Cash instruments, which amounted to €60 million, represented the premiums paid upon implementation of currency options for protecting the 2007 foreign currency earnings of the main subsidiaries of AXA SA. It must be noted that €15 million premiums received were recognized under liabilities.
Liabilities Shareholders’ equity, before 2006 net income and after payment of dividends in respect of the prior year was €30,727 million. This represents an increase of €4,302 million, which was due to: – the July 2006 of €4,091 million capital increase, net of issuance costs, used for the financing of Winterthur acquisition,
– and the cancellation of €305 million (€11.3 million AXA shares) acquired through the share purchase program to control dilution resulting from share-based compensations and employees Shareplan program.
– Borrowings from credit institutions increased by €1,462 million, €1,350 million of which derived from year-end issues of commercial paper, primarily related to the closing of the Winterthur acquisition and future restructurings envisaged,
The €98 million in operating payables represented the outstanding income tax liability
Unrealized foreign exchange gains were €663 million in 2006, compared to €461 million at December 31, 2005. This item reflects positive impacts derived from the revaluation of denominated foreign currency assets and liabilities at the balance sheet exchange rate. This item recorded an increase on the previous year owing primarily to the appreciation in the euro against the US dollar.
The amount available for the appropriation of earnings stands at €2,963,203,072: – net income for the year €1,432,561,750 – allocation to retained earnings €1,530,641,322
This dividend will give rise as of January 1, 2007 to a 40% tax credit for individuals whose fiscal residence is in France equal to €0.424 per share.
December 31, 2006 Net carrying Net carrying Gross Amortizations Net value as value as carrying and provisions carrying at December 31, at December 31, value value 2005 2004
As at december 31, As at december 31, As at december 31,
Allowances : for depreciation of buildings and deferred charges (10) (19) (33)
CONTRIBUTION ON COMMON OPERATIONS IV – – 1 FINANCIAL OPERATIONS ON SECURITIES
Net book value on the sale of fixed assets (102) (29) (12,038)
III. NET INCOME FOR THE FINANCIAL YEAR VI + VII + VIII 1,433 1,137 519
Cash flow for the year 1,144 1,518 680 Increases in shareholders’ equity 4,605 356 266
Purchase of fixed assets – – – – Tangible fixed assets – 3 –
SUBSIDIARIES AND PARTICIPATING INTERESTS (paragraphs 247 and 295 of executive order on trading companies)
Share Other Percentage Gross Book capital shareholders’ of capital Value of securities equity held held
AXA OYAK HOLDING AS 97 3 50.00% 64 Meclisi Mebusan caddasi n 81 Oyak hann - Salipazari 80200 - ISTANBUL
AXA Portugal COMPANHIA DE SEGUROS 37 43 83.01% 72 Rua Gonçalo Sampaio n°39 - 4002-001 PORTO
a) in French companies (total) 60 b) in foreign companies (total) 208
(a) Dividend of €1,06 per share proposed to the shareholders meeting on May 14, 2007, based on 2,092,888,314 outstanding shares.
AXA publishes EEV only for its life and savings business. The value can be considered in two pieces: 1) “Adjusted Net Asset Value” (ANAV)
ANAV VIF EEV Opening Life & Savings EEV at 12/31/05 13,568 15,921 29,489 Market calibration adjustments – 608 608
Present Value of Expected Premiums (PVEP) 50,375 57,994 15% 16% 16%
NBV/PVEP 2.3% 2.6% + 0.3 pt + 0.4 pt + 0.3 pt
“Life & Savings Annualized Premium Equivalent” (APE) is a measure of new business volume which includes sales of regular recurring premium business at 100% but sales of single premium business at only 10%. The “APE Margin” is the ratio of NBV to APE.
“Life & Savings Present Value of Expected Premium” (PVEP) is a measure of new business volume which includes the present value of the future premiums expected to be received over time for business sold in the current year. The “PVEP Margin” is the ratio of NBV to PVEP.
In addition to Life & Savings EEV, AXA calculates a “Group EV” which adds to the
The Group EV can be reconciled to Life & Savings IFRS Shareholder’s equity as follows (in euro million): Euro million, Group share
The TNAV for other-than-life business is adjusted also for any unrealized capital gains or losses not already included in equity and the impact of the mark to market of debt.
The Group EV equals the Life & Savings EEV plus the Other Business TNAV.
