In addition, Mr. Christopher Condron who became a Chief Executive Officer of AXA Financial and a member of AXA’s Management Board on July 4, 2001 entered into an employment agreement with AXA Financial that provides certain benefits including a severance benefit in the event that his employment with AXA Financial is terminated under certain circumstances. A copy of Mr. Condron’s employment agreement is filed as Exhibit 10.16 to AXA Financial’s Form 10-Q the quarter ended June 30, 2001.
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Employees The table below sets forth the number of salaried employees of the AXA Group over the past three years broken down by line of business and geographic region: Salaried Employees At 31 December 1999 At 31 December 2000 At 1 January 20011 At 31 December 2001
Personnel of non-consolidated companies or companies accounted for using the equity method are not included in the above table. Personnel of companies proportionally consolidated are included, pro-rata, in accordance with the percentage of consolidation. (1) The personnel at January 1, 2001 are included on a constant structural basis in relation to personnel at December 31, 2001 (transfer of
AXA France and AXA Corporate Solutions, consolidation of AXA Real Estate Investment Managers and PPP Assistance). (2) A portion of the personnel of AXA’s French affiliates are included in GIEs. In addition, the personnel included in insurance and financial services activities in France are included in the “cadre de convention”.
(3) Including salaried sales force for 5,947 “Equivalent Full Time” in 2001 and 5,925 in 2000. (4) The personnel at December 31, 1999 mistakenly included 346 persons already included in the central functions of AXA.
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Compensation The general principles of AXA’s executive compensation policy have been presented to the Compensation
Committee of the AXA Supervisory Board. This policy applies to all executive officers of the Company and is adapted to local regulations and practices under the supervision of the Boards of Directors and compensation committees of the Company’s subsidiaries. The effective application of these principles is regularly reviewed by the Compensation Committee of the Supervisory Board.
Executive compensation consists of both a fixed and a variable component. The fixed component is targeted to be within the top quartile of the market. The variable component is linked to AXA’s global performance, local company performance, and the realisation of the executive’s individual objectives, weighted to reflect the different levels of responsibility.
The variable portion is designed to represent the principal component of the executive’s annual global compensation such that, in the case of successful attainment of the objectives, the compensation levels of AXA
The following table sets forth: – On one hand, gross compensation paid for services rendered in 2001 (column e), including fixed compensation paid in 2001 (column a); variable compensation paid in 2002 for services rendered in 2001
– On the other hand, gross compensation paid during 2001 (column g), including gross compensation paid in 2001 (column a); variable compensation paid in 2001 for services rendered in 2000 (including expatriation allowances paid in 2001) (column f); director’s fees paid in 2001 (column c); and benefits in kind for services rendered in 2001 (column d).
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Fixed Variable Directors Other Total Variable Total compensation compensation fees (non-cash) compensation compensation compensation 2001(€) for 2001 (€) paid compensation paid with respect 2000 paid paid during paid in 2001 paid in 2002 in 2001(€) 2001 (€) to 2001 (€) in 2001 (€) 2001 (€)
Share Ownership Information The following table presents the ordinary shares of AXA, AXA ADRs and ordinary shares of Finaxa owned by the members of AXA’s Management Board.
Supervisory Board at December 31, 2001: AXA Shares owned by Supervisory Board Members at December 31, 2001
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Share Options For many years, AXA has promoted a stock option program for its management and employees aimed at providing them with a competitive compensation package and also as a means of linking them more closely with the Group and aligning their interests with those of the Group and its performance. As of the date of this annual report, there are approximately 2096 AXA Group employees who have been granted stock options.
(1) Options granted and not yet exercised as of December 31, 2001. (2) As part of AXA’s acquisition of the minority interest in AXA Financial, Inc., outstanding options on AXA Financial common shares were converted into options on AXA ADRs on January 2, 2001. (3) Also beneficiary of 36,381 option on ordinary shares of AXA Investment Managers, a non-listed company.
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Table of options granted and exercised during 2001 by Management Board Members
Number Expiration Price Number Price Number Expiration Price Number Price date (€) date
Ch. CONDRON (United States) – – – – – 1,122,802 17/05/2012 $30.96 – –
(1) During 2001, F. Pierson exercised 30.000 Mofipar options at a price of € 7.09 per share.
Item 7: Major Shareholders and Related Party Transactions Major Shareholders The table below sets forth at March 19, 2002 all persons known by the Company to own, directly or indirectly, more than 5% of the Company’s outstanding ordinary shares.
The following diagram sets forth the ownership structure of the Company at March 19, 2002 (numbers in parenthesis represent the percentage of total voting power held while numbers not in parenthesis represent the percentage of total outstanding shares held): MUTUELLES AXA
FINAXA is a holding company which is listed on the ParisBourse. The ordinary shares of FINAXA not owned by the Mutuelles AXA or BNP Paribas are publicly traded.
December 31, 1998 to 17.8% at December 31, 2001. The following table shows repartition of the Company’s ordinary share capital over the past three years: Ownership of AXA Ordinary Shares 31/12/1999 31/12/2000 31/12/2001
As of March 26, 2002, to the best of our knowledge based on the information available to us, the Company had approximately: • 9,836 total registered holders of its ordinary shares (i.e. holding in nominative form); and
Relationship with the Mutuelles AXA The Mutuelles AXA are four mutual insurance companies engaged in the life & savings insurance business and property & casualty insurance business in France: AXA Assurances IARD Mutuelle, AXA Assurances Vie
Mutuelle, AXA Courtage Assurance Mutuelle, and AXA Conseil Vie Assurance Mutuelle. The Mutuelles AXA
Item 10 competitiveness while maintaining their separate identities. As part of these agreements, the Mutuelles AXA
The insurance businesses of the Mutuelles AXA and the insurance businesses of the Company’s French insurance subsidiaries use similar distribution channels and are managed as single businesses, subject to legal and management arrangements established to maintain the legal distinctions between their respective businesses. While the Company and each of the Mutuelles AXA has its own board of directors (or similar corporate governance structure), they have in common certain members of management and certain members of the Company’s management and/or Supervisory Board also hold directorships and/or management positions in the Mutuelles AXA. The Mutuelles AXA, which have no employees, also use employees of the
AXA Courtage IARD, a property & casualty insurance subsidiary of the Company, and AXA Courtage Assurance
To the best of management’s knowledge based on information currently available to it, there are no existing arrangements that may at a future date result in a change of control of the Company.
For information concerning certain relationships and related party transactions involving Alliance Capital, please see Item 13 of Alliance Capital’s Form 10K for the year ended December 31, 2001 on file with the SEC
Supervisory Board, and are submitted for final approval to AXA’s shareholders at the annual general meeting of shareholders.
For further information on the dividends declared and paid in the most recent five years and on the Company’s dividend policy, see “Item 3–Key Information-Dividends” and “Item 10–Additional Information-Dividends”.
STOCK SPLIT At the annual general meeting of shareholders of the Company held on May 9, 2001, the Company’s shareholders approved a 4-for-1 stock split of the Company’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the parity between the Company’s ordinary share and the ADS was changed from one ADS representing one-half of an ordinary share to one
MARKET FOR AXA ORDINARY SHARES The principal trading market for the the Company’s ordinary shares is the premier marché of the ParisBourse.
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Price Per AXA Ordinary Share Calendar Period High (€) Low (€)
to 9:00 a.m. during which transactions are recorded but not executed, and a post-closing session from 5:30 p.m. to 5:35 p.m. The ParisBourse has introduced continuous trading by computer during exchange hours for most listed securities, including the AXA ordinary shares. Listed securities may generally be traded at any time outside the ParisBourse. Any trade effected after the close of a stock exchange session will be recorded on the next ParisBourse trading day at the closing price for the relevant security at the end of the previous trading day’s session. The ParisBourse publishes a daily Official Price List which includes price information on each listed security.
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Securities listed on the ParisBourse are traded on one of three markets. The securities of most large public companies, including AXA, are traded on the premier marché. Securities of small and medium sized companies are traded on the second marché. Securities of certain other companies maybe traded on the nouveau marché. Shares listed on the ParisBourse are placed in one of several categories depending on the volume of trading transactions. With effect as of September 25, 2000, the Company’s ordinary shares are listed in the category known as continu A, which includes the most actively traded shares (i.e., a minimum daily trading volume of 250,000 shares or twenty trades).
Trading and clearance and settlement procedures are the same for all markets on the ParisBourse, with cash settlement the general rule. However, a Deferred Settlement Service (Service de Règlement Différé) is offered by intermediaries for selective securities meeting capitalization and liquidity criteria, regardless of the market on which they are listed. To be eligible for clearance and settlement through the Deferred Settlement Service, a share must either be included in the SBF 120 index, a benchmark index which comprises the stocks in the
A fee is charged for this service. As for all other fees, intermediaries set the applicable rate freely without the intervention of market authorities. Intermediaries are entitled to refuse deferred settlement instructions, whether to buy or to sell. The Company’s ordinary shares are eligible for clearance through the Deferred
With a deferred settlement instruction, the purchaser may elect not to pay and not to receive the securities until the end of the month. The transfer of ownership of equity securities traded on the ParisBourse pursuant to a deferred settlement instruction takes place the last business day of the month. The purchaser may decide, five days before the end of the calendar month (the determination date), either (i) to settle the trade no later than on the last trading day of such month or (ii) upon payment of an additional fee, to extend settlement to the determination date of the following month with the option either to settle no later than the last trading day of that month or to further postpone settlement until the next determination date.
Trading in the listed securities of an issuer may be suspended by ParisBourse if quoted prices exceed certain price limits defined by regulations of the Conseil des Marchés Financiers, the self-regulatory organization that has general regulatory authority over the French stock exchanges and whose members include representatives of French stockbrokers. In particular, if the quoted price of a continu A security varies by more than 10% from the previous day’s closing price, trading may be suspended for up to 15 minutes. Further suspensions for up to 15 minutes are also possible if the price again varies by more than 5%. ParisBourse may also suspend trading of a listed security in certain other limited circumstances, including, for example, the occurrence of unusual trading activity in the security.
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TRADING ON THE NEW YORK STOCK EXCHANGE The Bank of New York serves as depositary with respect to the Company’s ADSs traded on the NYSE. Following the change in parity between the AXA ordinary share and the ADS effective May 16, 2001, each ADS
The table below sets forth, for the periods indicated, the reported high and low closing prices in U.S. dollars for the Company’s ADSs on the NYSE: Price Per AXA ADS Calendar Period High ($) Low ($)
(1) Reflects high and low closing price from June 25, 1996, the first trading day on the NYSE to December 31, 1996. Prior to June 26, 1996, there was no market for the AXA ADSs in the United States.
We cannot assure you of the market price of the Company’s ordinary shares or ADSs. We urge you to obtain current market quotations for these securities.
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Anonyme (a form of limited liability company), with a Supervisory Board and a Management Board.
AXA’s principal office is located at 25, avenue Matignon, 75008 Paris, France and AXA is registered under the number: 572 093 920 in the Paris Trade and Company Register. References to “AXA” in this Item 10 are references to the Company, unless otherwise indicated.
OBJECTS AND PURPOSES AXA’s objects and purposes, pursuant to article 3 of its memorandum and articles of association (“statuts”), are generally to: • acquire, manage and/or dispose of equity interests in French or foreign companies or businesses, and, in particular, equity interests in companies engaged in the insurance business,
• acquire, manage and/or dispose of listed or unlisted shares or other securities, real and/or personal property, as well as rights and listed or unlisted securities related to such assets, and
• to perform any and all industrial, commercial, financial, real or personal property transactions directly or indirectly related to any of the foregoing.
Company and any of its shareholders holding more than 5% of the voting rights at general shareholders’
Upon the proposal of the Compensation Committee (see paragraph below), the Supervisory Board fixes the amount and terms of compensation for each of the members of the Management Board. Members of the
The Supervisory Board also may compensate its members for the performance of special tasks or assignments in accordance with the provisions of French company law. Decisions of the Supervisory Board in that respect may be passed only if at least half of its members are present.
Supervisory Board. Each of these special committees shall be composed of such Supervisory Board members as the Supervisory Board may elect from time to time. Currently, four special committees have been established by the Supervisory Board: the Audit Committee, the Finance Committee, the Compensation
Committee and the Selection Committee. For further information on these four special committees, see
Pursuant to article 12.3 of AXA’s statuts, the Management Board must obtain the prior authorization of the Supervisory Board to issue guarantees that exceed in the aggregate a specified yearly global amount
(currently one billion Euros per year) and, within this limit, (i) to issue any guarantee in connection with any lines of credit whenever such guarantee exceeds a specified amount (currently 160 million Euros per transaction), (ii) to issue any guarantee on behalf of any subsidiary of AXA for the purpose of securing the performance of its commercial obligations whenever such guarantee exceeds a specified amount (currently 200 million Euros per transaction), (iii) to issue any guarantee in connection with any reinsurance business whenever such guarantee exceeds a specified amount (currently 30 million Euros per transaction), and (iv)
Furthermore, the Management Board must obtain the prior authorization of the Supervisory Board to issue any guarantee whenever the total aggregate amount of all outstanding guarantees issued by AXA from time to time exceeds a specified global amount (currently two billion Euros). Authorizations thus granted to the
Board for up to one-third of the members of the Supervisory Board (individuals or representatives of legal entities). Members of the Supervisory Board who have exceeded the age limit can only be appointed by shareholders for one term for a maximum two-year period.
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AXA ordinary shares As of March 26, 2002, there were 1,734,510,252 ordinary shares outstanding, each with nominal value of Euro 2.29. All these ordinary shares were fully paid and non assessable.
• upon conversion, exchange or redemption of equity-linked securities issued by AXA,
The shareholders of AXA may delegate to the Management Board the powers required to effect, in one or more stages, any increase in share capital previously authorized by them. In certain circumstances, the AXA
The share capital of AXA may be decreased only with the approval of the shareholders at an extraordinary general meeting. The share capital may be reduced by reducing the number of outstanding ordinary shares. The conditions under which the capital may be decreased will vary depending upon whether or not the reduction is attributable to losses incurred by AXA. Under French law, all holders of shares of the same class must be treated equally. If the reduction is not attributable to losses incurred by AXA, each shareholder will be offered an opportunity to participate in the share capital reduction, except in the case of a share repurchase program. The number of outstanding ordinary shares may be reduced, either by an exchange of ordinary shares or by the repurchase and cancellation by AXA of its ordinary shares. If, as a consequence of losses, the net assets (capitaux propres) of AXA are reduced below one-half of its share capital, the Management Board must, within four months from the approval of the accounts showing this loss, convene an extraordinary general meeting of shareholders in order to decide whether AXA should be dissolved before the end of its statutory term. If the dissolution is not declared, the share capital must be reduced, subject to the legal provisions concerning the minimum capital of sociétés anonymes, by an amount at least equal to the losses which could not be charged against reserves if, by the end of the second fiscal year following the fiscal year during which the accounts showing the losses have been approved, the net assets of the Company have not been restored up to an amount at least equal to onehalf of the share capital.
