements.
On July 1, 2007, 50 free shares were allocated to each AXA employee worldwide under the “AXA Miles” program. More than 100,000 AXA Group employees in 54 countries will become shareholders and — depending on the country — will own the shares after two years (with a two year holding period) or after four years (without any holding period), providing they are still employed by AXA. Approved by AXA’s shareholders during the Annual Shareholders’ Meeting on May 14, 2007, the resolution pertaining to the “AXA Miles” program authorized the Management Board to distribute free AXA shares to all AXA employees, representing up to 0.7% of AXA’s share capital. This allocation of 50 free shares constitutes the first step in the “AXA Miles” program which is one of several key human resources initiatives of AXA’s company-wide project “Ambition 2012”.
European companies to €1,830 million, including a €741 million increase from AXA France Assurance as a result of the high level of capital gains realized in 2006. The main contributors to the €1,830 million were AXA France Assurance and AXA Holdings Belgium, which generated a dividend of €1,415 million and €110 million, respectively; (ii) a €104 million increase in dividends received from insurance companies outside Europe to €213 million, principally due to AXA Canada with a dividend of €80 million; (iii) a €58 million decrease in dividends received from financial subsidiaries to €134 million, including €92 million decrease linked to Compagnie Financière de Paris, which paid out in 2006 an exceptional dividend of €121 million. On the other hand, the dividend paid by AXA Investment Managers reached €73 million, compared to €26 million in 2006, reflecting its earnings’ increase.
uses of funds Interests paid by the Company in 2007 totaled €938 million (2006: €530 million, 2005: €518 million) or €646 million after the impact of hedging derivative instruments (2006: €408 million, 2005: €267 million). On a consolidated basis, total interests paid in cash in 2007 were €554 million (2006: €539 million, 2005: €568 million).
Dividends paid to AXA shareholders in 2007 totaled €2,218 million in respect of the 2006 financial year, or €1.06 per share, versus €0.88 per share paid in respect of the 2005 financial year (€1,647 million in total). All of these dividends were paid in cash.
soLvency MArgin Each insurance company within AXA is required by local regulations to maintain a minimum solvency margin. The primary objective of the solvency margin requirements is to protect policyholders. AXA’s insurance subsidiaries are in compliance with the applicable solvency requirements.
The various components of what the Group considers as available capital are determined in accordance with these regulatory requirements under Solvency I. At December 31, 2007, available managed capital amounted to €31.0 billion (€36.9 billion at December 31, 2006 and €34.8 billion at December 31, 2005) of which: (i) consolidated shareholders’ equity after dividend proposal: €33.8 billion (€32.5 billion at December 31, 2006 and €25.5 billion at December 31, 2005), including minority interests, but excluding reserves relating to changes in fair value through equity (available for sale assets) and deeply subordinated debts,
(ii) unrealized capital gains: €13.0 billion (€17.3 billion at December 31, 2006 and €18.2 billion at December 31, 2005),
(iv) locally admitted assets: €2.9 billion (€3.1 billion at December 31, 2006 and €2.4 billion at December 31, 2005),
(v) less intangible assets (excluding goodwill on AllianceBernstein as it is part of its net consolidated book value): €24.5 billion (€23.3 billion at December 31, 2006 and €17.5 billion at December 31, 2005) and less the net consolidated book value of its equity interests in credit institutions, investment companies and financial institutions: €4.9 billion (€3.7 billion at December 31, 2006 and €3.9 billion at December 31, 2005).
— Employees 130 corporate goVernance, eXecUtiVe coMpensation, MaJor sHareHolDers anD relateD Matters 3.2 FUll DisclosUre on eXecUtiVe coMpensation anD sHare ownersHip
— Commitments made to Management Board and Supervisory Board members 136
— Share ownership of Management Board and Supervisory Board members 148 3.4 MaJor sHareHolDers anD relateD party transactions
— Special report of the Statutory Auditors on regulated agreements and commitments 160 3.3 Description oF tHe coMpany’s sHare repUrcHase prograM 154 3.5 tHe oFFer anD listing 162
Implementing sound corporate governance principles has been a priority at AXA for many years. AXA’s ordinary shares are publicly traded on Euronext Paris and its ADRs and ADSs are publicly traded on the New York Stock Exchange. Consequently, AXA is subject to prevailing corporate governance requirements and practices in both France and the United States including the Sarbanes-Oxley Act, the French Commercial Code and the recommendations resulting from the consolidation of the reports from the AFEP and the MEDEF dated 1995 (“Vienot”), 1999 (“Vienot II”) and 2002 (“Bouton”), which describe certain standards and practices of corporate governance for French listed companies (hereafter the “Report AFEP / MEDEF”).
Article 12 of the Company’s Bylaws specifies that the following types of transactions or issues require the prior approval of the Supervisory Board: — the issuance of securities with a direct or indirect claim on the equity securities of the Company; — proposed share buyback programs submitted to shareholders for approval; — financing operations that may have a material impact on the Company’s financial position; — any contemplated acquisition by the Company, whatever its form; — agreements to form strategic partnerships; — the establishment of any stock option plan or the granting of restricted shares (actions gratuites) to employees of the Company or to employees and officers of subsidiaries, as well as the granting of stock options or restricted shares to members of the Management Board; — proposals to amend the Company’s Bylaws submitted to shareholders for approval; — appropriations of earnings and dividends for the previous year submitted to shareholders for approval; and
The Company’s Bylaws require members of the Supervisory Board to own at least 100 AXA ordinary shares. In addition, to ensure that their interests and those of the Company are appropriately aligned, the Board’s Rules of Procedure provide that Supervisory Board members must own AXA shares in an amount at least equal to the amount of directors fees received in the course of any given year.
the criteria set forth in the Sarbanes-Oxley Act. As of February 27, 2008, ten of the fourteen Supervisory Board members are independent members in accordance with the criteria established in the Report AFEP / MEDEF, as appreciated by the Supervisory Board or the American Sarbanes-Oxley Act: Dominique Reiniche, Léo Apotheker,
Deputy CEO and President Customer Solutions & Operations of SAP AG
Jacques de Chateauvieux (57) (a) Member of the Supervisory Board (e)
Chairman of the Board of Banca Monte dei Paschi di Siena S.p.A. (Italy)
The Coca-Cola Company Groupe Europe 27, rue Camille Desmoulins 92784 Issy-les-Moulineaux Cedex 9
EPS/PIIRS Aaron Burr Hall Princeton University Princeton, N.J. 08544 — United States
(c) Reappointed by the shareholders on May 14, 2007. (d) Mr. Jean-René Fourtou has resigned from his Vice-Chairman of the Supervisory Board function since February 27, 2008. He has been replaced by Mr. Jacques de Chateauvieux. (e) Mr. Jacques de Chateauvieux has been appointed Vice-Chairman of the Supervisory Board since February 27, 2008. He has replaced Mr. Jean-René Fourtou.