The Life & Savings VIF calculation by its nature involves many assumptions about the future. For Life & Savings EEV, AXA has adopted a “market-consistent” approach to setting asset return assumptions. Each cash flow is discounted at an appropriate discount factor, so that starting with Euro 1 of bond or of equity, projecting expected cash flows, and discounting, will simply give you Euro 1 of value. Mechanically, this can be described in a short-cut as assuming that all assets will earn the risk-free rate defined by the current market in the future. However, cash flows are projected not only in a single scenario, but rather a stochastic set of scenarios is created, with the set maintaining the market-consistent condition that Euro 1 of any asset projected into the future gives a present value of 1. Future earnings available to shareholders are assessed across this range of stochastic scenarios, with the present value being the Life & Savings VIF. Our major assumptions include: – Actuarial assumptions reflect best estimates based on recent experience.
– No productivity gains in the future are assumed, while inflation averaging 2.15% was assumed in 2005 and 1.98% in 2006.
– Non-financial risks are provided for through the cost of holding capital consistent with the level to obtain a AA rating at each operation.
Market calibration adjustments is driven by improved methodology reflecting risk-free rates based on swaps rather than government bonds and equity and interest rate volatilities more closely linked to market conditions.
(Unwind of IDR) of €1,965 million is the mechanical effect of rolling forward the beginning of year VIF at the prior year Implied Risk Discount
– Expected return on surplus of €84 million is the expected after-tax profit on surplus assets (using the illustrative real world investment scenarios used to calculated IDR for the prior year) in excess of those supporting the VIF. The expected return is not large because (i) AXA generally does not retain large free surplus balances within its Life & Savings operations and (ii) the expected return on surplus is lower than the IDR.
– Operational experience and assumption changes of €204 million is the impact of actual versus expected experience and changes in future assumptions for items like mortality, expenses, lapse rates, etc.
Separate IDRs are calculated for the total inforce portfolio at the end of the year and the new business sold during the year: 2005 IDR shown in this table are for AXA alone. 2006 IDR are for the VIF AXA including Winterthur while for the NBV AXA excluding Winterthur. The NBV risk discount rate for Winterthur is 6.39%.
In addition to providing a comparison basis to other valuation techniques, the VIF IDR for 2005 also provides an element of the movement analysis between 2005 and 2006.
Life & Savings EEV Opening Life & Savings EEV at 12/31/05 29,489 Market calibration adjustments 608
Expected return on VIF + Req Capital (Unwind of Implied RDR) 1,965 Expected return on surplus 84 Operational experience and assumption changes 204 2006 New Business Value 1,501
Total Return on Life & Savings EEV 6,063 Capital Flows (1,162)
Current year investment experience of €2,311 million includes 1) the variance in experience during 2006 from that expected in the illustrative real world investment scenario at the end of 2005, and 2) the change in value created by reflecting yearend 2006 yield curves and investment conditions in the EEV rather than those of yearend 2005.
Exchange rate movements impact of €–1,381 million is predominantly due to the strengthening of the Euro versus the US dollar. This amount does not reflect the impact of AXA’s foreign currency hedging program which is in the Holdings segment.
Life & Savings EEV of other acquired business of €202 million was mainly related to the acquisition of MLC in Hong Kong.
Closing Life & Savings EEV of €38,390 million is the total value at the end of the year, representing the prior year balance plus opening adjustments, plus Total Return, plus capital flows, plus EEV of acquired business and the exchange rate impact.
LIFE & SAVINGS EEV SENSITIVITIES Life & Savings Life & Savings EEV Impact NBV Impact
10% higher value of equity markets at start of projection 1,929 154 10% lower value of equity markets at start of projection (1,959) (159)
10% higher value of real estate at start of projection 549 15 10% lower value of real estate at start of projection (572) (13)
Overall and permanent decrease of 10% in expenses 1,238 123 5% lower mortality rate for annuity business (143) (4)
Savings, Property & Casualty and Asset Management). Group EV return, unlike Life & Savings EEV return, benefits from debt leverage as the debt is allocated to the Other Business segment.
In addition, the favorable financial market environment contributed to the Life & Savings total return and by consequence to the 28% total return on Group EV.
– For participating business, the assumed bonus rates, and the allocation of profit between policyholders and shareholders, are consistent with the projection assumptions, established company practice and local market practice.
The methodology and assumptions used also comply with the EEV Guidance (noting the disclosed exception concerning the treatment of affiliated investment management companies, where the value of their profits for managing assets for the Life & Savings segment are not included in the Life & Savings EEV).