REPURCHASE AND REDEMPTION OF ORDINARY SHARES Under French law, AXA may not issue shares to itself. However, it may, either directly or through a financial intermediary acting on its behalf, purchase its ordinary shares for one of three purposes: (1) to reduce its share capital by canceling the ordinary shares it purchases upon proposal of the Management
(3) to acquire up to 10% of its share capital, provided its shares are listed on a regulated market (e.g., the premier marché of the ParisBourse). To acquire its shares for this purpose, AXA must first file a note d’information that has received the visa of the Commission des Opérations de Bourse (the “COB”), which is the French stock exchange authority, and obtain its shareholders’ approval at an ordinary general meeting.
In the case of repurchases of ordinary shares under (3) above, AXA has one of three options. It may: • keep the shares as treasury shares; • sell or transfer them, including to its employees under a profit-sharing plan or stock option plan; or
• cancel the shares upon proposal of the Management Board and after prior authorization of the Supervisory
AXA may not repurchase under either (2) or (3) above an amount of shares that would result in AXA holding, directly or through a person acting on its behalf, more than 10% of its outstanding share capital.
After making a purchase of its own shares, AXA must file monthly reports with the COB and the Conseil des
Marchés Financiers (the “CMF”) that contain specified information about subsequent transactions. The CMF
must distribute dividends to its shareholders pro rata according to their share holdings. Dividends are payable to holders of shares outstanding on the date of the shareholders’ meeting approving the distribution of dividends, or, in the case of interim dividends, on the date the Management Board meets and approves the distribution of interim dividends. The actual dividend payment date is decided by shareholders at an ordinary general meeting or by the Management Board subject to prior approval by the Supervisory Board, if no decision is taken by the shareholders. AXA must pay any dividends or interim dividends within nine months of the end of its fiscal year. Dividends not claimed within five years of the date of payment become property of the French state.
Board to grant an option to each shareholder to receive dividends in either cash or additionals Shares.
Under French regulations relating to the replacement of share certificates and share registers by a system of entries in share accounts (dématérialisation), AXA no longer maintains a register of holders of ordinary shares but instead maintains, through a transfer agent, share accounts in which transfers of registered ordinary shares are recorded. As a result, no share certificates are issued by or on behalf of AXA. Shareholders’
Any owner of ordinary shares of AXA may elect to have its ordinary shares held in registered form and registered in its name in an account currently maintained by BNP-Paribas for and on behalf of AXA or held in bearer form and recorded in its name in an account maintained by an accredited financial intermediary, such as a French broker, bank or other authorized financial institution. Any shareholder may, at its expense, change from one form of holding to the other. Both methods are operated through Sicovam SA (which we refer to in this annual report as “SICOVAM”), an organization which maintains share and other securities accounts of
In the case of ordinary shares in bearer form, the ordinary shares will be held on their holder’s behalf by the accredited financial intermediary and will be recorded in an account maintained by the accredited financial intermediary with SICOVAM. That account is separate from the AXA share account. Each accredited financial intermediary will maintain a record of ordinary shares held through it and may issue certificates of registration with respect to these shares. If this alternative is adopted, the ordinary shares are referred to as being in bearer form, although no bearer document of title is issued by or on behalf of AXA with respect to them. Ordinary shares held in bearer form may only be transferred through accredited financial intermediaries.
Under the stock market regulations of the CMF, and subject to limited exemptions granted by the CMF, any person or persons acting in concert acquiring one-third or more of the share capital or voting rights of AXA
Pursuant to its statuts, AXA may obtain from SICOVAM, at AXA’s own cost, at any time and according to the provisions of French company law, any information relating to the identity of the holders of ordinary shares and other equity-linked securities with the right to vote in general meetings of shareholders as well as the number of ordinary shares or other equity-linked securities held by any of them. Whenever these holders are not resident of France and hold such ordinary shares and other equity-linked securities through accredited financial intermediaries, AXA may obtain from these accredited financial intermediaries (through Euroclear
France), at AXA’s own cost, at any time and according to the provisions of French company law, any information relating to the identity of these holders. Holders who fail to comply with AXA’s request for information will not be permitted, in accordance with, and subject to limitations provided under French company law, to exercise voting rights with respect to any such ordinary shares or other equity-linked securities and to receive dividends pertaining thereto (if any) until the date on which these holders comply with AXA’s request for information.
LIQUIDATION RIGHTS If AXA is liquidated, the assets remaining after it pays its debts, liquidation expenses and all of its remaining obligations will first be used to repay its Shares up to the amount of its stated capital. After these payments have been made, the shareholders of AXA will receive any surplus in proportion of their shareholdings.
Description of AXA’s American Depositary Shares The following is a summary of certain provisions of an amended and restated deposit agreement, dated
Bank of New York, as depositary, and the holders from time to time of ADRs. This summary describes the material terms and conditions of the deposit agreement but does not purport to be complete and is qualified in its entirety by reference to the deposit agreement, which has been filed as an exhibit to the Company’s registration statement on Form F-6 filed with the SEC on April 18, 2001 (registration number 333-13376).
• requests the depositary to hold the number of deposited AXA ordinary shares represented by its ADSs in registered form.
Failure to comply with these disclosure requirements may affect the holder’s or beneficial owner’s ability to give voting instructions in respect of the AXA ordinary shares represented by its ADSs. See “Description of Capital
Stock of AXA-Form, Holding and Transfer of Securities” for a description of the disclosure requirements applicable to AXA ordinary shares and the consequences of non-compliance as of the date of this prospectus.
Subject to the provisions of the deposit agreement, the depositary has agreed that, upon receipt of notice from the custodian as provided in the deposit agreement of a deposit of AXA ordinary shares with the custodian in form satisfactory to the custodian (in the case of AXA ordinary shares to be held in bearer form), or upon delivery to the depositary of AXA ordinary shares (in the case of AXA ordinary shares to be held in registered form), together with any required certifications, the depositary will execute and deliver, at its
Corporate Trust Office to, or upon the order of, the depositor or the persons named in the custodian’s notice, an ADR or ADRs registered in the name or names requested by such person or persons for the number of
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Securities represented by that ADR, and upon payment of the fees and charges provided in the deposit agreement and subject to the other provisions of the deposit agreement, the Deposited Securities and the statuts of AXA, the holder of the ADR is entitled to the delivery to it, or upon its order, of the Deposited
DIVIDENDS, OTHER DISTRIBUTIONS AND RIGHTS Subject to any restrictions imposed by applicable law, regulations or permits, the depositary is required to convert or cause to be converted all cash dividends and other cash distributions received by it on the
If the holders of AXA ordinary shares are granted the option to receive dividends on their AXA ordinary shares in the form of cash or additional AXA ordinary shares, ADR holders shall be entitled to benefit from that option to the extent the offering of the option to ADR holders is lawful and practicable, and subject to the terms of the deposit agreement.
AXA ordinary shares distributed in respect of the Deposited Securities represented by that ADS.
In circumstances in which rights would not otherwise be distributed, if a holder of an ADR requests the distribution of warrants or other instruments in order to exercise the rights allocable in respect of the ADSs evidenced by that ADR, the depositary will make these rights available to that holder upon written notice from AXA to the depositary that: • AXA has elected in its sole discretion to permit these rights to be exercised, and
• the holder has executed any documents that AXA has determined in its sole discretion to be reasonably required under applicable law.
Upon instruction pursuant to warrants or other instruments to the depositary from a holder to exercise these rights, upon payment by that holder to the depositary for the account of that holder of an amount equal to the purchase price of the AXA ordinary shares or other securities to be received upon the exercise of the rights, and upon payment of the fees of the depositary as set forth in the warrants or other instruments, the depositary shall, on behalf of the relevant holder, exercise the rights and purchase these AXA ordinary shares or other securities and will arrange for AXA ordinary shares so purchased to be deposited, and for depositary shares representing such AXA ordinary shares to be delivered to the relevant holder, under a separate deposit agreement to be entered into between AXA and the depositary providing for the issuance of depositary receipts subject to appropriate restrictions on deposit and withdrawal of AXA ordinary shares and transfers of such depositary shares as required under the Securities Act.
Except as otherwise provided in the preceding paragraph, AXA and the depositary will not make available to
The depositary will use reasonable efforts to follow the procedures established by the French tax authorities to enable eligible U.S. holders and beneficial owners of ADRs to quality for a reduced withholding tax rate of 15% if available at the time dividends are paid, to recover any excess French withholding taxes withheld or deducted with respect to dividends and other distributions of AXA to these holders and beneficial owners of ADRs, to receive any payment in respect of the avoir fiscal for which these holders and beneficial owners may be eligible from the French tax authorities and to receive a refund of any précompte paid to the French
Treasury by AXA. Upon request of any U.S. registered holder of ADRs, the depositary will provide a copy of
For more information, please see “Taxation-Ownership of AXA Ordinary Shares and ADRs-French Taxation”
RECORD DATES Whenever: • any cash dividend or other cash distribution becomes payable, or any distribution other than cash is to be made,
• the depository shall receive notice of any meeting of, or solicitation of consents or proxies from, holders of AXA ordinary shares or other Deposited Securities, or
• AXA or the depositary finds it necessary or convenient in respect of any matter, the depository will fix a record date, for the determination of holders of ADRs entitled to receive the relevant dividend, distribution or rights, or the net proceeds of their disposition, or to give or receive instructions for the exercise of voting rights at any such meeting or in respect of any such solicitation or to receive information as to any such meeting or solicitation, or for fixing the date on or after which each ADS will represent the changed number of Deposited Securities.
VOTING OF THE UNDERLYING ORDINARY SHARES The procedures described in this summary must be followed in order for ADR holders to give voting instructions in respect of the underlying AXA ordinary shares.
• A statement that the registered ADR holders as of the close of business on a record date fixed by the depositary pursuant to the deposit agreement will be entitled, subject to the applicable provisions of French law, AXA’s statuts and the Deposited Securities, which will be summarized in the statement, to instruct the depositary with regard to the exercise of the voting rights, if any, pertaining to the AXA ordinary shares or other Deposited Securities represented by the ADSs evidenced by such holders’ ADRs.
In accordance with French company law and the statuts of AXA, fully paid AXA ordinary shares that have been held in registered form in the name of the same shareholder since at least the beginning of the second full calendar year preceding the date of the relevant shareholders’ meeting are entitled to double voting rights. Similarly, any eligible owner who has held continuously in its name, since at least the beginning of the second full calendar year preceding the date of the relevant shareholders’ meeting, ADRs evidencing ADSs representing AXA ordinary shares entitled to double voting rights will be eligible to instruct the depositary as to the exercise of double voting rights. No other ADR holder, including any beneficial owner of ADSs evidenced by ADRs registered in the name of a bank, broker or other nominee, will be eligible to instruct the depositary as to the exercise of double voting rights. Deposited AXA ordinary shares will be entitled to double voting rights to the sole extent that: • since at least the beginning of the second full calendar year preceding the date of the shareholder meeting in question the depositary, upon the request of holders of ADRs, has held the deposited AXA ordinary shares in registered form; • the relevant holders have since at least the same date continuously held ADRs evidencing ADSs representing that number of AXA ordinary shares; and
• the relevant holders have certified certain matters to the depositary including that as of the date the voting instruction card is executed, that they are, and at all times since the beginning of the second full calendar year preceding the date of the shareholder meeting in question have been, Eligible Owners.
• use its reasonable efforts, insofar as practical and permitted under any applicable provisions of French law, the statuts of AXA and the Deposited Securities, to vote or cause to be voted the AXA ordinary shares represented by these ADSs in accordance with any non-discretionary instructions set forth in the voting instruction card, or
Securities, to vote or cause to be voted the AXA ordinary shares represented by the ADSs in respect of which a voting instruction card has been received.
The depositary and AXA may modify or amend the above voting procedures or adopt additional voting procedures from time to time as they determine may be necessary or appropriate to comply with French or United States law or the statuts of AXA. These modifications, amendments or additional voting procedures may limit the practical ability of registered holders and beneficial owners of ADRs to give voting instructions in e • Items 8-17 (V5) 1/07/02 11:41 Page 168 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Item 10 respect of the AXA ordinary shares represented by ADSs or may include restrictions on the ability of registered holders and beneficial owners of ADRs to sell ADSs during a specified period of time prior to a shareholders’
REPORTS AND OTHER COMMUNICATIONS TO HOLDERS OF ADSS AXA will furnish to the depositary annual reports in English containing audited consolidated financial information, semi-annual reports in English containing unaudited interim consolidated financial information and English versions or copies or summaries in English of notices of shareholders’ meetings and other reports and communications that are made generally available by AXA to its shareholders. The depositary will mail, publish or otherwise make available these annual and semi-annual reports and notices of shareholders’
meetings and, at the written request of AXA, any other reports and communications or summaries thereof to holders of ADRs upon receipt from AXA. AXA is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements.
CHANGES AFFECTING DEPOSITED SECURITIES Upon any change in nominal value, split-up, consolidation or other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger, consolidation or sale of assets affecting AXA or to which
AXA is a party, any securities received by the depositary or the custodian in exchange for, conversion of, replacement or otherwise in respect of Deposited Securities will, subject to the deposit agreement and applicable laws, including the Securities Act, be treated as new Deposited Securities under the deposit agreement, and each ADR will, subject to the deposit agreement and applicable laws, including the Securities
Act, represent an appropriately adjusted proportional interest in the Deposited Securities so received in exchange or conversion or replacement or otherwise, unless additional or new ADRs are delivered pursuant to the following sentence. In any such case the depositary may, and shall, if AXA so requests, execute and deliver additional ADRs as in the case of a stock dividend on the AXA ordinary shares, or call for the surrender of outstanding ADRs to be exchanged for new ADRs specifically describing the new Deposited Securities.
and the depositary and such amendment requires no consent from ADR holders. Any amendment which imposes or increases any fees or charges, other than taxes and governmental charges, cable, telex or facsimile transmission costs, delivery costs or other such costs, or which otherwise prejudices any substantial existing right of ADR holders, will, however, not take effect as to outstanding ADRs until the expiration of 90 days after written notice of the relevant amendment shall have been mailed to holders of outstanding ADRs. Every holder of an ADR at the time the relevant amendment becomes effective will be deemed, by continuing to hold such ADR, to consent and agree to the amendment and to be bound by the deposit agreement as amended thereby. In no event may any amendment impair the right of any ADR holder to surrender its ADRs and receive in exchange the Deposited Securities represented by the ADSs evidenced by these ADRs, except where the amendment is required in order to comply with mandatory provisions of applicable law.
Whenever so directed by AXA, the depositary has agreed to terminate the deposit agreement by mailing notice of the termination to the holders of all ADRs then outstanding at least 30 days prior to the date fixed in the notice for the termination. The depository may likewise terminate the deposit agreement if at any time 90 days shall have expired after the depositary shall have delivered AXA a written notice of its election to resign, and a successor depositary shall not have been appointed and accepted its appointment as provided in the deposit agreement. If any ADRs remain outstanding after the date of termination, the depositary thereafter will discontinue the registration of transfers of ADRs, will suspend the distribution of dividends to the holders of these ADRs and will not give any further notices or perform any further acts under the deposit agreement, except that the depositary will continue the collection of dividends and other distributions e • Items 8-17 (V5) 1/07/02 11:41 Page 169 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
pertaining to the Deposited Securities, will sell rights such as warrants or options as provided in the deposit agreement and will continue to deliver Deposited Securities, together with any dividends or other distributions received with respect to these securities and the net proceeds of the sale of any rights or other property, in exchange for ADRs surrendered to the depositary. The applicable fees of the depositary and taxes and governmental charges will be deducted from the cash distributed or proceeds of sales.