At the Company’s General Meeting of shareholders scheduled for April 22, 2008: — Mr. François Martineau (56) is expected to be elected for a 4-year term, replacing Mr. Claude Bébéar as a member of the Supervisory Board, whose term of office will expire at the close of the Company’s Annual Meeting of Shareholders on April 22, 2008. Mr. François Martineau is currently Attorney at Law (Paris Bar).
— A new “employee shareholders’ representative” is expected to be elected for a 4-year term replacing Mr. Jacques Tabourot, whose term of office will expire at the close of this Meeting.
information on current members of the supervisory Board claude BÉBÉar, chairman of the aXa supervisory Board 72, French nationality.
Business address AXA — 25, avenue Matignon — 75008 Paris, France
FINAXA, Chairman and Chief Executive Officer AXA Courtage Assurance Mutuelle, Director AXA Conseil Vie Assurance Mutuelle, Director Vivendi, Director Schneider Electric, Director Lor Patrimoine1, Director AXA Financial, Inc.1 (United States), Director
Business address SAP — 141, boulevard Haussmann — 75008 Paris, France
Mr. Léo Apotheker has a Bachelor’s degree in Economics & International Relations. He started his career in 1978 at the Hebrew University as Senior Controller in the Finance Department. In 1984, he joined Mc Cormack & Dodge as European Operations Director. In 1988, he became Chairman and Chief Executive Officer of SAP France & Belgium. In 1995 he was appointed Chairman (France) of SAP AG and in 1997 he became Chief Executive Officer for South West Europe region. In 2000, he was appointed Chairman EMEA (Europe, Middle East and Africa) and he became member of the Extended Management Board of SAP AG. In July 2002, he became President Customer Solutions & Operations, Member of the Executive Committee of SAP AG. Since March 2006, Mr. Léo Apotheker has been President Customer Solutions & Operations and Deputy Chief Executive Officer of SAP AG.
SAP AG, Deputy Chief Executive Officer & President Customer Solutions & Operations Director or member of the Supervisory Board: — SAP America, Inc. (United States) — SAP Global Marketing Inc. (United States)
— S.A.P. ITALIA Sistemi, applicazioni, prodotti in data processing S.p.A. (Italy) — SAP Hellas “Systems Application and Data Processing S.A.”
Financière Norbert Dentressangle, Chairman and Chief Executive Officer Groupe Norbert Dentressangle, Chairman of the Supervisory Board Financière de Cuzieu (SAS), Chairman ND Investissements (SAS), Chairman SOFADE (SAS), Chief Executive Officer Director or member of the Supervisory Board: — SEB — SOGEBAIL
Dentressangle to the Board of Via Location — Permanent Representative of Financière Norbert
Peugeot SA, Chairman of the Management Board Automobiles Peugeot, Automobiles Citroën, Banque PSA Finance, Peugeot Citroën Automobiles, Chairman Faurecia, Director
— NBC Universal (United States) — Maroc Telecom (Morocco) — Nestlé (Switzerland)
Vivendi Universal, Chairman and Chief Executive Officer Vivendi Environnement, Chairman of the Supervisory Board AXA Assurances IARD Mutuelle, Vice-Chairman of the Board of Directors AXA Assurances Vie Mutuelle, Vice-Chairman of the Board of Directors AXA Courtage Assurance Mutuelle, Vice-Chairman of the Board of Directors USI Entertainment Inc (United States), Chief Executive Officer EADS (Netherlands), Director Aventis, Director USA Interactive (United States), Director anthony HaMilton, Member of the aXa supervisory Board 66, British nationality.
Mr. Anthony Hamilton is a graduate of Oxford University. His early career was spent in London and New York working for the investment banks Schroders, Morgan Grenfell, and Wainright. In 1978 he joined Fox-Pitt, Kelton and was appointed Chief Executive Officer in 1994. In 1993, he became a non-executive Director of AXA Equity and Law (Chairman, 1995) and in 1997 a non-executive Director of AXA UK. Since September 2000, Mr. Anthony Hamilton has been Chairman of AXA UK.
Chairman: — Fox-Pitt, Kelton Group Limited (United Kingdom) — Fox-Pitt, Kelton Nominees Limited (United Kingdom) Director or member of the Supervisory Board: — Pinault-Printemps-Redoute — Fox-Pitt, Kelton Limited (United Kingdom) — Swiss Re Capital Markets Limited (United Kingdom) — CX Reinsurance (United Kingdom)
Business address Schneider Electric — 43-45, bd Franklin Roosevelt, 92500 Rueil-Malmaison, France
Mr. Henri Lachmann is a graduate of the Ecole des Hautes Etudes Commerciales (HEC) and holds an accounting degree. In 1963, he joined Arthur Andersen, the international auditing firm, where he served successively as Auditor, then, as Manager of the Accounting Review Department. In 1970, he joined the Strafor Facom Group where he held various management positions until June 1981, when he was appointed Group Chairman. Director of Schneider Electric since 1996, Mr. Henri Lachmann became Chairman and Chief Executive Officer of the Group in 1999. Since 2006, he has been Chairman of the Supervisory Board of the Group.
Schneider Electric, Chairman of the Supervisory Board Centre Chirurgical Marie-Lannelongue, Chairman of the Board of Directors Vivendi, Vice-Chairman and Member of the Supervisory Board Director, member of the Supervisory Board or Management Committee: — AXA Assurances IARD Mutuelle — Groupe Norbert Dentressangle — AXA Millésimes (SAS)1
Mr. Gérard Mestrallet is a graduate of the Ecole Polytechnique and the Ecole Nationale d’Administration (ENA). He joined the Compagnie de Suez in 1984 as Vice-President, Special Projects. In 1986, he was appointed Executive Vice-President, Industry and then in February 1991, Executive Director and Chairman of the Management Committee of Société Générale de Belgique. In 1995, he became Chairman and Chief Executive Officer of Compagnie de Suez and in June 1997, Chairman of the Management Board of the Suez Lyonnaise des Eaux. On May 4, 2001, Gérard Mestrallet was appointed Chairman and Chief Executive Officer of Suez.