Of which South East Asia – – 362 362 Of which Central and Eastern Europe – – 164 164
(a) The personnel at January 1, 2006 are included on a constant structural basis in relation to personnel at December 31, 2006. The main restatements are: – Acquisition of MLC Indonesia and MLC Hong Kong entities with respectively 362 and 82 salaried employees.
PRICEWATERHOUSECOOPERS AUDIT: 63, rue de Villiers – 92208 Neuilly-sur-Seine, represented by Mr. Yves Nicolas and Mr. Eric Dupont, first appointed on February 28, 1989. The current appointment is for a term of 6 years, until the Annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2012.
MAZARS & GUÉRARD: Exaltis – 61, rue Henri Régnault – 92075 Paris-La Défense Cedex represented by Mr. Patrick de Cambourg and Mr. Jean-Claude Pauly, first appointed on June 8, 1994. The current appointment is for a term of 6 years, until the Annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2009.
Membership in a professional body: Mazars & Guérard is registered as a statutory auditor with the Compagnie Régionale des Commissaires aux Comptes de Paris.
Mr. Patrick Frotiée: 63, rue de Villiers – 92208 Neuilly-sur-Seine, first appointed on May 17, 1995. The current appointment is for a period of 6 years, until the Annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2012.
Table of compensation paid to Statutory Auditors in 2006 and 2005
13. Profits forecasts or estimates...................................................................................................................................................... n/a 14. Administrative, Management, and Supervisory bodies and senior management 14.1. Information on members of the administrative, management or 14.2. Administrative, Management and Supervisory bodies’ conflicts of interests................................ 38 15. Remuneration and benefits 15.1. Amount of remuneration paid............................................................................................................................. 57 to 61 15.2. Amounts set aside or accrued to provide pension, retirement or similar benefits....... 61 to 62 16. Board practices 16.1. Date of expiration of the current term of office.................................................................... 22 to 23 and 34 16.2. Information about members of the management bodies’ service contracts with the issuer or any of its subsidiaries ................................................................................................ 32 and 38 16.3. Information on the audit committee and the remuneration committee................................ 32 to 34 16.4. Statement of compliance with the country of incorporation’s corporate governance regime .................................................................................................................................................................. 20 17. Employees 17.1. Number of employees......................................................................................................................................................... 462 17.2. Shareholdings and stock options..................................................................................... 68 to 69 and 74 to 75 17.3. Arrangements for involving the employees in the capital of the issuer ............................................. 75 18. Major shareholders.................................................................................................................................................................. 83 to 86 19. Related party transactions ........................................................................................................................................... 427 to 428 20. Financial information concerning the issuer’s assets and liabilities, financial position and profits and losses 20.1. Historical financial information * ................................................................................................................. 250 to 438 20.2. Pro forma financial information..................................................................................................................................... n/a 20.4. Auditing of historical annual financial information ......................................................................... 439 to 440 20.5. Age of latest financial information.................................................................................................................................... – 20.6. Interim and other financial information.................................................................................................................... n/a 20.8. Legal and arbitration proceedings............................................................................................................. 166 to 167 20.9. Significant change in the issuer’s financial or trading position ....... 141 to 142 and 178 to 181 21. Additional information 21.1. Share capital.................................................................................................................................... 64 to 67 and 79 to 89 21.2. Memorandum and Articles of association................................................................................................. 76 to 77 * Pursuant to Article 28 of Commission Regulation (EC) n° 809/2004 of April 29, 2004, the following items are incorporated by reference: – AXA’s consolidated financial statements for the year ended December 31, 2005 and the Statutory Auditors’ report on them, respectively presented on pages 232-396 and on pages 397-398 of the Annual Report (Document de Référence) n° D06-0267 filed with the AMF (Autorité des Marchés Financiers) on April 13, 2006; –AXA’s consolidated financial statements for the year ended December 31, 2004 and the Statutory Auditors’ report on them, respectively presented on pages 196-275 and on pages 276-277 of the Annual Report (Document de Référence) n° D05-0313 filed with the AMF (Autorité des Marchés Financiers) on March 31, 2005.
23. Third party information and statement by experts and declarations of any interest........................... n/a 24. Documents on display........................................................................................................................................................... 90 to 93 25. Information on holdings ................................................................................................................................................... 06 and 07