CHARGES OF DEPOSITARY To the extent permitted by applicable law or the rules of any securities exchange upon which ADSs are listed or traded, the depositary will charge any party depositing or withdrawing AXA ordinary shares or any party surrendering ADRs or to whom ADRs are issued, including, without limitation, issuance pursuant to a stock dividend or stock split declared by AXA or an exchange of stock regarding the ADRs or Deposited Securities or a distribution of ADRs pursuant to the deposit agreement, where applicable: • taxes and other governmental charges; • any registration fees that may from time to time be in effect for the registration of transfers of AXA ordinary shares generally by the appointed agent of AXA for transfer or exchange of AXA ordinary shares and applicable to transfers of AXA ordinary shares to or from the name of the depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals; • the air courier, cable, telex and facsimile transmission expenses that are expressly provided in the deposit agreement to be at the expense of persons depositing AXA ordinary shares or holders of ADRs; • reasonable expenses incurred by the depositary in the conversion of foreign currency pursuant to the deposit agreement; • a fee of $5.00 or less per 100 ADSs (or portion thereof) for the execution and delivery of ADRs and the surrender of ADRs for the purpose of withdrawal of Deposited Securities; • a fee of $.02 or less per ADS (or portion thereof) for any cash distribution made pursuant to the deposit agreement, except in the case of a cash dividend or other cash distribution received from AXA on any
Securities, the depositary or the custodian may require payment of a sum sufficient to reimburse it for any applicable stock transfer, registration or conversion fee and payment of any applicable fees provided in the deposit agreement.
The depositary will keep books, at the Corporate Trust Office, for the registration and transfer of ADRs, which at all reasonable times will be open for inspection by the holders of ADRs, provided that these inspections will not be for the purpose of communicating with holders in the interest of a business or object other than the business of AXA or a matter related to the deposit agreement or the ADRs.
GOVERNING LAW The Deposit Agreement is governed by the laws of the State of New York.
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Certain rights of AXA shareholders AXA is organized under the laws of The Republic of France and the rights of its shareholders are governed by
French law and AXA’s statuts, which is the equivalent of a certificate of incorporation and by laws in the
VOTING RIGHTS Each holder of ordinary shares or ADSs is entitled to one vote for each ordinary share (or ADS) held of record.
However, holders of fully paid ordinary shares who have held these shares in registered form since at least the beginning of the second full calendar year preceding the date of a shareholders’ meeting enjoy double voting rights with respect to these shares.
PREEMPTIVE OR PREFERENTIAL SUBSCRIPTION RIGHTS Under French company law, shareholders have preferential rights to subscribe for additional shares to be issued on a pro rata basis. Additional shares may be subscribed for with cash or by set-off of cash debts.
ANNUAL AND SPECIAL SHAREHOLDERS’ MEETINGS Two types of shareholders’ meetings exist under French company law, ordinary and extraordinary. AXA’s statuts provides that an annual ordinary general meeting of shareholders must be convened by the
Management Board or the Supervisory Board within six months of the end of each fiscal year to approve
French law requires that in order to have the right to attend or be represented at a general meeting of shareholders and vote, a holder of registered ordinary shares of AXA must have its Shares registered in its name in a share account maintained by or on behalf of AXA at least five days prior to the date of the meeting.
Shareholders have the right to attend and vote at shareholders’ meetings either personally, by proxy or, under certain conditions provided for by French law, through an accredited financial intermediary acting as their nominee.
During the two weeks preceding a meeting of shareholders, any shareholder may submit by registered mail questions to the Management Board relating to the agenda for the meeting. The Management Board must respond to these questions.
of the voting power of the outstanding AXA ordinary shares. If a quorum is not present at any meeting, then the meeting is adjourned. If a shareholders’ meeting is reconvened for lack of a quorum, there is no quorum requirement in the case of an ordinary general meeting, and 25% of the voting power of the outstanding
• the Management Board’s ability, after prior authorization by the Supervisory Board, to increase the share capital of the Company during a tender offer provided that such increase by the Management Board had previously been authorized by the shareholders, the relevant shareholders’ authorization expressly refers to tender offer periods, the share issuance is not reserved and is in compliance with the Company’s interest.
SHAREHOLDER VOTES ON CERTAIN REORGANIZATIONS Under French company law, the vote of holders of a two thirds majority of the votes of the shareholders attending or represented at the general meeting is necessary to approve a merger or certain consolidations.
Supervisory Boards, the statutory auditors’ reports, information concerning candidates for the Supervisory
Management Board or the Supervisory Board. Any damages awarded would be paid to AXA. One or more shareholders can also sue the members of the Management Board and the Supervisory Board, in his or her own name, for damages personally suffered by him or her. In such a case, any damages awarded are paid to the dissenting shareholder or shareholders. There are no class action lawsuits permitted under French company law.
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AVAILABLE FINANCIAL INFORMATION In addition to financial information required to be published in France, AXA is required to file periodic reports with the U.S. SEC containing certain financial information. AXA files its annual report on Form 20-F, which contains AXA’s consolidated annual financial statements prepared in accordance with French GAAP together with a reconciliation to U.S. GAAP. In addition, AXA files periodic reports on Form 6-K which contains AXA’s unaudited consolidated financial statements for the six-month period ended June 30 prepared in accordance with French GAAP.
French law, no such extraordinary shareholders’ meetings may decide (i) to increase the liability of the shareholders towards the Company or a third party; or (ii) to undermine the individual rights vested in each shareholder (such as voting rights, right to distributable profits of the Company when allocated as dividends, right to sell one’s shares, right to sue the Company).
Material contracts There have been no material contracts (outside the ordinary course of business) during the last two years to which the Company is a party, other than the Merger Agreement, dated October 17, 2000, between AXA,
Exchange controls and other limitations affecting security holders Under current French foreign exchange control regulations, there are no limitations on the amount of cash payments that may be remitted by AXA to residents of the United States. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a non-resident be handled by an accredited financial intermediary. In France, all registered banks and substantially all credit establishments are accredited financial intermediaries.
Under current French company law and AXA’s statuts, there are no general limitations on the right of nonresident or non-French persons to own or, where applicable, vote the AXA ordinary shares, whether held in the form of Shares or ADSs. However, both European Union and non-European Union residents must file a déclaration administrative or administrative notice, with French authorities in connection with the acquisition of a controlling interest in any French company. Under existing administrative foreign direct investment regulations and administrative rulings, ownership by non-residents of France of more than 20% of a listed company’s share capital or voting rights is regarded as a controlling interest, but a lower percentage might be held to be a controlling interest in certain circumstances. The factors that will be taken into account in making that determination include the existence of: • an option of the acquiring party to buy additional shares,
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Under current French insurance regulations, any person, or group of persons acting in concert, who is not a resident of a member state of the European Economic Area must obtain authorization from the French
Ministry of the Economy prior to entering into a transaction to acquire a direct or indirect interest, or to increase or decrease its direct or indirect interest, in AXA if such transaction would allow that person, or group of persons acting in concert, to (i) acquire control of, or cease to control, AXA or (ii) increase its interest to 10%, 20%, 33.33% or 50% of AXA’s voting power, including, in each case, through the holding of ADSs.
Furthermore, any such transaction allowing such person, or group of persons acting in concert, to hold AXA
ordinary shares representing in aggregate in excess of 5% of AXA’s voting power requires that person to provide prior notice to the French Ministry of the Economy. No prior authorization or prior notice, as the case may be, is required for such a transaction entered into by a person, or group of persons acting in concert, who is a resident of a member state of the European Economic Area, although that person, or group of persons, is required to provide the French Ministry of the Economy with notice upon completion of the transaction.
United States or of any political subdivision of the United States, including the District of Columbia,
• A person otherwise subject to U.S. Federal income tax on its worldwide income.
A “Non-U.S. Holder” is a holder that is not a U.S. Holder. This discussion does not address the U.S. Federal, local, state, foreign or other tax consequences to Non-U.S. Holders as a result of the ownership or disposal of AXA ordinary shares or ADRs.
Respect to Taxes on Income and Capital dated August 31, 1994 (which we refer to in this annual report as the
Under the Treaty, an “Eligible U.S. Holder” is a U.S. Holder whose ownership of AXA ordinary shares or ADRs representing ADSs is not attributable to a permanent establishment or fixed base in France and who is (i) an individual or other non-corporate holder, or (ii) a corporation that does not own, directly or indirectly, 10%
or more of the capital of AXA, provided in each case that that holder: • is a resident of the United States under the Treaty,
(with this tax reduced at a later date to 15%, subject to filing formalities), but will be immediately subject to the reduced rate of 15% provided that the Holder establishes before the date of payment that he is a resident of the United States under the Treaty.
TAXATION OF DIVIDENDS - “AVOIR FISCAL” Under French domestic tax law, a resident of France generally is entitled to the avoir fiscal, which is a form of tax credit, in respect of a dividend received in cash or in the form of ordinary shares from a French corporation in an amount equal to: • 50% of the net dividend received if the beneficiary of the distribution is an individual,
• 15% of the net dividend received if the beneficiary of the distribution is not an individual, increased by an amount corresponding to 70% of the précompte per Share actually paid in cash by AXA, if any, less the 15%
French Treasury, no distribution of cash or ordinary shares by a French corporation to its shareholders will be treated as dividend by the French Treasury and, accordingly, none of these shareholders will be eligible for the avoir fiscal in respect of such distribution, if such distribution is not approved by the annual general shareholders’ meeting which approves the annual accounts or in the event of advance payments of dividend
January 15th following the close of the calendar year in which the related dividend is paid, and only after receipt by the French tax administration of a claim for that payment in accordance with the procedures described below. However, the following are certain limitations to the availability of the avoir fiscal under the Treaty: • the avoir fiscal is generally only granted if the Eligible U.S. Holder is subject to U.S. Federal income tax on both the dividend and the avoir fiscal,
• the Eligible U.S. Holder, where required by the French tax administration, must show that he or she is the beneficial owner of the AXA ordinary shares or ADRs and that the holding of those AXA ordinary shares or ADRs does not have as one of its principal purposes the purpose of allowing another person to take advantage of the grant of the avoir fiscal under the Treaty, and
• if the Eligible U.S. Holder is a regulated investment company, it should not own, directly or indirectly, 10%
Under the Treaty, any payment of the avoir fiscal is subject to the 15% dividend withholding tax.
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• an Eligible U.S. non Individual Holder and the requirements are satisfied, that holder would initially receive 85 (the 100 dividend less a 15 withholding tax). That holder also would receive an additional payment from the French Treasury of 12.75, consisting of the avoir fiscal of 15, less the 15% withholding tax on that amount. Thus, the total net payment to the Eligible U.S. non Individual Holder would be 97.25, although, as discussed below, that holder would recognize 140 of income for U.S. Federal income tax purposes.
Any amounts distributed as a dividend by AXA out of profits which: • have not been subject to French corporate income tax at the standard corporate income tax rate,
A U.S. Holder that is not entitled to the full avoir fiscal generally may obtain from the French tax authorities a refund of any précompte paid by AXA with respect to the dividends distributed. Pursuant to the Treaty, the amount of the précompte refunded to U.S. residents is reduced by the 15% French withholding tax applicable to dividends and the partial avoir fiscal, if any. A U.S. Holder is only entitled to a refund of the précompte actually paid in cash by AXA and is not entitled to a refund of the précompte paid by AXA by offsetting French and/or foreign tax credits.
Centre des Impôts des Non-Résidents (9, rue d’Uzès, 75094 Paris Cedex 02, France).
• have certified by the U.S. financial institution that is in charge of the administration of the AXA ordinary shares or ADRs of that Eligible U.S. Holder, and e • Items 8-17 (V5) 1/07/02 11:41 Page 179 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
• file with AXA or the French person in charge of the payment of dividends on the AXA ordinary shares (such as the French paying agent in the case of AXA ordinary shares), or with the depositary (in the case of AXA
However, if an Eligible U.S. Holder is not able to complete, have certified and file the Application for Refund before the date of payment of the dividend, that Eligible U.S. Holder may still benefit from the Treaty if the
U.S. financial institution that is in charge of the administration of that holder’s AXA ordinary shares or ADRs provides AXA or the French paying agent in the case of AXA ordinary shares, or the depositary in the case of AXA ADRs, with certain information with respect to that Eligible U.S. Holder and his or her holding of AXA
Service. The depositary will provide to all U.S. Holders of AXA ADRs the applications or certificates, together with instructions, and will arrange for the filing with the French tax authorities of all applications and certificates completed by U.S. Holders of AXA ADRs and returned to the depositary in sufficient time to effect the filing.
• any “Eligible Not-For-Profit Organization”, which is a tax-exempt entity organized in the United States, the use of whose assets is limited under U.S. Federal or state laws, both currently and upon liquidation, to the accomplishment of the purposes that serve as the basis of its exemption from income taxation in the United
States under the Treaty and who owns AXA ordinary shares or ADRs through an individual retirement account, a Keogh plan or any similar arrangement. (“Eligible Pension Funds”, “Eligible Not-For-Profit
Organizations” and “Individuals Holding Shares in a Retirement Plan” are referred to collectively in this annual report as “Eligible Tax-Exempt Holders”.)
Item 10 individual holder would initially receive 85 (the 100 dividend less a 15 withholding tax). The Eligible Tax-
Exempt Individual Holder would be further entitled to an additional payment from the French Treasury of 15, consisting of the partial avoir fiscal of 30/85ths of 50, less the 15% withholding tax on that amount. When the avoir fiscal is equal to 15% of the net dividend (for instance for “Eligible Pension Funds” and “Eligible Not-for-
Procedures to Obtain Treaty Benefits”. Nevertheless, the existing French forms do not take into account the special tax treatment applicable to Eligible Tax-Exempt Holders with respect to the payment of the partial avoir fiscal and the refund of the précompte. Certain Eligible Tax-Exempt Holders may also be required to provide written evidence certified by the U.S. Internal Revenue Service of their status under U.S. Federal income tax law. As a consequence, Eligible Tax-Exempt Holders are urged to contact their own tax advisors with respect to the procedures to be followed to obtain Treaty benefits.
ADRs representing ADSs by a U.S. Holder who: • is a resident of the United States under the Treaty,
• does not have a permanent establishment in France to which the AXA ordinary shares or ADRs are attributable to or, in the case of an individual, who does not maintain a fixed base in France to which the
Under French domestic tax law, any gain realized by a shareholder on a redemption of AXA ordinary shares by AXA generally will be treated as a dividend and will be subject to French dividend withholding tax as described above under “Taxation of Dividends-Withholding Tax”, unless all AXA’s accumulated earnings and profits, as determined for French tax purposes, have been distributed to shareholders of AXA before that redemption.