Société Générale de Belgique (Belgium), Chairman Hisusa (Spain), Chairman Sociedad General de Aguas de Barcelona (Spain), Vice-Chairman Director or member of the Supervisory Board: — Crédit Agricole S.A.
— Taittinger giuseppe MUssari, Member of the aXa supervisory Board 45, Italian nationality.
Business address Banca Monte dei Paschi di Siena S.p.A. — Piazza Salimbeni, 3 — 53100 Siena — Italy
Mr. Giuseppe Mussari is a graduate in Law from the University of Siena (Barrister registered in the Rolls of the Court of Siena since 1993). In 1998, he became Deputy Chairman of the Criminal Section of the Court of Siena and then in 2000 Chairman of the Criminal Section of the Court of Siena. In July 2001, he was appointed Chairman of the Monte dei Paschi di Siena Foundation. Since April 2006, Mr. Giuseppe Mussari is Chairman of Banca Monte dei Paschi di Siena (BMPS).
Michel pÉBereaU, Member of the aXa supervisory Board 66, French nationality. Business address BNP Paribas — 3, rue d’Antin — 75002 Paris, France
Mr. Michel Pébereau is a graduate of the Ecole Polytechnique and the Ecole Nationale d’Administration (ENA). In 1967, he started his career as auditor at the Treasury (inspecteur des finances). In 1970, he became project leader and then adviser to the Cabinet of the Finance Minister (Valéry Giscard d’Estaing). In 1978, he was appointed Head of the Finance Minister’s Cabinet (René Monory). In 1982, he became Chief Executive Officer of Crédit Commercial de France and then in 1987 Chairman and Chief Executive Officer of Crédit Commercial de France. In 1993, he became Chairman and Chief Executive Officer of Banque Nationale de Paris. Since 2004, Mr. Michel Pébereau has been Chairman of the Board of Directors of BNP Paribas.
BNP Paribas, Chairman of the Board of Directors Director or member of the Supervisory Board: — Saint-Gobain — Total — Lafarge — EADS N.V. (the Netherlands) — Banque Marocaine pour le Commerce et l’Industrie (BMCI)
(Morocco) — Pargesa Holding S.A. (Switzerland) Galeries Lafayette, Censor (non-voting member of the Board)
Dominique reinicHe, Member of the aXa supervisory Board 52, French nationality. Business address The Coca-Cola Company — Groupe Europe — 27, rue Camille Desmoulins — 92784 Issy-les-Moulineaux Cedex 9, France
Mrs. Dominique Reiniche is a graduate of the Essec. In 1978, she joined Procter & Gamble and in 1983 became Associate Advertising Manager. In 1986, she joined Kraft Jacobs Suchard and was apppointed Marketing & Strategy Manager. In 1992, she joined Coca-Cola Entreprise as a Marketing & Responsible “Compte-clé” Manager. In 1998, she was appointed Chairman and Chief Executive Officer of Coca-Cola Entreprise and Vice-Chairman of Coca Cola Enterprises — Europe Group in 2002. From January 2003 to May 2005, she was Chairman of Coca-Cola Enterprises — Groupe Europe. Since May 2005, Mrs. Dominique Reiniche is Chairman Europe of the CocaCola Company.
Business address EPS/PIIRS — Aaron Burr Hall — Princeton University — Princeton, N.J. 08544 — United States
Political Sciences at the University of Princeton (United States), Professor European Studies Center at the University of Princeton (United States), Manager Director: — AXA Financial, Inc.1 (United States) — AXA Equitable Life Insurance Company1 (United States) — MONY Life Insurance Company1 (United States) — MONY Life Insurance Company of America1 (United States) Institut Montaigne, Member of the Management Committee Member of the Editorial Committee: — Comparative Politics — La Revue des Deux Mondes — Politique Internationale — Politique Américaine Council on Foreign Relations (New York), Member HEC International, member of Advisory Board
Institut d’Etudes Politiques (Paris), Associate Professor Centre Américain, Institut d’Etudes Politiques (Paris), member of the Management Committee
sUperVisory BoarD coMMittees The Supervisory Board has four Committees: (1) the Audit Committee, (2) the Finance Committee, (3) the Selection, Ethics, Governance and Human Resources Committee, and (4) the Compensation Committee.
The external auditors of the Group, the Group Chief Financial Officer, the Deputy Group Chief Financial Officer, the Group Chief Accounting Officer as well as the head of the Group Internal Audit department attend the Committee’s meetings.
As of December 31, 2007, the Finance Committee had five members, two of whom met the independence criteria set forth in the Report AFEP / MEDEF as appreciated by the Supervisory Board. Those members were: Claude Bébéar (Chairman), Léo Apotheker, Henri Lachmann, Michel Pébereau and Jacques Tabourot.
— to examine all acquisition plans in excess of €500 million.
As of December 31, 2007, the Selection, Ethics, Governance and Human Resources Committee was comprised of four members, two of whom met the independence criteria set forth in the Report AFEP / MEDEF as appreciated by the Supervisory Board. Its members were: Jean-René Fourtou (Chairman), Gérard Mestrallet, Michel Pébereau and Ezra Suleiman.
The Selection, Ethics, Governance and Human Resources Committee has the following principal missions: — to formulate recommendations to the Supervisory Board on proposed appointments to the Supervisory Board or the Management Board, including their respective Chairmen and Vice-Chairmen, as well as on all appointments to the Supervisory Board’s Committees, including their respective Chairmen; — to make suggestions to the Supervisory Board regarding succession plans for Management Board members, and to be informed of the succession plans for the Group’s other principal executive officers; — to be notified of the appointments of AXA’s principal executive officers, in particular members of the Executive Committee; and
The Selection, Ethics, Governance and Human Resources Committee met three times in 2007. The global attendance rate was 83.33%. Within the framework of its principal
missions such as described above the Committee notably focused on the following issues: — composition of the Supervisory Board and its
Committees; — AXA Miles program (allotment of free shares to all employees of the Group); — Executive Committee and main Group CEOs: changes and perspectives; — equity plans 2007-2008; — 2012 and Beyond; — emerging countries staffing; — 2007 Shareplan final results.
As of December 31, 2007, the Compensation Committee had four members who all qualify as independent pursuant to the criteria set forth in the Report AFEP / MEDEF as appreciated by the Supervisory Board: Jacques de Chateauvieux (Chairman), Norbert Dentressangle, Anthony Hamilton and Gérard Mestrallet.