Should such written agreement be executed or enforced in France, it would be subject to transfer taxes at the rate of 1%, up to a maximum of 3,049 euros per transaction.
FRENCH ESTATE, GIFT AND WEALTH TAXES A transfer of AXA ordinary shares or ADRs representing ADSs by gift by, or by reason of death of, a U.S. Holder e • Items 8-17 (V5) 1/07/02 11:41 Page 181 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
TAXATION OF DIVIDENDS For U.S. Federal income tax purposes, the gross amount of a distribution by AXA to U.S. Holders, including any amounts of French tax withheld, will be treated as dividend income to the extent paid out of AXA’s current or accumulated earnings and profits, as determined for U.S. Federal income tax purposes. If a U.S. Holder has the option to receive a distribution either in cash or in the form of AXA ordinary shares, and such U.S. Holder chooses to receive AXA ordinary shares (a “Stock Distribution”), such U.S. Holder will be treated for purposes of the preceding sentence as having received a distribution to the extent of the fair market value of these AXA
ordinary shares. The gross amount of any related avoir fiscal or précompte payment also will be treated as dividend income. That dividend income will not be eligible for the dividend received deduction generally allowed to corporations under Section 243 of the Code. To the extent that an amount received by a U.S.
ADRs outstanding on the record date established by French law, which in the case of an annual dividend will be fixed by the shareholders at the shareholders’ meeting approving the distribution of dividends, and in the case of an interim dividend will be fixed by the Management Board approving the distribution of interim dividends. Any payment of the avoir fiscal or the partial avoir fiscal and précompte, plus the withholding tax relating to those payments, will generally be included in the dividend income of a U.S. Holder in the year in which the payment or refund is received. The amount recognized as dividend income by a U.S. Holder will be equal to the U.S. dollar value of the distributed Euro, or, in case of a Stock Distribution, the AXA ordinary shares, on the date of the recognition of the dividend for U.S. Federal income tax purposes, regardless of whether the payment is in fact converted into U.S. dollars. The Euro distributed will have a tax basis equal to their U.S. dollar value at such time. Any gain or loss realized upon a subsequent conversion or other disposition of the Euro will be treated as ordinary income or loss from sources within the United States.
AXA or the French paying agent, which represents the difference between the 25% and the 15% tax rates, would not be eligible for the foreign tax credit.
ordinary shares or ADRs will be capital gain or loss if these AXA ordinary shares or ADRs are held as capital assets by the U.S. Holder, and will be short term or long term depending whether the holding period of the
BACKUP WITHHOLDING AND INFORMATION REPORTING Under certain circumstances, a U.S. Holder who is an individual may be subject to information reporting requirements and backup withholding, currently at a 31% rate on dividends received on AXA ordinary shares or ADRs representing ADSs. This withholding generally applies only if that individual holder: • fails to furnish his or her taxpayer identification number to the U.S. financial institution that is in charge of the administration of that holder’s AXA ordinary shares or ADRs or any other person responsible for the payment of dividends on the AXA ordinary shares or ADRs,
• is notified by the U.S. Internal Revenue Service that he or she has failed to properly report payments of interest and dividends and the U.S. Internal Revenue Service has notified AXA that such individual holder is subject to backup withholding, or
• fails under specified circumstances, to comply with applicable certification requirements.
ordinary shares and ADRs representing ADSs under U.S. federal, state, local and foreign law.
AXA’s exposure to market risk varies by nature and by activity across its operations.
Furthermore, a large proportion of AXA’s insurance operations consists of products where the majority of the investment risk and rewards is transferred to the policyholders. Risks attributable to policyholders are also actively managed to ensure that such risks are prudent, satisfy policyholders’ risk and reward objectives and do not adversely affect the insurance companies’ ability to pay benefits and claims when due. In addition,
AXA’s insurance operations worldwide are subject to local regulatory requirements in most jurisdictions in which AXA operates. The local regulations prescribe the following: • the type, quality and concentration (counterparty, geographical and type of securities held) of investments, and
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AXA’s Life & Savings operations sell products that may include policyholder participating benefits, including the UK with-profit contracts, which represented approximately 10% of the total gross life insurance liabilities at December 31, 2001. In respect of the participating insurance contracts, the policyholder participates in the earnings or surplus of the insurance company (in the case of UK with-profit contracts, the amounts due to policyholders are generally based on the fair value of the investments supporting such contracts)
In addition, AXA’s Life & Savings operations also sell interest-sensitive products. Interest-sensitive products earn income primarily from the spread between investment income, largely earned on investment-grade fixedincome securities, and interest credited to policyholder account values, which may be a guaranteed rate of return, such is the case for guaranteed income contracts and indexed-linked contracts. AXA strives to maintain this spread by adjusting the interest-crediting rates at contractually specified intervals. AXA’s ability to adjust interest-crediting rates may be constrained by competitive forces and minimum guaranteed crediting rates, if any. Interest rate risk is further reduced by managing the duration and maturity structure of each investment portfolio in relation to the estimated duration of the liabilities it supports. Proceeds from policies with long-term fixed payout patterns, such as guaranteed income contracts, annuities in the payout phase, and disability income policies, are predominately invested in highly-rated fixed maturity securities with the objective of matching their duration to the underlying liabilities.
• Sensitivity analyses are primarily used for participating products and simulate the impact of certain market fluctuation scenarios on future cash flows, fair values, or forecasted earnings. Many of these sensitivity analyses are performed for local regulatory purposes. The goal of such analyses is to ensure AXA is able to provide policyholders adequate returns while complying with regulatory requirements.
Property & Casualty, including International Insurance and Reinsurance. Generally, management of market risk is less critical for property & casualty insurance and reinsurance products, as the amounts and timing of claims do not vary significantly with interest rates or other market changes that affect the underlying investments. The premiums received and the return on investments (net investment income and realized gains and losses) provide substantial liquidity to meet claims payments and associated expenses as they arise.
See notes 2 and 25 to the consolidated financial statements for information regarding AXA’s use of derivatives.
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In accordance with French GAAP, the carrying value of AXA’s consolidated invested assets is generally at historical cost or amortized cost except for assets backing UK with-profit contracts, separate account assets and certain other trading account securities, which are held at market value.
• For participating life insurance contracts, the fair value was considered to be the greater of 1) the fair value of the assets designated to support such policies or 2) the future cash flows discounted using the guaranteed minimum interest rate, if any. For interest-sensitive life insurance contracts, a discounted cash flow approach was used. As is the case with most variable rate liabilities, interest-sensitive life insurance contracts’ fair values were not significantly affected by market changes as future crediting rates can be adjusted, subject to guaranteed minimum interest rates, if any, to reflect market changes.
• The fair values for property & casualty and international insurance and non-participating life insurance contracts were estimated using a discounted cash flow approach. Such fair values, which vary with changes in the estimated discount rate, were considered to be sensitive to interest rate changes but unaffected by equity price changes. For property & casualty and international insurance contracts, no changes were made in the estimates of claims’ amounts and timing as a result of changes in interest rates or stock market prices for equity securities.
Interest Rate Risk. For purposes of interest rate sensitivity analyses, parallel yield curve shifts were made relative to the yield curves prevailing in the country in which the subsidiary operates. The estimated potential exposure due to a hypothetical 100 basis point parallel shift upward in the December 31, 2001 and 2000 yield curves would result in an estimated net fair value loss for all items within the scope of the analyses of approximately €1.3 billion and €1.0 billion, respectively, before minority interest and tax. The increase in the estimated net fair value loss exposure of €0.3 billion in 2001 was primarily attributable to an increase in the business portfolios supported by fixed rate-fixed maturity securities in the year.
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Equity Price Risk. The estimated potential exposure to a hypothetical 10% decline in the value of the
December 31, 2001 and 2000 stock markets would result in an estimated net fair value loss exposure for all items within the scope of the analyses of approximately €1.6 billion and €2.3 billion, respectively, before minority interest and tax. A 20% decline would result in an estimated net fair value loss exposure of approximately €3.1 billion and €4.6 billion at December 31, 2001 and 2000, respectively. The decrease in exposure to volatility in the stock markets was mainly due to the deterioration in the global stock markets in 2001 and, consequently, the depressed year-end market values at December 31, 2001, as compared to
Over the past three years, the potential loss from stock market fluctuations has been more significant than the loss resulting from interest rate changes. The impact of interest rate fluctuations on interest-sensitive investments was partially offset by fair value changes in the related insurance liabilities. The impact of stock market declines on equity securities was accompanied by smaller changes in the estimated fair value of insurance liabilities (except for participating life contracts and separate account contracts). The gross life insurance liabilities, which do not include separate account (unit-linked) liabilities, are supported largely by fixed maturity securities and the fair value of these liabilities are generally estimated using discounted cash flows.
The decrease in foreign currency exposure to €11 million in 2001 was primarily due to a lower level of net income of €520 million for the year ended December 31, 2001 as compared to €3,904 million in 2000. The 2000 earnings included U.S. dollar exceptional operations, being a realized gain of €2,004 million associated with the sale of DLJ that was partly offset by €236 million of realized and unrealized losses attributable to the
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Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2001, 2000, and 1999 F-5
The consolidated financial statements also include: Financial Statement Schedule: Parent Company Condensed Financial Statements S-1 e • Items 8-17 (V5) 1/07/02 11:41 Page 189 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
TO THE SHAREHOLDERS OF AXA: We have audited the accompanying consolidated balance sheets of AXA (the “Company”) and its subsidiaries as at December 31, 2001, 2000 and 1999 and the related consolidated statements of income, of shareholders’
equity, and of cash-flows for each of the three years in the period ended December 31, 2001, all expressed in
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and its subsidiaries at December 31, 2001, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in France. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Reinsurers’ share of separate accounts (unit-linked) liabilities 28 92 89 15 Reinsurers’ share of insurance liabilities 11,619 9,234 8,075 9 Receivables from insurance and reinsurance activities 15,571 13,817 13,425
Receivables from non-insurance activities 11,433 10,719 78,254 10 Cash and cash equivalents 17,646 28,728 16,509
(1) The December 31, 2000 and 1999 financial statement data, as reported, have been presented under a new basis of presentation following the implementation of new French Regulations effective January 1, 2001. The impact of the new French Regulations is described in note 2, with proforma financial information provided in note 32.
Ordinary shares of euro 2.29 nominal value per share 3,971 3,809 3,260 1,848 million authorized shares and 1,734 million issued and outstanding shares at December 31, 2001 (2000: 2,102 million authorized shares and 1,665 million issued and outstanding shares on a post 4-for-1 stock split basis).
Minority interests’ share in net income for the financial year 385 2,124 858
(1) The December 31, 2000 and 1999 financial statement data, as reported, have been presented under a new basis of presentation following the implementation of new French Regulations effective January 1, 2001. The impact of the new French Regulations is described in note 2, with Pro forma financial information provided in note 32.
At December 31, (in euro millions) 2001 2000 1999 26 Other commitments received 26 Other commitments given
Income before income tax expense 1,721 9,176 4,816 8 Equity in income from affiliated entities 17 (23) (10)
(1) The December 31, 2000 and 1999 financial statement data, as reported, have been presented under a new basis of presentation following the implementation of new French Regulations effective January 1, 2001. The impact of the new French Regulations is described in note 2, with unaudited Pro forma financial information provided in note 32.
(2) 2000 and 1999 per ordinary share data restated for the effect of the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May 9, 2001. (3) The exceptional operations included: In 2000: – the consolidated net realized gain on the sale of Donaldson, Lukfin & Jenrette (“DLJ”), which totaled euro 2,004 million net group share (euro 2,071 million net group share and net of realized and unrealized losses on Credit Suisse Group shares received in respect of that transaction of euro 67 million); – realized losses and valuation allowances of euro 236 million (net group share) relating primarily to the Equitable Life high yield bond portfolio as a result of broad weaknesses in credit markets from a slowing economy during the third and fourth quarter coupled with review of investment strategy following AXA’s acquisition of the minority interests in AXA Financial; and
Number Nominal of nominal brought financial TOTAL (in euro millions, except number of shares) in millions1 value value forward year
Impact of New French GAAP restatements3 – – – (593) – (593) Conversion of 4.5% mandatorily convertible bonds at maturity 28.7 66 254 – – 320 Issuance of ordinary shares
(1) The movement in the number of ordinary shares outstanding in 2000 and 1999 was restated to reflect the 4-for-1 stock split approved by the shareholders in May 2001. (2) The change in goodwill arising from the UAP acquisition in 1999 was attributable to AXA’s decrease in ownership interest in Sun Life & Provincial Holdings (“SLPH”)
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Depreciation and amortization expense 2,253 1,163 1,999 Change in insurance liabilities 9,011 14,873 14,863 Net change in banking activities including broker-dealer receivables & payables (187) 1,457 (494) Net change in repurchase agreements 53 (2,907) 9,817
Net cash provided by operating activities 12,795 14,078 33,776 Cash flows from investing activities3: Maturities and sales: Loans and other 5,825 4,787 3,138
Net purchases of property and equipment (724) (452) (133) Net cash used in investing activities (20,793) (15,220) (36,703) Cash flows from financing activities: Long term debt and borrowings 1,432 193 818 Subordinated debt and mandatorily convertible bonds and notes (1,774) 8,174 2,126 Issuance of ordinary shares5 301 4,567 222
(1) Includes net change in other debtors and others creditors, including reinsurance deposits. (2) Includes the realized gain on the sale of Donaldson, Lufkin & Jenrette in 2000 of euro 3,407 million of which euro 1,336 million was attributed to minority interests. (3) Includes the cost of acquisitions and proceeds from the sale of subsidiaries. (4) Includes net movement in Separate Account assets in 2001 of euro 5,336 million (2000: euro 15,240 million and 1999 : euro 8,640 million). (5) Non-cash transactions in 2000 included: (i) conversion of the 6.0% mandatorily convertible notes into ordinary shares at maturity in January 2000 of euro 282 million, (ii) the merger of AXA Participations (an existing wholly-owned subsidiary of AXA) with and into AXA (the Company) of euro 216 million, and (iii) ordinary shares of AXA exchanged in connection with the buyout of the minority interests in AXA Financial of euro 3,131 million.
Notes to the Consolidated Financial Statements 1-Financial Statement Presentation General Principles AXA, a French société anonyme (the “Company” and, together with its consolidated subsidiaries, “AXA”), is the holding company for an international financial services group focused on insurance and asset management.
A list of AXA’s consolidated entities is provided in note 3.
Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses for the accounting period. Changes in such estimates and assumptions may affect the amounts reported and disclosed in future periods.
– assets and liabilities of subsidiaries denominated in foreign currencies, being the functional currency of the local subsidiary, were translated into Euro at exchange rates prevailing at the year-end.
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• Non-subordinated debt issued by the company and its subsidiaries is presented separately in the balance sheet, whereas previously it was included under the balance sheet caption of financing debt or operating debt.
STATEMENT OF INCOME • The change in the value of the separate account (unit-linked) assets are now included in the net investment results whereas in prior periods such changes were included in insurance, benefits and claims.
2 - Significant Accounting Policies General Accounting Principles The consolidated financial statements are prepared in accordance with generally accepted accounting principles in France (“French GAAP”). French GAAP is based on the: – French Law of January 3, 1985 and its decree of application regarding consolidation; and
Comptable) including the new French Regulation No. 2000-05 that became effective on January 1, 2001 and introduced certain new accounting and disclosure principles for preparing and presenting the consolidated financial statements of an insurance company.
CHANGES IN ACCOUNTING PRINCIPLES IN 2001 In 2001, there have been changes in accounting principles due to (i) the implementation of the new French
The new French Regulation No. 2000-05 became effective on January 1, 2001 and introduced certain new accounting and disclosure principles for preparing and presenting the consolidated financial statements of insurance groups in France. Most of the changes set out under the new French Regulations were already used by AXA and, therefore, only certain significant changes in accounting principles needed to be made, as summarized below.
– Non-European life insurance companies: The results of these companies were previously prepared and consolidated based on U.S. GAAP, whereas under the new French Regulations, these companies now prepare and consolidate their results in accordance with French GAAP. This change principally affected the accounting for (i) fixed maturity and equity investments, which are to be stated at amortized cost and historical cost, respectively, whereas in prior periods such investments were stated at market value, and (ii) the cost of reinsurance, in particular relating to the reinsurance arrangement on the disability income business in the United States in 2000, which is now recorded as a charge in the period the reinsurance arrangement is placed whereas in 2000 the cost was to be amortized over the duration of the contract.
– Insurance liabilities: From January 1, 2001 an additional provision relating to adverse changes in mortality assumptions is recorded in full in the year of the change rather than being recognized as an additional liability over the contract term, as in prior years. In addition, the basis used by AXA in determining its actuarial insurance liabilities is in line with the preferred method set out in the new French Regulations, in particular, the discount rates used are, in effect, lower than the expected future investment yield recommended in the
GAAP was recorded in AXA’s consolidated shareholders’ equity at January 1, 2001, net of tax and allocation to participating policyholders when material. For further information, see AXA’s consolidated statement of shareholders’ equity.
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at December 31, 2000 and consolidated statement of income for the year ended December 31, 2000 are presented in note 32.
is, in general, used to fund the future terminal bonuses to be attributed to participating policyholders in accordance with the terms of the insurance contract. Consequently, the balance sheet in a UK insurance company will include not only the policyholder insurance benefits but also the FFA.
“with-profit” contract insurance liabilities, with the remaining portion in shareholders’ retained earnings and reserves. Effective from January 1, 2001 and due to AXA Equity & Law’s Plan of Financial Reorganization undertaken in 2001, to better reflect policyholders’ rights, 100% of the FFA is now included as part of the UK
This method is based on the “UK modified statutory basis” used in the local UK financial statements. Under this methodology the basis for which AXA recognizes profits from such participating business has also been changed, from the sum of 10% of the operating results derived from the business to only 10% of the bonus declared in the period.
In accordance with French GAAP, the impact of this change was included in AXA’s consolidated shareholders’
equity at January 1, 2001. For further information see AXA’s consolidated statement of shareholders’ equity.
Companies in which AXA exercises significant long-term influence, that is affiliated companies, are accounted for by the equity method. Significant influence is presumed when AXA directly or indirectly holds 20% or more of the voting rights or when significant influence is exercised through an agreement with other shareholders.
AXA’s consolidated financial condition or operating results. A subsidiary or an investment in an affiliated company is accounted for at cost, rather than being consolidated or accounted for as an investment under the equity method, if: – from the date of acquisition, the entity is held for sale,
– the information required to prepare the consolidated financial statements cannot be readily obtained, either for reasons of cost or timeliness of preparing such information.
Business Combinations: Purchase Accounting and Goodwill including acquisitions of minority interests Business combinations generally are accounted for as acquisitions using the purchase method of accounting.
However, the insurance liabilities are maintained at the predecessor’s carrying value if the measurement basis is consistent with AXA’s accounting principles. In conjunction with purchase accounting relating to acquired life insurance operations, an asset is recorded corresponding to the present value of estimated future profits emerging on purchased life insurance business in-force at the date of acquisition (also referred to as value of purchased life insurance business in-force or VBI). The present value of future profits is estimated using actuarial assumptions based on anticipated experience determined as of the purchase date using a discount rate that includes a risk premium.
ACQUISITIONS OF MINORITY INTERESTS In respect of acquisitions of minority interests of an existing consolidated entity, the portion of assets acquired and liabilities assumed are maintained at their carrying values at the date of acquisition and not adjusted to reflect their estimated fair values.
DETERMINATION OF PURCHASE PRICE The purchase price includes the direct costs and external fees related to the transaction, including the costs of settling or exchanging outstanding employee share options of the target company (applicable to all acquisitions including acquisitions of minority interests). If the transaction is based in a foreign currency, the impact of the foreign currency is included in the purchase price at the date of the transaction or the initial date of the transaction (if it occurs over a period of time).
GOODWILL The difference between the purchase price and the net assets acquired represents goodwill. If goodwill is positive, that is, the purchase price is greater than the identifiable net assets acquired, goodwill is recorded as an asset. If goodwill is negative, the following adjustments are made: – acquisition was a company that was not previously consolidated: the estimated fair value determined for real estate is decreased to the extent necessary to eliminate such excess.
Revisions can be made to goodwill up until the end of the fiscal year end following the year of the acquisition, if new information becomes available.
in the acquired company (see “Net Investment Results” below). Any remaining goodwill would have been recorded as a goodwill asset and amortized. This prior treatment was not subject to a retroactive adjustment upon adoption of the new French Regulations in 2001.
INTANGIBLE ASSETS Value of purchased life insurance business in force (“VBI”) The VBI, in respect of acquired life insurance companies, is determined based on profits emerging over the contract period and is amortized over the life of the relevant contracts. VBI is subject to annual recoverability testing based on actual experience and expected trends with respect to the principal assumptions used to calculate the VBI.
Capitalized software costs Certain costs associated with developing software for internal use are capitalized and amortized on a straightline basis over the estimated useful life of such assets (in general not to exceed five years).
INVESTMENTS FROM INSURANCE, BANKING AND OTHER ACTIVITIES In general, the accounting for investments is described below.
Equity securities are stated at historical cost less any valuation allowances for declines in the estimated fair values of specific equity investments that are deemed to be other-than-temporary. An other-than-temporary decline is determined based on a systematic analysis of the equity security and may be recognized depending on various qualitative factors and the estimated fair value of the security, if it is 80% or less of its carrying value for a period, in general, of at least 6 months. Certain equity securities that do not fall under this criteria may be subject to a valuation allowance if the decline in value is determined to be other-than-temporary. Valuation allowances recorded for the impairment of equity securities may be reversed in subsequent periods.
Mortgage loans on real estate are stated at outstanding principal balances, net of unamortized discounts and valuation allowances. Impairment measurement is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.
Investments for certain activities are stated at fair value with the change in fair value included in income under “net investment result”. The activities in which investments can be valued at fair value are set out below: • Invested assets in respect of insurance operations in which the unrealized gains and losses of the invested assets are used to determine the value of insurance liabilities: – invested assets in respect of separate account (unit-linked) contracts; – invested assets supporting the UK “with-profit” funds; and
• Invested assets held by AXA’s banking subsidiaries for trading purposes.
OTHER ASSETS Real estate (property) owned and occupied by AXA is included under the balance sheet caption “Other assets” and depreciated on a straight-line basis over the estimated useful life of the buildings, ranging from 20 to 50 years. This includes materials, fixtures and equipment that are depreciated on a straight-line basis over the estimated useful life for each asset.
Amounts receivable from reinsurers are estimated in a manner consistent with the insurance benefits / claim reserves associated with the reinsured business. These receivables are evaluated and monitored for recoverability to minimize exposure to significant losses from reinsurer insolvencies.
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DEFERRED ACQUISITION COSTS (“DAC”) IN RESPECT OF LIFE INSURANCE OPERATIONS The costs of acquiring new and renewal business that vary with and are primarily related to the production of new business are specifically identified and deferred by establishing an asset. This asset is amortized based on the estimated gross profits emerging over the contract term. Estimates of gross profits are reviewed at the end of each accounting period and the amount not deemed recoverable from future estimated gross profits is recorded as a charge against income. DAC is reported net of unearned revenue reserves, which are recorded in income over the contract term using the same amortization basis used for DAC.
PROVISIONS FOR RISKS AND CHARGES Restructuring costs In connection with a business combination, restructuring costs relating to employee termination benefits, the closing of office sites and image changes in respect of the acquired company are included in a restructuring provision recognized in the opening balance sheet of the acquired company. When a restructuring provision impacts the acquirer or its subsidiaries, a restructuring provision is recorded as a liability and included in the purchase price. In the event that the provision is not fully utilized, the release of the provision does not impact the post-acquisition operating results. In other cases, restructuring provisions are recorded in the period a restructuring plan is approved with any release in provision recorded in the operating results.
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The liability for savings contracts or other investment contracts, in which there is minimal mortality or morbidity risk and that are not separate account (unit-linked) contracts, is determined using the retrospective method.
Specific to future policy benefits on the UK “with-profit” contracts and as a result of AXA Equity & Law’s Plan of Financial Reorganization completed in 2001 (see “ Changes in accounting principles under French GAAP”
above), the future policy benefits for such contracts include 100% of the FFA, which principally covers the future terminal bonuses according to the terms of these contracts. The FFA and, therefore, the future policy benefits vary with the change in market value of the assets supporting the participating “with-profit” funds.
Claims reserves include unexpired risk provisions, equalization provisions and provisions for future negative margins as set out below.
SEPARATE ACCOUNT (UNIT-LINKED) CONTRACTS These contracts are linked to a specific pool of investment funds / assets and are written by AXA’s life insurance companies. In respect of these contracts, the investment risks and rewards are principally transferred to the policyholders and the guarantees on the benefits are realized and supported by the investment funds. For these contracts the liability represents the fair value of the investment funds / assets linked to those contracts at the balance sheet date.
Derivative Instruments Derivative instruments designated to hedge a specific asset, liability or net exposure and deemed effective in offsetting the hedged item’s changes in estimated fair value or cash flows are recorded on the accrual method. Under such method and in general, gains and losses associated with the derivative instruments, in respect of effective hedges, are deferred and recognized in the net investment results generally over the life of the hedged asset or liability with amounts recorded in the category corresponding to the hedged item.
Short duration life contracts, property and casualty insurance contracts and reinsurance contracts are recognized as revenue over the terms of the related insurance contracts. An unearned premium reserve is established to cover the unexpired portion of the written premiums. The unearned premium reserve is calculated on a pro rata basis based on the proportion of insurance still in force at year-end.
CHANGE IN UNEARNED PREMIUM RESERVES The unearned premium reserve is reported as a liability (see “Unearned Premium Reserve” above). Total revenues in the period include the change in unearned premium reserve, which represents the earned premium in the period, gross of reinsurance.
• unrealized investment gains and losses on invested assets in respect of separate account (unit-linked) assets, assets allocated to UK “with-profit” contracts and other invested assets whereby such assets are stated at market value (refer to “Investments from insurance, banking and other activities” above).
Treasury Shares The investment holding of a parent company’s shares by AXA (the Company) or its subsidiaries (“treasury shares”) is accounted for as an investment in equity securities if the treasury shares are held to stabilize the
Company’s share price in the market, to be attributed to employees in connection with share purchase programs, or to be held for a short term by a subsidiary. In other cases, the treasury shares are accounted for as a reduction of shareholders’ equity.
Accounting for Share Options The accounting principles adopted by AXA for the accounting of stock option plans will vary according to the type of stock option plan.
OPTIONS TO SUBSCRIBE FOR SHARES (INCREASES AXA’S CAPITAL) For share option plans issued by the Company that do not provide a guarantee of liquidity given by the
entities other than the Company in which the grant provides an advantage to the employees (the exercise price is less than the market price at the date the number of options and the exercise price are known), a liability is recorded on a systematic basis over the vesting period.
over the vesting period. This provision is adjusted on an annual basis to reflect the change in market value of the underlying shares up until the date the shares are to be acquired upon exercise of the option by the employee.
3-Principal Subsidiaries and Companies accounted for under the equity method PRINCIPAL CHANGES IN CONSOLIDATION IN 2001 The principal change in the scope of consolidation in 2001 was the sale of Banque Worms to Deutsche Bank that was completed on April 2, 2001. Since January 1, 2001, Banque Worms has not been consolidated. See note 26 “Off Balance Sheet Commitments” for further information. All other changes in scope of consolidation in 2001, as indicated in the tables below, were not significant.
PRINCIPAL CHANGES IN CONSOLIDATION IN 2000 The principal changes in scope of consolidation in 2000 are set out below.
in July 2000, whereby AXA’s ownership interest increased from 56% to 100%.
Agreement dated October 17, 2000. The tender offer became unconditional from December 26, 2000 and was completed on December 29, 2000. The subsequent merger between AXA Merger Corp.1 and AXA
AXA Nichidan. As a result of the acquisition, AXA’s total assets increased by €38 billion at December 31, 2000.
(1) A Delaware holding company created to facilitate the exchange offer and subsequent merger of AXA Financial, Inc. and was a whollyowned subsidiary of AXA.
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Companies fully consolidated Certain entities below represent the parent company of sub-groups that can hold an interest in entities in more than one country and, therefore, may be consolidated with an ownership interest less than that indicated for the parent company of the sub-group.
Change Voting rights Ownership Voting rights Ownership in Scope interest interest
AXA Insurance Holdings Japan 96.42 96.42 96.39 96.39 AXA Asia Pacific Holdings Ltd 51.00 51.00 51.00 51.00
(*) Consolidated under the German sub-group (became a separate reporting operation in 2001).
United States The Equitable Life Insurance Soc. 100.00 100.00 100.00 99.99
Spain Ayuda Legal de Seguros y Reaseguros 100.00 99.68 100.00 99.67 AXA Aurora Iberica de Seguros y Reaseguros 99.68 99.68 99.68 99.68 AXA Aurora Vida de Seguros y Reaseguros 99.68 99.68 99.68 99.68
Life & Savings and Property & Casualty f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-22 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Alliance Capital (sub-group) 52.28 52.28 52.64 52.64 National Mutual Funds Management (sub-group) 100.00 51.00 100.00 51.00
Compagnie Financière de Paris Crédit Created 100.00 100.00 – – AXA France Finance Created 100.00 99.97 – –
Compagnie Parisienne de Participations ** – – 100.00 100.00 Monté-Scopeto ** – – 100.00 100.00 Société de Gestion Civile Immobilière ** – – 100.00 100.00 Transaxim SNC ** – – 100.00 100.00 Colisée Victoire ** – – 99.74 99.74 AXA Millésimes ** – – 36.18 36.14
(*) Consolidated under the German sub-group (became a separate reporting operation in 2001). (**) Entity had no activity in 2001 and therefore, was not material and was deconsolidated.