The Compensation Committee met three times in 2007. The global attendance rate was 91.67%. Within the framework of its principal missions such as described above the Committee notably focused on the following issues: — compensation paid to members of the Management Board and the Executive Committee; — stock-options: valuation principles; — Supervisory Board members’ fees; — Equity plan 2007.
ManageMent BoarD The AXA Management Board is currently comprised of six members, each of whom serves for a 3-year term expiring on October 11, 2009.
While the Management Board operates as a collective decision-making body under French law, each Management Board member has been assigned responsibility for a specific area of the Company’s management.
composition of the Management Board on December 31, 2007 name (age) principal office presently held in aXa (as of December 31, 2007) principal business address First appointment /
Henri de Castries (53) Chairman of the Management Board AXA 25, avenue Matignon 75008 Paris
Alfred Bouckaert (61) Member of the Management Board, Chief Executive Officer for Northern, Central and Eastern Europe
Denis Duverne (54) Member of the Management Board, Group Chief Financial Officer
François Pierson (60) Member of the Management Board, Chairman and CEO of AXA France, also responsible for Large Risks, Assistance and AXA Canada
Chase Manhattan Bank where he held various commercial and credit posts before becoming Chase’s Manager of Commercial Banking for Belgium. In 1984, he was appointed General Manager of Chase in Copenhagen (Denmark) and General Manager and Country Manager of Chase in Belgium in 1986. In 1989, Chase Manhattan Bank’s Belgian operations were sold to Crédit Lyonnais France. Alfred Bouckaert was in charge of merging Chase’s and Crédit Lyonnais’s Belgian Operations. In 1994, he was asked by Crédit Lyonnais to head the bank’s European Operations. In 1999, he became Managing Director of AXA Royale Belge and AXA also appointed him Country Manager for the Benelux (Belgium, The Netherlands, Luxembourg). In 2005, Mr. Bouckaert became General Manager of the Group’s Northern European Region (Belgium, The Netherlands, Luxembourg, Germany, Switzerland). Since October 2006, Alfred Bouckaert is a member of the AXA Management Board, in charge of operations in the Northern, Central & Eastern Europe Region (Belgium, The Netherlands, Luxembourg, Germany, Switzerland, Poland (Life insurance), Czech Republic, Solvak Republic, Hungary).
Member of the Management Board: AXA Managing Director: — AXA Holdings Belgium (Belgium) Chairman of the Board of Directors: — AXA Belgium SA (Belgium) — AXA Participations Belgium (Belgium) — AXA Bank Belgium (Belgium) — AXA Luxembourg (Luxembourg) — AXA Assurances Luxembourg SA (Luxembourg) — AXA Assurances Vie Luxembourg (Luxembourg) — AXA Konzern AG (Germany) — AXA Service AG (Germany) — AXA ART Versicherung AG (Germany) — “Winterthur” Société Suisse d’Assurances (Switzerland) — Winterthur Vie (Switzerland) Director of member of the Supervisory Board: — L’Ardenne Prévoyante (Belgium) — Contere (Luxembourg) — AXA Lebensversicherung AG (Germany) — AXA Versicherung AG (Germany) — AXA Insurance SA (Greece) Permanent representative of AXA to the Supervisory Board of Ukrainian Insurance Alliance (Ukraine) and Insurance Company Vesko (Ukraine)
Consuco (Belgium), patrimonial family company De Waere (Belgium), patrimonial family company
Director or member of the Supervisory Board: — AXA RE — AXA Konzern AG (Germany)
Member of the Management Board: AXA Director, President and Chief Executive Officer: — AXA Financial, Inc. (United States) Director, Chairman of the Board, President and Chief Executive Officer: — AXA Equitable Life Insurance Company (United States) — AXA Equitable Life Financial Services, LLC (United States) — MONY Life Insurance Company (United States)
— MONY Life Insurance Company of America (United States) — MONY Financial Services, Inc. (United States) — AXA Life and Annuity Company (United States) — AXA Distribution Holding Corporation (United States) Director and President: AXA America Holdings, Inc. (United States) Director, Chairman and President: ACMC, Inc. (United States) Director: — AllianceBernstein Corporation (United States) — AXA Art Insurance Corporation (United States) — American Council of Life Insurers (ACLI) (United States) Director, Vice-Chairman and Member: Financial Services Roundtable (United States)
Central Supply Corp (United States), Director KBW, Inc. (United States), Director The American Ireland Fund (United States), Director and Treasurer President’s Business Council of the University of Scranton, Chairman
Chairman of the Board, “President” and Chief Executive Officer: — MONY Holdings, LLC (United States) Director and Chairman: — U.S. Financial Life Insurance Company (United States) — Financial Marketing, Inc. (United States)
Member of the Management Board: AXA Chairman and Chief Executive Officer: — AXA America Holdings, Inc. (United States) Director: — AXA France IARD — AXA France Vie — AXA Belgium SA (Belgium) — AXA Holdings Belgium (Belgium) — AXA Assicurazioni S.p.A. (Italy) — AXA Italia S.p.A. (Italy) — AXA MPS Assicurazioni Vita S.p.A. (Italy)
— AXA MPS Assicurazioni Danni S.p.A. (Italy) — AXA UK PLC (United Kingdom) — AXA Financial, Inc. (United States) — AXA Equitable Life Insurance Company (United States) — AllianceBernstein Corporation (United States) — MONY Life Insurance Company (United States) — MONY Life Insurance Company of America (United States)
After studies of Sciences and Management at the University Paris Dauphine, Mr. François Pierson joined AGP in 1974 and became Sales Director. In 1990, he became General Manager of the South-East Region of AXA Assurances in France and Director of Distribution. In 1995, he was appointed Deputy Chief Executive of AXA Assurances and, in 1997, he became Chief Executive Officer of UAP Vie and of Alpha Assurances. In 1999, he became Chief Executive Officer of AXA Assurances. Since November 2001, Mr. François Pierson has been a member of the AXA Management Board as well as Chief Executive Officer of AXA France and responsible of the Group’s Large Risks activities, AXA Assistance and AXA Canada.