Financial Services f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-24 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Carrying Acquisition Currency Amorti- Other Carrying Acquisition Currency Amorti- Other Carrying Years (in euro millions) value changes zation changes value changes zation changes value remaining
AXA China Region (including acquisition of minority interests) 39 300 (10) (15) – 314 – (18) (20) – 276 18
AXA Financial, Inc. (acquisition of minority interests) – 4,782 – – – 4,782 – – (191) 7 4,599 291
Goodwill under euro 100 millions each 860 146 12 (133) (144) 741 – 6 (107) 40 680 –
(assets in excess of the amount required to meet the policyholders reasonable expectations) held in the “withprofit ” fund of AXA Equity & Law. Approximately 74% of eligible policyholders (by policy value) elected in favor of the Plan. In December 2000, the Plan was approved by the High Court of Justice in the United
Inherited Estate had a fair value of £1.7 billion (€2.7 billion). In July 2001, AXA Equity & Law made a second and final proposal, with terms similar to the original proposal, to the remaining eligible policyholders who did not elect at the first opportunity in 2000. The Plan was finally approved by a total of approximately 87% of all
As part of the Plan, a reorganization bonus of £250 million (€397 million) had been allocated to all “withprofit ” policyholders from the Inherited Estate, payable upon surrender, maturity or death.
(i) the reorganization bonus of £250 million (€397 million), (ii) approximately £600 million (€954 million) of unrealized capital gains and (iii) certain other adjustments to comply with French GAAP.
As a result of this operation, AXA acquired a portion of the surplus assets held in the “with-profit” fund and related future benefits based on the percentage of policyholders who elected in favor of the plan. This acquisition was effectuated by the payment of an incentive bonus of approximately £260 million plus £18 million of direct expenses associated with the transaction (or approximately €451 million in the aggregate using the average £/€ exchange rate for the period). This cost represents goodwill and will be amortized over 30 years. The annual goodwill amortization expense will be €15 million, or €11 million for 2001 as the effective date of the transaction was April 1, 2001.
AXA Financial – buyout of minority interests (40%) On January 2, 2001 and in connection with the exchange offer to the minority shareholders in AXA Financial
(i) AXA Merger Corp. ( a wholly-owned subsidiary of AXA created to effectuate the transaction) was merged with and into AXA Financial, (ii) the remaining shares of AXA Financial common stock outstanding were converted into the right to receive $35.75 in cash (without interest) and 0.295 of an AXA ADS, and (iii) AXA
December 29, 2000 at which time AXA held a 92.4% direct and indirect ownership interest in AXA Financial.
The subsequent merger between AXA Merger Corp.1 and AXA Financial occurred on January 2, 2001 (see
“Principal acquisitions in 2001” above). As a result, AXA increased its ownership interest in AXA Financial from 60% to 100%. For purposes of these consolidated financial statements, the date of acquisition was December 31, 2000 given that pursuant to the Merger Agreement, AXA had an obligation to acquire all of the remaining shares of AXA Financial common stock outstanding through the merger of AXA Merger Corp. with and into
In connection with the transaction, AXA issued 25.8 million of ordinary shares in the form of AXA ADSs
(103.2 million on a post 4-for-1 stock split basis), of which 20.9 million were issued by December 31, 2000
(83.6 million on a post 4-for-1 stock split basis). As a result, AXA’s consolidated shareholders’ equity at
– €4,782 million of the remaining excess purchase price was recorded as a goodwill asset, of which 80% was attributed to the life insurance operations (being amortized over 30 years) and 20% was attributed to the asset management operations of Alliance Capital (being amortized over 20 years).
As a result of the transaction, 100% of AXA Financial’s post-acquisition operating results, along with goodwill amortization expense was included in AXA’s consolidated net income in 2001, as the date of acquisition was
Sanford C. Bernstein transaction On October 2, 2000, Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, Inc., a U.S.-based asset management company. The purchase price was
issued private units in Alliance Capital. A portion of the cash was funded by AXA Financial through a financing agreement whereby in June 2000 AXA Financial purchased 32.6 million units of limited partnership interest of
Alliance Capital Management L.P. for an aggregate purchase price of U.S.$ 1.6 billion and, as a result, recorded goodwill of €583 million. The excess purchase price paid by Alliance Capital over the fair value of the net assets acquired in Sanford C. Bernstein, Inc. totaled U.S.$ 3.5 billion (or €4.0 billion).
Sun Life & Provincial Holdings (SLPH) subsequently renamed AXA UK Holdings – buyout of minority interests (44%) In July 2000, AXA acquired the 44% minority interests in SLPH, which was subsequently delisted from the
The purchase price was £2.3 billion (approximately €3.7 billion) and was funded principally from the net cash proceeds obtained from the issuance of ordinary shares of AXA in June 2000. The excess purchase price over the carrying value of the portion of net assets acquired was €1,971 million. The entire excess purchase price was attributed to goodwill and is being amortized over 30 years. The goodwill amortization charge was €72 million in 2001.
¥10.5 billion yen (€107 million). In addition, AXA contributed cash of approximately ¥207 billion (€2 billion)
AXA China Region – buyout of minority interests (26%) In November 1999, AXA Australia purchased the minority interests in AXA China Region for HK $4.1 billion
The excess purchase price over the carrying value of the portion of net assets acquired totaled €300 million and is being amortized over 20 years and is consistent with the estimated useful life used in the accounting for the acquisition of AXA Asia Pacific Holdings (formerly National Mutual Holdings and the parent company of AXA China Region) in 1995. The goodwill amortization charge in 2001 was €17 million.
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Guardian Royal Exchange (1999) Through SLPH, AXA acquired the UK group Guardian Royal Exchange (GRE) in May 1999. Total purchase consideration was £3,417 million (€5,110 million). The excess purchase price over the fair value of net assets acquired of €1,138 million was attributed to goodwill. The goodwill primarily related to GRE’s UK, Irish and
A portion of the goodwill was attributable to a decrease in net assets of the acquired companies at date of acquisition, as there was a significant deficiency in insurance claims reserves recorded in the opening balance sheet by AXA. This deficiency related to the difference between local statutory basis and AXA’s accounting policies on establishing property and casualty claims reserves. Consequently, an exceptional amortization of goodwill of €446 million (€259 million, net group share) was recorded as a charge against French GAAP
In 2000 there was deterioration in the claims ratios relating to the former GRE property and casualty insurance portfolios in the United Kingdom and Ireland from the pre-acquisition period. As a result, the opening balance sheet of GRE had been revised and, therefore, goodwill had increased. At December 31, 2000, gross goodwill was €1,261 million, accumulated amortization was €505 million (of which €25 million represented an amortization charge in 2000) and, therefore, goodwill net of accumulated amortization totaled €770 million, after taking account of foreign currency fluctuations of €14 million. The goodwill amortization charge in 2001 was €43 million.
(of which €15 million represented an amortization charge in 2001) and, therefore, goodwill net of accumulated amortization totaled €235 million. Had no goodwill been charged directly to retained earnings and reserves, additional goodwill amortization of €53 million would have been recorded against income.
Banque Worms of €36 million was written off in 1999 as the operations were generating operating losses.
5 - Value of Purchased Life Business in Force (VBI) The value of purchased life business in force on a consolidated basis and by product type, including the changes thereto, are as follows: F-30
Goodwill from companies accounted for by the equity method – – (36)
2001 (see note 4 “Business Combinations”), the unit-linked business was transferred from a participating fund to a non-participating fund. As a result of this transfer, VBI of €466 million was recorded. In 2000, VBI
increased by €1,365 million due to the acquisition of Nippon Dantaï in March 2000.
Amortization of the value of purchased life business in force, net of accrued interest, expected to be recorded in each of the next five years is €293 million in 2002 and €271 million, €260 million, €239 million and €199 million in 2006 and thereafter. Such amounts are best estimates based on assumptions regarding anticipated future experience of the purchased business. Accordingly, such amounts are subject to adjustment each year to reflect actual experience.
6- Investments Determining Fair Value For publicly traded fixed maturities and equity investments, estimated fair value is determined using quoted market prices.
(as a change in future policy benefits), minority interests and tax.
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Invested assets excluding investments in participating interests 249,126 244,380 252,638 9,497 9,385 9,556
– Of which non listed – 73,346 75,760 – 609 648
– Equity securities and holdings in equity security-based mutual funds – 42,092 45,914 – 1,599 1,685
– Equity holdings in fixed maturity-based mutual funds – 10,054 10,474 – – –
Mortgages, policy and other loans 26,416 26,316 26,386 665 332 349
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ANALYSIS OF FIXED MATURITY AND EQUITY SECURITY INVESTMENTS The historical cost (for equity securities) or amortized cost (for fixed maturity securities) represents the cost of acquiring the security, net of discount or premium in respect of fixed maturity securities acquired.
Total equity investments (including holdings in mutual funds) 66,586 Investment in participating interests 6,317
Held to maturity and available for sale 135,528 139,031 4,994 (1,340) Allocated to UK with-profits business trading 3,529 Other trading securities 2,065 Total fixed maturities 144,625 Equity investments (including holdings in mutual funds)
INSURANCE-RELATED ASSETS (EXCLUDING SEPARATE ACCOUNT ASSETS) Based on AXA’s principal operations in France, the United States, the United Kingdom, Japan, Australia / New
or more of total shareholders’ equity at December 31, 2001 and 2000.
(1) Fixed maturities classified as “available-for-sale” represented 99% of total, based on amortized cost as at December 31, 2001.
Treasury Shares At December 31, 2001, AXA ordinary shares held by AXA (the Company) or its subsidiaries (“treasury shares”)
totaled 30.5 million (or a increase of 12.0 million from 18.5 million at December 31, 2000 on a post 4-for-1 stock split basis approved by the shareholders at the annual general meeting on May 9, 2001). At December 31, 2001, the carrying value of such shares was €489 million, representing 1.7% of outstanding ordinary shares (2000: €385 million, representing 1.1% of outstanding ordinary shares). The treasury shares held at
December 31, 2001 are to cover the potential ordinary shares to be issued upon conversion of outstanding share options in AXA ordinary shares (in the form of AXA ADS’s) by employees of AXA Financial, Inc. In 2001,
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Net carrying Fair Shareholders’ Last fiscal year net income Fiscal year Percentage of (in euro millions) value value equity Amount Year end ownership
Listed companies: Banque de Crédit Marocain 119 104 472 85 2000 Dec. 31, 2000 10.4%
– Crédit Lyonnais 482 646 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-35 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Investment Valuation Allowance Investment valuation allowances, which have been deducted in arriving at investment net carrying values as presented in the consolidated balance sheets, and changes thereto are shown below.
Balance at Balance at (in euro millions) January 1, 2001 Additions Deductions Other changes2 December 31, 2001
Equity investments and holdings in mutual funds 509 1,178 (282) 447 1,853
Fixed maturities and other fixed income securities 153 419 (706) 742 608
(1) Includes provisions on assets from banking activities. (2) “Other changes” relate principally to changes in scope of consolidation and foreign currency fluctuations. In addition, the valuation allowances for fixed maturity securities in respect of the U.S. Life & Savings operations was presented as a decrease in the gross value of the asset in 2000. This provision was reclassed as a valuation allowance under “other changes” of euro 774 million.
Equity investments and holdings in mutual funds 596 645 (206) (525) 509
Balance at Balance at (in euro millions) January 1, 1999 Additions Deductions Other changes2 December 31, 1999
Equity investments and holdings in mutual funds 568 273 (167) (78) 596
Fixed maturities and other fixed income securities 70 22 (22) 160 230
(a) Includes provisions on assets from banking activities. (b) “Other changes” relate principally to changes in scope of consolidation and foreign currency fluctuations.
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Carrying value Change Other Carrying value Contribution (in euro millions) at January 1, 2001 in scope changes1 at December 31, 2001 to net Income
AXA Asia/Pacific Holdings affiliates: – NM Home Loans Trust 74 – (5) 69 –
Other affiliates under euro 30 million each 55 1 (5) 51 7
of real estate entities in Australia and New Zealand as investments under the equity method.
For the years ended December 31, 2001, 2000 and 1999, AXA received cash dividends from companies accounted for by the equity method of €63 million, €4 million and €49 million, respectively. The increase in dividends received in 2001 related to the dividends paid by the Australian entities accounted for under the equity method.
AXA Asia/Pacific Holdings affiliates: – NM Home Loans Trust 73 – 1 74 –
Life & Property International (in euro millions) Savings & Casualty Insurance Total Total Total
– gross of unearned revenue reserves 11,342 – – 11,344 9,676 8,078
“with-profit” funds in order to better reflect the policyholders’ rights, as discussed in note 2 under “ Changes in accounting principles under French GAAP”. The net impact of the change in accounting principles relating to the UK “with-profit” contracts and the financial reorganization mentioned above, has reduced the opening shareholders’ equity at January 1, 2001 by €79 million.
At the annual general meeting of shareholders of AXA held on May 9, 2001: • The shareholders approved a 4-for-1 stock split of AXA’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the
See note 35 “Events Subsequent to December 31, 2001” for further information regarding the amount of dividend in respect of the 2001 financial year that was approved by the shareholders at the annual general meeting held on May 3, 2002.
At December 31, 2001, 2 out of 5 employees held 2.3% of the AXA ordinary shares, which included AXA
13-Minority Interests Changes in minority shareholders’ interests are summarized as follows: F-40
(1) Represents the impact of adopting new French Regulations effective from January 1, 2001. See notes 2 and 32 for further information. (2) Represents the adjustment principally relating to (i) the deconsolidation of AXA Millésimes (euro 135 million), (ii) the change in method of consolidating real estate companies under AXA Asia Pacific Holdings has changed to an investment acounted for under the equity method, as well as (iii) the exercise of Alliance Capital stock options of euro 22 million and, consequently, AXA’s ownership interest decreased from 52.64% at December 31, 2000 to 52.28% at December 31, 2001.
In 2001, AXA Millésimes was deconsolidated as it had no activity (see note 3) and real estate companies in
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AXA, The Company: Subordinated Perpetual Notes, variable (US $ and euro) 1,033 1,009
(2) In February 2000, the Company issued euro 1,099 million 3.75% subordinated convertible notes. The proceeds were used primarily to finance the acquisition of minority interests in AXA China Region and the acquisition of Nippon Dantaï. In 2000, euro 1 million of the total debt was converted into ordinary shares of AXA. The conversion into shares of all notes issued would result in the issuance of 6.7 million of AXA ordinary shares. The Company has the right to redeem these notes starting in January 2007 at a price of euro 196.00 per note. The issuance price per note was euro 165.50. Unless previously converted, redeemed or cancelled, the notes will mature and become repayable in full on January 1, 2017 at a price of euro 269.16 per note.
(3) The Company issued four subordinated debt instruments in 2000. The debt has a variable interest rate based on Euribor three-month rates and is scheduled to mature in 20 years with an option to redeem early during the first ten years.
At December 31, 2001 the aggregate maturities of subordinated debt based on required principal payments at maturity for 2002 and the succeeding four years totaled €nil, €6 million, €93 million, €473 million and €nil, and €8,294 million in 2007 and thereafter.
Separate account (unit-linked) liabilities, gross of reinsurance ceded 115,305 117,469 – – – – 115,305 117,469
Which includes: – Policyholders’ participation (bonuses), excluding UK with-profit business 10,832 9,573
and provisions for construction risks, which are included in “Other reserves” as shown in the table above.
Changes in scope of consolidation, portfolio transfers and change in accounting principles 191 (9) 706 271 4,484 239
Provision attributable to the current year 12,125 5,100 11,879 2,684 11,222 3,092
Increase (decrease) in provision attributable to prior years (262) 920 247 951 (631) (123)
Claims and claims expenses attributable to prior years (6,080) (1,743) (6,845) (1,693) (4,956) (809)
U.S. TERRORIST ATTACKS ON SEPTEMBER 11, 2001 AXA’s insurance operations were directly affected by the U.S. terrorist attacks on September 11, 2001.
The total cost associated with these attacks has been estimated by Tillinghast between US$30 billion and US$
60 billion on a worldwide basis. The estimated cost for AXA for the year ended December 31, 2001, based on information available at such date, amounted to €846 million (before tax and net of reinsurance), or €561 million impact against the net income.
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Under insurance and reinsurance contracts related to environmental pollution and asbestos, AXA paid claims and legal costs of approximately €77 million in 2001 (2000: €67 million and 1999: €30 million). At December 31, 2001, AXA has made cumulative payments relating to such contracts of €332 million (2000: €254 million).
Pension obligations and other similar liabilities (see note 17)2 2,212 3,396 3,416 2,953
Pension Obligations and Other Similar Liabilities Detailed information is provided in note 17 “Employee Benefit Plans”.
German property & casualty operations (€701 million), Japanese life & savings operations (€267 million) and the French insurance operations (€548 million).
(in euro millions) in purchase accounting provisions Total in purchase accounting provisions Total
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In 2001, the opening balance sheet in respect of the buyout of minority interests in AXA Financial was adjusted for €57 million, including a €50 million provision recorded to cover employee departure costs relating to AXA’s buyout of minority interests in AXA Financial in 2000. In addition, a restructuring provision was recorded by AXA Financial relating to employee departure costs in respect of the head office and in the sales offices in 2001. Of the total provision established, a €16 million balance remained to be used in 2002.
In 2000, €221 million of total restructuring provisions was utilized and included: (i) €19 million in respect of
In addition, in 2000 a provision was recorded in respect of (i) the restructuring of AXA’s Australian operations of €34 million, of which €12 million was used in 2000, and (ii) AXA France Assurance holding company of €28 million.
Other Provisions Other provisions include principally (i) a provision recorded in 2000 to offset the profit dilution realized by AXA
Financial in conjunction with the acquisition of Sanford C. Bernstein, Inc., of €928 million, as its subsidiary
Alliance Capital issued private units in connection with the acquisition (see note 20 “Net Investment Result” for further information), (ii) a provision of €125 million was recorded in 2000 in connection with the sale of
The following table sets forth the change in benefit obligation, change in plan assets and weighted-average assumptions associated with various pension plan and post-retirement benefits. The amounts are recognized in the accompanying balance sheets as at December 31, 2001 and 2000.
Change in benefit obligation: Benefit obligation, beginning of year 8,049 7,067 588 531
Fair value of plan assets, end of year 6,876 7,503 7 9
Reconciliation of Funded Status to Accrued Pension Cost: Unrecognized Prior Service Cost 55 44 (24) (20)
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Expected return on plan assets (625) (629) (475) – – (1)
Pension Plans Pension costs for AXA’s defined benefit plans are actuarially determined, in general, using the projected unit credit method. Assumed discount rates and rates of increase in remuneration used in calculating the projected benefit obligations together with long term rates of return on plan assets vary according to the economic conditions of the country in which the pension plans are situated.
For other plans with accumulated benefit obligations in excess of plan assets and accrued pension liability as at December 31, 2001, the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans were €2,300 million, €2,147 million and €511 million, respectively (2000: €1,671 million, €1,708 million and €447 million, respectively).
The post-retirement benefits are principally in the U.S. Life & Savings operations whereby the assumed health care cost trend rate used in measuring the accumulated post-retirement benefits obligation in 2001 was 10%, gradually declining to 5.0% in 2011 (2000: 7.0% gradually declining to 4.25% in 2010). If the health care cost trend rate assumptions were increased by 1%, the accumulated post-retirement benefits obligation as of
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In connection with the acquisition of Sanford C. Bernstein, Alliance Capital agreed to invest US$ 96.0 million per year for three years to fund open market purchases of Alliance Holding units or money market funds in each case for the benefit of certain individuals who were shareholders or principals of Sanford C. Bernstein, Inc. or were hired to replace them.
AXA, The Company: Medium Term Notes, 3.3% to 8.2%, due through 2005 162 162
AXA Germany (formerly AXA Colonia): AXA Financial, Inc.: Senior Notes, 7.30% due through 2003 151 142
AXA UK Holdings: Syndicated loan, variable rate due 20014 – 511
Guardian Royal Exchange: Wholly-owned and Joint venture Real Estate (AXA Financial, Inc.): Mortgage Notes, 4.92% due through 2017 397 371
Note: Certain increases year on year are attributable to the impact of foreign currency exchange rates. (1) Euro 1.0 billion issued in June 2001 under a Euro 3.0 billion Euro Medium Term Note Program (“EMTN”). (2) At December 31, 2001, the Company had a euro 3.0 billion French commercial paper program, of which euro 826 million was in issue (2000: euro 3.0 billion of which euro 2,076 million was in issue). The repayment was refinanced primarily by euro 1.0 billion issued by AXA under the EMTN (see footnote (1) above).
AXA Financial, through Equitable Life, has a commercial paper program with an issue limit of US $1.0 billion.
Of AXA’s total non-subordinated debt instrument obligations outstanding at December 31, 2001 of €5,957 million (before accrued interest), the amount related to short term debt was €1,802 million, of which €826 million related to AXA the holding company (2000: €3,703 million and €2,076 million, respectively).
(2) Credit facility was cancelled in the year. (3) Alliance Capital repaid the outstanding credit facility, which was partly refinanced by US$400 million 5.625% notes issued in 2001 (see note 18
Rate (“EURIBOR’’). At December 31, 2001, the three-month Euribor rate was 3.294%.
Alliance Capital’s mutual fund distribution system, capital expenditures and for general working capital purposes. The revolving credit facilities contain covenants which, among other things, require Alliance Capital to meet certain financial ratios. Alliance Capital was in compliance with the covenants at December 31, 2001.
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20-Net Investment Result The sources of net investment results are summarized as follows: Item 1
Years ended December 31, Insurance Financial services1 Holding companies Intersegment eliminations Total
(1) Amounts do not include investment income and investment expenses from the banking operations, which are included in “Revenues from banking activities” and in “Bank operating expenses” in the consolidated statements of income. Also, depreciation expense related to real estate held by AXA’s real estate companies is excluded in the above presentation, as also included in “Bank operating expenses”.
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Net investment income on: Investment gains/(losses), net of valuation allowances on:2
• Net investment losses, including realized losses and valuation allowances, totaled €2.4 billion in 2001 as compared to a net investment gain of €7.0 billion in 2000. 2001 included (i) a realized loss of €145 million in respect of investment holdings (primarily in fixed maturity securities) in Enron, which filed bankruptcy in early December 2001; (ii) valuation allowances on the U.S. high-yield bond portfolio of €163 million after tax; and (iii) valuation allowances for other-than-temporarily impaired equity securities that totaled €995 million on a consolidated basis (€636 million net group share) given the significant decrease in the global stock markets performance in 2001, for example, the CAC 40 (France) fell by 22%; the Dow Jones (United
In January 2001, AXA and certain of its subsidiaries sold the remaining shares of Credit Suisse Group received in connection with the sale of DLJ for a realized gain of €110 million (net group share).
On November 3, 2000, AXA sold its interest in DLJ to the Credit Suisse Group. Total proceeds were $7.3 billion
Credit Suisse Group held by AXA and its affiliates. The realized gain (before minority interests and tax and net of realized and unrealized losses on the shares of Credit Suisse Group received) amounted to €5.4 billion, or €2.0 billion (net group share). The realized gain was allocated to the Life & Savings Segment (€2.5 billion before tax and minority interests, or €936 million net group share) and the holding companies (€2.9 billion before tax and minority interests, or €1,068 million net group share).
(see note 4 “Business Combinations” and note 16 “Provisions for Risk and Charges” for further details). As a result, there was no impact on AXA’s consolidating operating results.
US $20 per share, representing 17.9% of DLJdirect, DLJ’s online brokerage unit. A realized gain of €120 million
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When French Savings Contracts are issued, shares of the funds supporting such French Savings Contracts are transferred from the General Account to the corresponding Separate Account on a first-in, first-out basis and a gain or loss is recognized by AXA through its General Account for the difference between the fair value of the fund shares and their carrying value. Annual fund income is credited to the policyholders and additional fund shares are transferred from the General Account to the Separate Account for such income. At contract maturity or redemption, fund shares are transferred back to the General Account, for cash, at fair value and a new cost basis in such shares held in the General Account is established. Such shares are generally held in the General Account as equity investments or real estate, as appropriate, pending issuance of new French
AXA limits the effect of catastrophic events and certain other risks on the results of its property and casualty insurance subsidiaries by reinsuring against such events and risks on a non-proportional excess of loss basis.
AXA’s life insurance subsidiaries reinsure individual mortality risks in excess of amounts that vary by subsidiary, based on its financial position. AXA also assumes certain levels of risk in various areas of exposure from other insurance companies or reinsurers. Reinsurance assumed activity is included with direct insurance activity for each of the three insurance segments.
The components of reinsurance ceded, net, as presented in the consolidated statements of income, are summarized as follows: F-56
Years ended December 31, (in euro millions, except for percentages) 2001 2000 19991
(1) Correction in 1999 to reflect gross premiums earned in Property & Casualty Segment and in International Insurance Segment, previously presented net of certain reinsurance ceded contracts.
(2) The “Reinsurance assumed as a percentage of net premiums written” for the International Insurance segment is primarily effected by AXA’s reinsurance operations within this segment, which in 2001, represented over 90% of gross premiums written within the segment. In addition, the percentage for 2001 was affected by the increase in reinsurance ceded.
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reinsurer insolvencies. Significant reinsurance amounts recoverable on paid and unpaid losses are secured by letters of credit or assets deposited with AXA or in trusts on behalf of AXA.
22 - Operating Charges The analysis of operating charges below does not include operating charges in respect of banking activities, which are presented separately in the Statements of Income.
Financial services-related charges incurred by the insurance companies were included under “Administrative expenses”.
Year ended December 31, 2001 Life & Property International Total Asset Other Holdings Intersegment
Year ended December 31, 2000 Life & Property International Total Asset Other Holdings Intersegment
Year ended December 31, 1999 Life & Property International Total Asset Other Holdings Intersegment
Savings & Casualty Insurance Insurance Management Financial companies eliminations Total (in euro millions) Services
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Remuneration of the Management and Officers Executive Officer’s remuneration in increased to €32 million (€9 million for the Management Board and €23 million for the Executive Committee). The members of the Supervisory Board do not receive remuneration with the exception of a fee for attending meetings which totaled less than €1 million.
Euro The total estimated cost of the changeover of AXA’s operations to report in Euro is approximately €159 million, of which €86 million was incurred up to December 31, 2001. 58% of the total cumulative costs to date relate to the information systems and 23% relate to training costs. These costs are charged against income in the period that the cost is incurred. No material provision was established.
23- Income Taxes A summary of the income tax (expense) benefit in the consolidated income statements is shown below: Years ended December 31, (in euro millions) 2001 2000 1999
French income tax (expense) benefit: Foreign income tax (expense) benefit: f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-60 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Insurance policy acquisition costs, policy reserves and reinsurance (376) (499) 41
The components of the net deferred tax asset and net deferred tax liability are as follows: f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-61 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
At December 31, 2001, AXA’s consolidated deferred tax asset, net of valuation allowances, included tax benefits attributable to net operating loss carryforwards of €618 million (2000: €413 million). The principal countries with net operating loss carryforwards at December 31, 2001 included Japan of €362 million and the
24-Net Income per Ordinary Share The calculation of basic net income per ordinary share assumes no dilution and is based on the weighted average number of ordinary shares outstanding for the period. The calculation of diluted net income per ordinary share reflects the dilution that would have occurred if potential ordinary shares had been issued and shared in the net income of the Company. Potential ordinary shares include stock options granted but not exercised and potential ordinary shares on convertible debt (on an ‘if converted’ basis). The weighted average number of share options outstanding during 2001 but not included in the calculation of diluted net income per ordinary share because the exercise price exceeded the average market price of AXA’s shares was approximately 14.0 million, due to a 39% fall in the AXA stock price in 2001 (2000: approximately 1 million and 1999: 14,188)
The method of calculating net income per ordinary share (basic and diluted) is based on guidance published by the “Ordre des Experts Comptables” in August 1993.
(2) Relates to stock options issued by subsidiaries within AXA which are not 100% owned by AXA, principally AXA Financial (1999 only) and its subsidiaries, Alliance Capital (2001, 2000 and 1999) and DLJ (1999 only).
(1) 2000 financial data restated to take account of presentational changes required by the new French Regulations adopted on January 1, 2001. (2) Excludes investments in participating interests.
While notional amount is the most commonly used measure of volume in the derivatives market, it is not used as a measure of risk because the notional amount greatly exceeds the possible credit and market loss that could arise from such transactions. AXA is exposed to the credit risk of the counterparty to the derivative instrument, however, AXA has no credit risk related to notional principal amounts. The notional amounts do not represent the amounts actually exchanged by the parties and thus are not a measure of AXA’s exposure to the derivative instruments. AXA’s exposure is represented by the mark to market exposure at a point-in-time measured by the value of a derivative contract in the open market.
AXA’s insurance and banking operations. At December 31, 2001, the notional amount, fair value and net carrying value of derivative instruments for non-trading purposes used by AXA’s operations totaled €102,006 million, €118 million and €2,262 million, respectively. The impact on AXA’s consolidated net income was a charge of €167 million in 2001.
At December 31, 2001, nearly 50% of the derivative instruments used for non-trading purposes consisted of swap contracts, specifically interest rate swaps. The other types of derivative instruments used in AXA’s hedging strategies consisted of interest rate cap and floors and non-foreign currency related forward / future contracts as discussed below.
interest rate swap contracts to manage cash flows on interest received on investments or interest payments on debt, and to a lesser extent (ii) currency swap contracts to manage foreign currency denominated cash flows or investments. On a consolidated basis, the notional amount, net fair value and net carrying value of such instruments as at December 31, 2001 was €49,959 million, €121 million and €1,906 million. The net impact on income for 2001 was a charge of €86 million. At December 31, 2001, interest rate swap contracts accounted for more than 75% of these instruments used by AXA and were predominantly used by
(i) AXA (the parent company) to hedge its interest rate exposure on debt issued or amounts borrowed, and
• Forward and future contracts are contracts that obligate settlement at a specified price at a specified future date and can be either exchange or non-exchange traded. On a consolidated basis, the notional amount, net fair value and net carrying value of such instruments as at December 31, 2001 was €29,314 million, €106 million and €351 million. The net impact on income for 2001 was a charge of €23 million.
Non-foreign currency related forward and future contracts accounted for more than 90% of these instruments and were predominantly used by AXA’s French insurance operations and AXA Bank Belgium mainly to hedge future operating margins.