Member of the Management Board: AXA Chairman and Chief Executive Officer: — AXA France IARD — AXA France Vie Chairman: AXA France Assurance (SAS) Chairman of the Board of Directors: AXA Corporate Solutions Assurance Vice-Chairman of the Board of Directors: AXA Canada Inc. (Canada) Director: — AXA Assurances IARD Mutuelle — AXA Assurances Vie Mutuelle — AXA Assurances Inc. (Canada) — AXA Japan Holdings Ltd (Japan) — AXA Holding Maroc (Morocco) (formerly AXA-ONA) — AXA Assurance Maroc (Morocco)
Permanent representative of AXA France IARD to the board of UCAR
Chairman of the Board of Directors: — AXA France Collectives — AXA Conseil Vie — AXA Conseil IARD — AXA Courtage IARD Chief Executive Officer: — AXA Conseil Vie Assurance Mutuelle Chief Executive Officer — non Director: — AXA Assurances IARD Mutuelle — AXA Assurances Vie Mutuelle — AXA Courtage Assurance Mutuelle
The French members of the AXA Management Board (Henri de Castries, Claude Brunet, Denis Duverne and François Pierson) are employed by AXA under employment contracts.
Christopher Condron and Alfred Bouckaert, also members of the Management Board, have employment contracts, respectively, with AXA Equitable in the United States and AXA Holdings Belgium. For a description of termination provisions of those contracts, please refer to Section 3.2 “Full disclosure on executive compensation and share ownership” below.
To the knowledge of the Company, there are no family relationships among the members of the Management Board or with members of the Supervisory Board.
To the best of the Company’s knowledge, there are no arrangements or understandings that have been entered into with major shareholders, customers, suppliers or others pursuant to which a member of the Management Board or the Supervisory Board was selected, except for Mr. Giuseppe Mussari who was proposed for election to AXA’s Supervisory Board consistent with the terms of a bancassurance partnership agreement entered into in March 2007 between AXA and Banca Monte dei Paschi di Siena (BMPS), an Italian bank. This agreement, among other
To the best of the Company’s knowledge, none of the members of its Management Board or Supervisory Board has been, during the last 5 years (i) subject to any conviction in relation to fraudulent offences or to any official public incrimination and/or sanction by statutory or regulatory authorities, (ii) disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer, or (iii) associated as a member of the administrative, management or supervisory bodies with any company that has declared bankruptcy or been put into receivership or liquidation, provided, however, that AXA has from time to time sold, discontinued and/or restructured certain business operations and voluntarily liquidated affiliated companies in connection with these or similar transactions and certain members of AXA’s Management Board and/or Supervisory Board may have been associated with other companies that have undertaken similar solvent liquidations.
As an internal management committee, the Executive Committee has no formal decision making authority. Its principal role is to assist the Management Board in effectively managing the Group’s operating businesses, considering strategic initiatives and such other areas as the Management Board deems appropriate.
As of December 31, 2007, the Executive Committee was comprised of the following fourteen members, including eight non-French nationals: Jean-Raymond Abat Chief Executive Officer of the Mediterranean region business unit
John R. Dacey Chief Executive Officer for the Japan Asia-Pacific business unit
Nicolas Moreau Chief Executive Officer of AXA UK-Ireland and Chairman of the Board of Directors of AXA Investment Managers
The Group Governance Standards require the Boards of AXA’s principal subsidiaries to establish an Audit Committee and a Compensation Committee in addition to any other Board committees that they consider necessary or appropriate for their specific businesses. The role, duties, and composition of these Committees (including the requirements for participation of independent directors) are specified in a detailed Audit Committee Standard and Compensation Committee Standard. The Audit Committee Standard requires the Company’s Audit Committee to be composed entirely of independent directors and the Audit Committee’s of Group subsidiaries to have a significant component of independent directors in order to ensure that this Committee is strongly independent of management given its critical role in reviewing financial results and other financial information prepared by management, financial reporting and control processes, critical accounting policies, particular accounting issues, fraud and similar issues. In addition, the Group’s Compensation Committee Standard requires that the Compensation Committee have a minimum of one independent director to ensure a level of independent review and judgment on all senior executive compensation matters.
at December 31, 2005 at December 31, 2006 published at January 1, 2007 (a)
— Belgium (including AXA Bank Belgium) (c) 4,787 4,606 5,981 5,762
(a) The employees at January 1, 2007 are included on a constant structural basis in relation to employees at December 31, 2007. The main restatements are: — Acquisition of Thinc Group and Venture Preference Limited with 544 and 1,439 salaried employees, respectively. — Uniov and Union disposals (—49 and —152 salaried employees, respectively). — Acquisition of Alpha Insurance in Greece with 333 salaried employees; Montepaschi Vita and Montepaschi Danni in Italy with 140 and 53 salaried employees, respectively. — Transfer of all salaried employees of Morocco and Turkey entities to the Mediterranean Region (504 and 573 salaried employees, respectively). — Disposal of the Netherlands entities (—1,022 salaried employees). — Acquisition of Kyobo (1,464 salaried employees). — AXA Affin General Insurance Berhad minority interests’ buyout in Malaysia (338 salaried employees). — Acquisition of ELLA Bank in Hungary (229 salaried employees).
(c) Employees of AXA Belgium provide services in common for both the insurance activities and the bank activities. Consequently, split is not available. (d) Including Ireland since January 1, 2004 and AXA Business Services in India.
(e) Starting January 1, 2007, ex Winterthur employees are allocated by business and country in the table
Executive compensation is therefore structured so as to foster and reward performance: — both at individual level and collective level (local business entity and AXA Group), — both with a short-term, medium-term and long-term focus.
The variable component of his pay is calculated on the basis of a predefined target amount (€2,500,000 in 2007) and includes three components: — Group performance, as measured by underlying earnings, P&C revenues and new business value in Life & Savings,
individual competencies individual performance entity performance aXa group performance aXa share performance stock options performance Units/shares annual incentive
Variable compensation for the year 2000 paid in 2001 €1,381,373 €1,750,000
Variable compensation for the year 2007 paid in 2008 €2,644,366 €2,500,000
— their individual performance, evaluated on the basis of predetermined strategic objectives.
The performance of operational entities is determined on the basis of a grid made of the following performance indicators: — underlying earnings, — adjusted earnings, — technical operating cash flow (Life net inflow), — P&C revenues, — Life New Business Value, — combined ratio, — expenses.
(e), i.e. the fixed component paid in 2007 (a), the variable component earned in 2007 and paid in 2008 (including expatriation allowances paid in 2007) (b), any directors’ fees paid by AXA Group companies in 2007 (c) and benefits in kind for the year 2007 (d); — gross compensation paid by the Group in 2007 (g), i.e. the fixed component paid in 2007 (a), the variable component earned in respect of 2006 and paid in 2007 (including expatriation allowances paid in 2007) (f), any directors’ fees paid by AXA Group companies in 2007 (c) and benefits in kind for the year 2007 (d); — and gross compensation paid by the Group in 2006, i.e. fixed compensation paid in 2006, the variable component earned in respect of 2005 and paid in 2006 (including expatriation allowances paid in 2006), any directors’ fees paid by AXA Group companies in 2006 and benefits in kind for the year 2006.
This table also enables comparisons between compensation earned in respect of 2007 and that paid in 2006 and 2007.
(4) J. Dacey was employed by Winterthur until January 1, 2007 and was appointed as member of the Executive Committee on April 11, 2007. Compensation and benefits in kind paid to J. Dacey include benefits paid in respect of his expatriate status in France since April 1, 2007. Of his e365,532 fixed component, e19,163 have been paid in 2008.
(9) E. Teysen joined AXA on August 16, 2005 and has been appointed as member of the Executive Committee on January 1, 2007.
Substantial differences in the tax systems to which AXA’s executive officers are subject make meaningful comparisons of the compensation and benefits they earn difficult. For information, the relevant marginal tax rates are as follows: Germany: 51.36%; Australia: 46.50%; Belgium: 53.50%; the United States (New York): 43.27%; Spain: 43%; France: 51%, including an additional 11% for social taxes; the United Kingdom: 40% and Switzerland (Zurich): 42.5%.
The members of the Supervisory Board do not receive compensation from the Company, with the exception of a fee for attending meetings. The amount of directors’ fees paid to AXA’s Supervisory Board members is indicated in the table below.
Directors’ fees earned in 2007 for 2006 current members of the supervisory Board
The representative of the employee-shareholders at the Supervisory Board (Jacques Tabourot) has received during the year 2007 a total amount of €223,447 as a preretirement compensation.
This scheme, which exists since January 1, 1992, has been modified with effect from January 1, 2005.
The new scheme has been approved by the Supervisory Board on December 22, 2004, after having been presented for advice to all work councils and central work councils in France during the last quarter of 2004.
Reduced rates apply for an executive seniority of less than 20 years. As an example, with 10 years of executive seniority, the supplementary pension allows to reach a global pension equivalent to 34% instead of 40%. This rate is reduced to 20% for an executive seniority of 5 years, and no supplementary pension is paid for an executive seniority of less than 5 years.
Alfred Bouckaert, member of the Management Board, benefits from a contractual supplementary pension arrangement with AXA Holdings Belgium providing for a capital at the age of 65 equivalent to N/40 x (25% T1 + 75% T2) x 12.2221, where: N = number of years of service T1 = annual Social Security ceiling (€44,995 in 2007) T2 = part of the fixed salary exceeding T1.
In case of retirement between 60 and 65, the 25% and 75% coefficients are reduced by 1.6% per year of anticipation.
The French members of the AXA Management Board (Henri de Castries, Claude Brunet, Denis Duverne and
François Pierson) benefit, as all other executives of AXA Group companies in France, from the regulations provided for under the Collective Agreement of March 3, 1993 signed by the Fédération Française des Sociétés d’Assurances (F.F.S.A), the Syndicat National des Cadres de Direction de l’Assurance (CFE-CGC) and the Syndicat du Personnel de Direction des Sociétés d’Assurances et de Capitalisation (S.D.A.C).
Alfred Bouckaert, member of the Management Board, benefits from a contractual clause with AXA Holdings Belgium stating that in case of termination of its position within AXA Holdings Belgium by this company for any other reason than gross misconduct, he would be given a 24 month notice period. If the notice period is not served, he would receive from AXA Holdings Belgium an indemnity equivalent to 24 month remuneration, calculated on the basis of his fixed salary and variable compensation received during the past 12 months preceding the termination of his contract.
stocK options Since 1989, AXA has promoted a stock options program, for its directors, officers and employees in France and abroad, aimed at rewarding their performance and aligning their interests with those of the Group by linking them to AXA’s stock performance over the long term.
Within the global cap authorized by the shareholders, the Supervisory Board approves all stock options programs prior to their implementation.
Stock options are valid for a period of 10 years. They are granted at market value, with no discount, and become exercisable upon vesting, generally in thirds between 2 and 4 years following the grant date.
In the United States, options may be granted during the year to newly-hired or newly-promoted employees or when the performance measures that give rise to option grants are available after the first quarter of the year.
If this performance condition is not met at that date, a new test will occur at each anniversary date and the last tranche will be exercisable from one of these dates only if the performance condition is met.
On December 31, 2007, 7,634 AXA employees own 77,152,941 outstanding subscription options, representing 3.74%1 of the share capital on the same date, and 3,269 employees in the United States2 own 18,950,545 outstanding purchase options on ADRs, representing 0.90% of the share capital.
In the table above all dates that are indicated shall read day/month/year. (a) Options that were initially granted by FINAXA that merged into AXA on December 16, 2005. (b) Options exercised by the heirs of a deceased beneficiary. (c) Adjustments made, pursuant to applicable regulation, as a result of operations on the AXA stock (such as share capital increases with preferential subscription rights granted to shareholders).
Beneficiaries number expiry date price (€) number (a) price (€) number expiry date price (UsD) number price
stock options granted and/or exercised by the top 10 beneficiaries (outside the Management Board) during 2007 stock options granted or exercised by the top 10 beneficiaries (outside the Management Board) during 2007 number of options granted or exercised weighted average price (euro)
stock options granted in 2007 by AXA to the 10 employees of the Company or of eligible AXA Group’s subsidiaries who received the highest number of stock options 636,926 33.88 stock options exercised in 2007 by the 10 employees of the Company or of eligible AXA Group’s subsidiaries who exercised the highest number of stock options 1,406,927 16.89
(a) As part of AXA’s buyout of minority interests in AXA Financial, the outstanding options on AXA Financial ordinary shares were converted into options on AXA American Depository Shares (ADR) on January 2, 2001.
(b) Also owns 80,000 stock options on AllianceBernstein. (c) Also owns 7,562 stock options on AXA Investment Managers. (d) Also owns 1,116,501 stock options on AXA Asia Pacific Holdings.
perForMance sHares anD perForMance Units Since 2004, stock options have been partially replaced by performance units.
From 2005 onwards, performance units have been replaced in France by performance shares. Performance shares are free shares subject to performance conditions.
— During each year of the acquisition period, half of the performance units/shares initially granted (one third for the 2004 performance unit plan) is subject to collective performance conditions measuring both the AXA Group performance and the beneficiary’s operational business unit performance, based on pre-determined targets.
— The performance targets in 2006 have been for both the
As far as performance units are concerned: — Each unit is valued based on the average opening price of the AXA stock during the past 20 trading days of the acquisition period.
As far as performance shares are concerned: — Shares that are definitely acquired at the end of the acquisition period are restricted from sale during a 2-year period.
The amounts corresponding to performance units are charged to expenses each year under the variable accounting method, but do not create any dilution for shareholders since no new shares are issued.
A second performance unit plan was launched on March 29, 2005 and 939,880 performance units have been initially granted to 1,707 beneficiaries outside France.
The 2-year acquisition period of this plan ended on March 29, 2007 and at that date 960,520 performance units were definitely acquired by 1,532 beneficiaries. The settlement of these performance units was made both in cash (€25.3 million) and in shares (152,379 shares) subject to a 2-year restriction period until March 29, 2009.
A fourth performance unit plan was launched on May 10, 2007 and 1,361,869 performance units were initially granted to 2,346 beneficiaries outside France. The 2-year acquisition period of this plan will end on May 10, 2009.
The first performance shares plan was launched on April 21, 2005, after approval having been obtained at the Annual General Meeting of April 20, 2005. A total of 743,310 performance shares were granted to 1,154 beneficiaries in France.
Furthermore, 770 employees in France have elected to renounce to their performance units granted in 2004 and were granted on April 21, 2005 an equivalent number of free shares. As a total, they received 250,306 performance shares and 143,630 restricted shares (free shares the acquisition of which are not subject to the achievement of performance targets).
A second performance shares plan was launched on March 31, 2006. A total of 893,326 performance shares were granted to 1,186 beneficiaries in France. The 2-year acquisition period of this plan will end on March 31, 2008. The shares acquired will be subject to a 2-year restriction period until March 31, 2010.
NB: 380 shares granted in 2006 have been acquired further to the death of a beneficiary in 2007.
(d) The settlement of 17,920 Performance Units acquired by A. Bouckaert has been made through a cash payment of €392,376.32 and 5,376 AXA shares subject to a minimum of 2-year restriction period, i.e. until March 29, 2009.
(e) The settlement of 107,469 Performance Units acquired by C. Condron has been made through a cash payment equivalent to €2,353,131.84 and 32,241 AXA ADRs subject to a minimum of 2-year restriction period, i.e. until March 29, 2009.
(1) At the date of grant of the Performance Units/Shares plans described above, the price of the AXA share (as used for IFRS valuation purposes) was E17.7 for the 2004 plan, E19.5 for the 2005 plan, E29.0 for the 2006 plan and E33.8 for the 2007 plan. This is an historic value at the date of grant and does not represent a current market or other current valuation of these Performance Units/Shares or the actual proceeds if and when they become vested.
NB: The shares acquired by H. de Castries, C. Brunet, D. Duverne and F. Pierson are subject to a minimum 2-year restriction period, i.e. until April 21, 2009.
Performance Units/Shares Plan 2006 initial grant shares/Units actually granted shares/Units at stake at 31/12/2007 shares/Units cancelled at 31/12/2007 shares/Units acquired at 31/12/2007
— Other Management Board members are required to hold the equivalent of 2 years target total cash remuneration.
— Executive Committee members are required to hold the equivalent of 1.5 years target total cash remuneration.
— Units of AXA mutual funds invested at 100% in AXA shares or ADRs.
The following are not considered: — AXA stock options or ADR stock options that have not yet been exercised.
— Performance shares, performance units or restricted shares granted but not yet definitely acquired.
The Supervisory Board also decided that, as long as a Management Board member has not met this shareholding requirement, the stock options and performance shares granted to him/her after January 1, 2007 will be subject to the following obligations: — as far as stock options granted after January 1, 2007 are concerned, a Management Board member who does not meet his/her shareholding requirement will, at every stock option exercise, hold a minimum number of shares equivalent to 25% of the pre-tax capital gain realised (i.e. in France about 50% of the post-tax capital gain). These shares will have to be held during the whole duration of the Management Board mandate; — as far as free shares (“performance shares”) granted after January 1, 2007 are concerned, a Management Board member who does not meet his/her shareholding requirement will, at every share acquisition date, hold a minimum of 25% of these shares during the whole duration of the Management Board mandate.
When a Management Board member already meets the above shareholding requirements, there will be no obligation when he/she exercises stock options or acquires shares.
Fixed salary target stic total target cash number of years amount (€) target date number of years amount (€) aXa shares aXa aDrs aXa funds allianceBernstein shares
transactions involving company stock completed in 2007 by members of the Management Board
subscription to units of aXa group mutual funds invested in aXa shares
Alfred Bouckaert — — 8,833 — — — — — — 15,587 —
François Pierson — — 81,165 — 100,000 — 50,000 — — — —
To the best of the Company’s knowledge, several members of the Supervisory Board made the following disclosures in the course of 2007 concerning their transactions involving Company stock. Detailed information about all of these transactions, as well as individual disclosures filed in accordance with Articles 223-22 and 223-25 of the AMF’s (Autorité des marchés financiers) General Regulations, are published on the Company’s website (www.axa.com) and on the the AMF website (www.amf-france.org).
Claude Bébéar — — — — 324,000 — — — — 2,610 —
Léo Apotheker — 900 — — — — — — — — —
Norbert Dentressangle — 195 — — — — — — — — —
Pursuant to article 241-2 of the AMF General Regulations, this section constitutes the description of the Company’s share repurchase program that will be submitted to the Shareholders’ approval on April 22, 2008.
Date of the shareholders’ meeting called to authorize the program treasury shares (held directly by the company and owned by subsidiaries) as of February 29, 2008
The table below illustrates the number of AXA shares and the percentage of shares directly (treasury shares) or indirectly (shares hold by the subsidiaries) held by the Company.
number of shares % of share capital (a) par value (in euro)
Treasury shares held directly by the Company 11,644,231 0.57% 26,665,289 €
(a) Percentage calculated on the basis of the share capital of the Company as recorded by the Chairman of the Management Board on January 24, 2008.
analysis of treasury shares in terms of objectives as of February 29, 2008 liquidity agreement Hedging of free shares granted to employees cancellation
(a) This number corresponds to the theoretical maximum number of shares that may be purchased by the Company, calculated on the basis of the Share Capital as of February 29, 2008, i.e. 4,719,125,496.68 € divided into 2,060,753,492 securities. Based on the number of securities held by the Company on that date, AXA may purchase up to 194,431,118 of its own shares.
Duration of the repurchase program 18 months, subject to the approval of the program by the Shareholders’ Meeting of April 22, 2008.
table of transactions made during the current share repurchase program (until February 29, 2008)
Number of shares purchased since the beginning of the program 88,369,265
The Company has not used derivatives in connection with the previous share repurchase program. All of the share repurchases have been made in cash.
In addition, and in connection with the two share repurchase programs mentioned above (liquidity agreements being excluded), AXA repurchased 13,602,000 of its own shares between January 1, 2007 and May 13, 2007 for an average weighted gross unit price of €33.74 and between May 14, 2007 and December 31, 2007 AXA repurchased 56,946,264 of its own shares for an average weighted gross unit price of €29.28, i.e. a total of 70,548,264 repurchased shares for the year 2007 which corresponds to an amount of €1,470,654 as of the related transaction fees.
At its meeting on December 17, 2007, the AXA Management Board decided to reduce AXA’s share capital through the cancellation of 63,103,647 treasury shares.
As a result, on December 31, 2007 the number of treasury shares held under the liquidity agreement was 2,250,000, and the number of treasury shares, allocated to the purpose of hedging, was 7,646,268, i.e. a total of 9,896,268 shares held directly by the Company, equal to 0.48% of AXA’s share capital at the year-end closing date, acquired for an aggregate purchase price of €294,806,315 (with a par value of €2.29 per share).
To the best of the Company’s knowledge, the table below summarizes the ownership of its issued outstanding ordinary shares and voting power as of December 31, 2007: number of shares capital ownership Voting power (a)
Treasury shares held by Company subsidiaries (directly and indirectly) 20,859,062 1.01% [0.88%] (c)
(b) AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle. (c) Voting power will be valid again once the shares to which they are attached stop being treasury shares. (d) Source: Euronext Notice as of January 11, 2008.
Certain of the Company’s shares are entitled to double voting rights as described in Part VI “Certain additional information”, “Voting rights” Section of this Annual Report. Of the Company’s 2,060,753,492 outstanding ordinary shares as of December 31, 2007, 319,921,480 shares entitled their holders to double voting rights as of that date.
To the best of the Company’s knowledge, as of December 31, 2007, subsidiaries of the Company do not hold any AXA ordinary shares that are pledged. Third parties who own AXA ordinary shares may have pledged them for a variety of reasons including as collateral for loans or in connection with other arrangements, however, as of December 31, 2007, the Company was not aware of any pledge material in any respect to the Company.
as of December 31, 2007 (a) as of December 31, 2006 (a) as of December 31, 2005 (a)
(b) AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle. (c) Voting power will be valid again once the shares to which they are attached stop being treasury shares. (d) Source: Euronext Notice as of January 11, 2008. (e) Treasury shares as indicated in Note 13 to “Consolidated Financial Statements” included in Part V of this Annual Report
Stock subscription warrants related to the Shareplan operation in Germany 3,981,073
Early redemption — The Company may purchase the notes on any Stock Exchange or otherwise in accordance with applicable law, including by way of tender for purchase or exchange,
— at the option of the issuer, in cash, from January 1, 2007 at a price with a gross 6.00% actuarial yield, if the Company’s share average over 10 consecutive days is above 125% of the anticipated repayment price,
— at any time, at the option of the issuer, at 269.16 euros if the number of bonds in circulation is below 10% of the number of bonds issued.
Number of bonds in circulation as of December 31, 2007 6,636,946
(a) Following the capital increase with preferential subscription rights made by AXA in June 2006 to finance part of the Winterthur acquisition, the conditions of conversion of AXA 3.75% 2017 convertible bond have been adjusted. The conversion ratio has been increased from 4.06 to 4.15 AXA shares with a par value of 2.29 euros for 1 convertible bond (see Euronext notice n° 2006-2063 published on July 18, 2006).
In countries that met the legal and tax requirements, two investment options were proposed in 2007: — the traditional plan, available in 35 countries, — the leveraged plan, offered in 35 countries.
The leveraged plan allowed employees to subscribe, on the basis of 10 times their personal investment, to AXA shares (either through mutual funds (FCPE) or through direct share ownership) with a 14.26% discount in 2007. The shares are held within the Group Company Savings Plan and are restricted from sale during a period of 5 years (except specific early exit cases allowed by applicable laws). Employees benefit from a guarantee on their personal investment, as well as 75% of the share appreciation, as compared to the non-discounted reference price. The leveraged plan is not accessible to Management Board and Executive Committee members.
In order to reward its employees for the results obtained in 2005 and 2006 and to foster their engagement to the success of its “Ambition 2012” project, AXA has implemented a worldwide program of granting free shares to all its employees, called “AXA Miles”.
By virtue of the authorization granted by the shareholders at the Annual General Meeting of May 14, 2007, the Management Board has granted on July 1, 2007 a number of 50 AXA shares to each employee of the AXA Group, with the exception of Management Board and Executive Committee members.
A second grant of 50 shares to all employees will be made on July 1, 2009, following the same rules, if the AXA Group has met at end 2008 the two following objectives: — underlying earnings per share at least equal to e2.41, — customer satisfaction index at least equal to 82%.
AXA has entered into cross-shareholding agreements with BNP Paribas and Schneider which are described hereafter.
In force for a period of five years from the date of signature, this agreement is renewable automatically for an initial period of two years and for successive periods of one year thereafter, unless one of the two parties decides to terminate beforehand, in which case the terminating party is required to give three months notice prior to the next renewal date.
On May 15, 2006, and after authorization by the AXA Supervisory Board on December 21, 2005, the AXA Group, the Mutuelles AXA and the Schneider Group entered into an agreement that provides for the maintenance of minimal cross-shareholdings. Under the terms of this agreement, the AXA Group undertakes to hold at least 2,583,300 shares of Schneider stock and the Schneider Group undertakes to hold at least 8,816,681 AXA ordinary shares. The number of shares held under this cross-shareholding agreement will be adjusted as needed to reflect the impact of certain capital transactions, including, but not limited to: capital increases, free allotments of stock, stock splits or similar transactions. In addition, the parties have agreed to a reciprocal repurchase option in the event of a hostile takeover attempt on either AXA or Schneider.
In our capacity as Statutory Auditors of AXA, we hereby submit our report on regulated agreements and commitments which we have been informed of.