• Interest rate caps and floors are option-like agreements where the seller agrees to pay to the counterparty an amount equal to the differential, based on a notional amount, between the interest rate of the specified index and the interest rate cap or floor. The notional amount, net fair value and net carrying value of such instruments as at December 31, 2001 was €21,880 million, €(112) million and €(21) million liability. The net impact on income for 2001 was a charge of €59 million. These types of derivatives are used predominantly by AXA’s U.S. and French Life & Savings operations to hedge interest crediting rates on products with guaranteed rates of return and other interest-sensitive products. Income and expense resulting from these hedges program are generally reflected as an adjustment to interest credited to policyholders’ account balances. Any net premium paid on such contracts is amortized on a straight-line basis over the life of the contracts.
Bank Belgium is required to give collateralized commitments (i) to the central bank in Belgium as security for normal clearing-house activities, and (ii) to financial institutions in respect of existing security repurchase agreements.
Other – letters of credit: Commitments given under letters of credit as at December 31, 2001 primarily related to AXA’s insurance operations, in particular, AXA Corporate Solutions (€1,347 million). Such commitments were required to be given mainly pursuant to applicable legislation in connection with future claims settlements arising from the U.S. terrorist attacks on September 11, 2001.
In addition and in connection with Alliance Capital’s acquisition of Sanford C. Bernstein in October 2000, AXA
Financial, Inc. agreed to provide liquidity to the former shareholders of Sanford C. Bernstein who received 40.8 million of private Alliance Capital units. According to the terms of the purchase and after the end of the two-year lockout period in October 2002, these private Alliance Capital units can be sold to AXA Financial, Inc.
over an eight-year period but generally not more than 20% of such units may be sold to AXA Financial in any one annual period.
Following the letter of intent executed in October 2000, AXA completed the sale of Banque Worms to
27 - Litigation On August 25, 1998, AXA and certain other European insurers signed a Memorandum of Understanding with certain US insurance regulators and non-governmental Jewish organizations agreeing to the establishment of the International Commission on Holocaust Era Insurance Claims (“ICHEIC”). The ICHEIC is currently conducting an investigatory process to determine the current status of life insurance policies issued to Holocaust victims between 1920 and 1945 and has established a claims and valuation process designed to settle valid claims filed with the ICHEIC with respect to any such policies which remain unpaid. The ICHEIC process is ongoing and AXA continues to actively participate in that process and pursue a dialogue with US Jewish organizations,
US insurance regulators and the State of Israel in the context of the ICHEIC.
(out of a total of €10.5 million contributed by the French insurance industry) to the “Fonds pour la Mémoire”, a French government Holocaust-related initiative. In addition, AXA is cooperating with a similar body in
Assessing the extent of unpaid policies issued to Holocaust victims is complex due to the passage of time, incomplete records, restitution programs, payments to blocked accounts, currency devaluations, insurance portfolio transfers and nationalization of insurance companies. This assessment involves historical, actuarial, economic, regulatory and legal expertise, research and analysis. While the outcome of these matters cannot be predicted with certainty, based on the information currently available to it, management believes that the ultimate resolution of these matters should not have a material adverse effect on the consolidated financial
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Plaintiffs have asserted that AXA, as well as these two insurance companies and/or their successors in interest, have failed to fulfill contractual and other obligations relating to such policies and have requested judicial relief, including compensatory and punitive damages. In addition, several AXA subsidiaries are involved in lawsuits (both class action and individual), investigations, and other actions arising in the various jurisdictions where they do business, including the following: • A number of lawsuits have been filed against life and health insurers in the United States and certain other jurisdictions involving insurers’ sales practices, alleged agent misconduct or misrepresentation, failure to properly supervise agents and other matters. Some of the lawsuits have resulted in the award of substantial judgements against insurers (including material amounts of punitive damages) or in substantial settlements.
In certain jurisdictions, juries have substantial discretion in awarding punitive damages. In the United States,
Equitable Life and certain of its subsidiaries are involved in such litigation.
Life and Alliance Capital, which have been filed with the SEC.
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• In the United Kingdom, life insurers, including certain of AXA’s UK subsidiaries, have been subject to governmental investigations regarding sales practices, agent misconduct or misrepresentation and certain other matters, particularly in connection with sale of pension products and, more recently, in connection with the sale of mortgage endowment policies.
• In addition, certain AXA subsidiaries have been involved in litigation in both the US and United Kingdom concerning the validity of, and scope of coverage under, insurance and reinsurance contracts issued by them in connection with financing of various film productions.
28 - Related Party Transactions From time to time the Company enters into agreements and transactions with its subsidiaries and affiliates for various business purposes including the furnishing of services and/or financing of operating activities. These agreements and transactions are generally negotiated on an arms-length basis and reflect prevailing market terms and conditions for similar transactions at the time they are implemented.
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(ii) loaned $3.0 billion to AXA Merger Corp. which AXA Merger Corp. used to fund a portion of the cash consideration delivered to tendering AXA Financial shareholders under the terms of the tender offer.
Tulin, Vice-Chairman and Chief Financial Officer of AXA Financial and an Executive Officer of AXA. For further information concerning this transaction, please see the Registration Statement on Form F-4 filed by AXA with the
Acquisition of the Minority Interest in Sun Life & Provincial Holdings (SLPH). In July 2000, the
Company completed the acquisiton of the outstanding minority interests in SLPH for approximately £2.3 billion.
In connection with that transaction, the Company offered SLPH shareholders a choice between cash and an
Yen 207 billion (€2 billion) to increase AXA Life Japan’s capital.
Agreement provides that AXA will hold a minimum of 21,706,299 BNP Paribas shares which, on July 27, 2001, represented an approximate 4.9% ownership interest in BNP Paribas; and that BNP Paribas will hold a minimum of 14,580,330 FINAXA shares which, on July 27, 2001, represented an approximate 22.25%
AXA, AXA Asia Pacific Holdings Limited and AXA Asia Pacific Finance Ltd
Loan Agreement (2 loans) between the Company, as lender, and AXA UK plc, as borrower
Shareholder advance/loan agreement between the Company, as lender, and Colisée Excellence, as borrower
Sale Agreement with respect to 21,563,111 shares of AXA Assicurazioni Spa between the Company, as seller, and AXA Italia Spa, as purchaser
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AXA, AXA Asia Pacific Finance Ltd and AXA Asia Pacific Holdings Ltd
Management and AXA Investment Managers (the “Asset Managers”). In addition to managing assets for unaffiliated third parties, the Asset Managers manage the “general account” investment assets of AXA’s various insurance subsidiaries. At
December 31, 2001, the general account assets managed on behalf of the Company’s insurance subsidiaries by the Asset
Principal Life Principal Property Principal Life Principal Property & Savings operations & Casualty (including & Savings operations & Casualty (including the International the International (in euro millions) Insurance operations) Insurance operations)
Maximum amount of dividends that could be paid by these operations without prior regulatory appoval 1,301 780 3,030 728
(1) The amount at December 31, 2001 and 2000 represents an estimate, as certain insurance operations have not yet completed their regulatory returns for 2001.
(2) The statutory capital and surplus is an aggregate number, being the sum of the statutory capital and surplus for each insurance company in each country subject to local regulatory requirements, which may differ from jurisdiction to jurisdiction.
29 - Dividend Restrictions and Minimum Capital Requirements AXA (the Company) is not subject to legal restrictions on the amount of dividends it may pay to its shareholders provided that accumulated earnings available for distribution are sufficient. However, certain of the AXA’s subsidiaries, principally insurance companies, are subject to restrictions on the amount of funds they may transfer in the form of cash dividends or otherwise to their shareholders.
In most cases, the amounts available for dividends from the AXA’s insurance subsidiaries are limited to the accumulated earnings calculated using the subsidiaries’ historical statutory basis of accounting. These amounts can be further limited based on the discretion of the insurance regulators in each country in which
AXA operates. In some cases, amounts available for dividends are also subject to regulatory capital adequacy tests, individual subsidiary restrictions contained in company by-laws or approval of the company chief actuary.
OPTIONS ISSUED BY THE COMPANY AXA (the Company). Executive officers and other key employees may be granted options to purchase ordinary shares of the Company at a price generally between 90% and 100% of the market price of the ordinary shares at the date of grant. Options have a maximum term of ten years and generally become exercisable in installments of 25% per year on each of the second through fourth anniversaries of the grant date with the final 25% on either the fifth or ninth anniversary.
share option plans, the number of share options in AXA ordinary shares were increased in proportion to the increase in share capital.
In respect of share option plans issued by the Company for ordinary shares, the number of share options outstanding and the number of share options exercisable at December 31, 2001 are set out below.
OPTIONS TO PURCHASE AXA ADSs AXA Financial, Inc. In connection with AXA’s buyout of minority interests in AXA Financial, Inc. in 2000 and upon completion of the merger with AXA Merger Corp. with and into AXA Financial on January 2, 2001 (see note 4 “Business Combinations” for further information), all of the outstanding employee stock options in AXA
AXA ADS options for tandem Stock Appreciation Rights (“SARs”) and at-the-money AXA ADS options of equivalent intrinsic value. The maximum obligation for the SARs is approximately US$ 85 million, based upon the underlying price of AXA ADSs at January 2, 2001, the closing date of the merger.
OTHER Under a separate variable option plan, in 1996 AXA granted key managers options which vest over five years to acquire approximately 2 million shares of a wholly-owned subsidiary. This plan allows holders to benefit indirectly in the appreciation of the share price in ordinary shares of AXA Asia Pacific Holdings. The shares under option would represent 25% of the shares issued by the subsidiary, if and when such options are exercised. Any shares acquired by exercising options are nontransferable and the holders have certain rights to put the shares to AXA for a price based on the equivalent market price of AXA Asia Pacific Holdings common stock at the date when put.
31- Segment Information AXA has five operating business segments: Life & Savings. Property & Casualty, International Insurance, Asset
Management and Other Financial Services. In addition, non-operating activities are conducted by the holding companies. The financial information for AXA’s business segments, and the holding company activities, is presented on a French GAAP basis and is consistent with the presentation provided in the consolidated financial statements presented herein.
(1998), GRE (1999), and Nippon Dantaï and Sanford C. Bernstein (2000) (see note 4 “Business
Life & Savings Segment products and services. Includes individual and group traditional term and whole life insurance (including participating policies whereby the policyholder participates in the net investments results or profits of the insurance company), immediate annuities and investment products (including endowments, savings-related products, such as variable life and variable annuity products and other investment-linked products) and services (such as financial planning services, sales of mutual fund investments)
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Total gross premiums include: – Separate Account (Unit linked) contracts 35% 16,767 19,612 15,080 115,305
(in euro millions, except percentages) 2001 2000 1999 at December 31, 20011
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International Insurance Segment products and services. The reinsurance operations principally focus on property damage, third party liability and marine property and third party liability reinsurance through proportional and non-proportional treaties. The products in the insurance operations within this segment, which specifically relate to AXA Corporate Solutions Insurance, include large commercial risk coverage to large national and international corporations principally including property and casualty; marine aviation and transport; construction risk; financial risk; and directors and officers liability.
Asset Management Segment products and services. Includes diversified asset management (including mutual funds management) and related services to a variety of institutional clients and individuals, including
Other Financial Services Segment products and services. Principally related to DLJ that was sold in 2000, whose products and services included securities underwriting, sales and trading, merchant banking, financial advisory services, investment research, venture capital, correspondent brokerage services, securities lending, online interactive brokerage services and other advisory services. This segment also includes other financial services, such as banking activities conducted primarily in France and Belgium.
Information described as “Insurance’’ below includes the three insurance segments: Life & Savings, Property &
Casualty and International Insurance. Information described below as “Financial Services” includes both the
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Total (reinsurance assumed accounted for euro 1,513 million, euro 1,516 million and euro 1,275 million, respectively) 48,399 45,997 37,091
Total (reinsurance assumed accounted for euro 674 million, euro 404 million and euro 114 million, respectively) 15,896 15,579 13,593
Total (reinsurance assumed accounted for euro 4,139 millions, euro 2,544 million and euro 1,807 million, respectively) 5,678 3,651 3,109
Year ended December 31, 2001 Life Property International Asset Other Holdings Intersegment
& Savings & Casualty Insurance Management Financial companies eliminations Total (in euro millions) Services
Revenues from banking activities – – – – 1,167 – (40) 1,127
Gross premiums and financial services revenues 48,407 15,928 5,751 4,100 1,168 1 (522) 74,832
Total Benefits, Claims and Other deductions (43,124) (17,789) (6,508) (3,130) (1,190) (222) 452 (71,512)
Equity in income from affiliated entities 16 5 – (4) – – – 18 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-81 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Gross premiums and financial services revenues 45,998 15,605 3,696 3,352 11,799 2 (482) 79,971
Revenues from banking activities – – – – 10,823 – (24) 10,799
Change in unearned premium reserve (1) 212 (197) – – – (5) 9
In addition, to the amortization of goodwill, AXA also has amortization expense related to value of purchased business in-force (VBI), which relates specifically to the Life & Savings Segment, see note 5 “Value of Purchased
Change in separate account (unit-linked) liabilities 414 (63) 351 (7,009) (19,296)
(1) The sum of the net investment result included in the technical result, the net change in separate account (unit-linked) assets and the net investment result (other) equals total net investment result for the segment as detailed in note 20 “Net investment result”.
Net investment result included in technical result1 1,551 – 1,551 1,882 1,922
Other revenues, net of benefits, claims and other deductions 2 – –
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32 - Unaudited Pro forma Financial Information - Impact of Change in Accounting Principles (French GAAP) The unaudited pro forma financial information below presents the impact of change in accounting principles in connection with the adoption of the new French Regulations on January 1, 2001, as it relates to AXA’s consolidated balance sheet and statement of income.
Balance Sheet at December 31, 2000 The impact of the adopting the new French Regulations for insurance groups effective from January 1, 2001 was a €593 million decrease in AXA’s opening consolidated shareholders’ equity, which principally related to the following: • A change in accounting treatment for non-European life insurance operations which previously reported to AXA for purposes of French GAAP accounting on a U.S. GAAP basis including primarily (i) a change in accounting for equity investments from market value (as “trading”) to historical cost, and (ii) the cost of reinsurance ceded is no longer amortized over the contract term but rather recorded as a charge in the period the contract is placed.
The unaudited pro forma balance sheet presented below reflects only the changes in accounting due to the implementation of the new French Regulations and does not take into account the impact of disposals or changes in scope of consolidation.
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(2) Proforma financial information taking into account the cumulative effect of changes in accounting principles in connection with the adoption of the new French Regulations.
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(1) Based on the financial data as reported in the consolidated financial statements for the year ended December 31, 2000, as reclassified according to the new presentation as prescribed by the French Regulation No. 2000-05 adopted on January 1, 2001.
(2) Unaudited pro forma financial information taking into account the cumulative effect of changes in accounting principles in connection with the adoption of the new French Regulations.
Financial at the end of 2000). Previously, this cost was to be amortized against income over the contract term whereas under the new French Regulations the cost would have been recorded as a charge in the period the reinsurance arrangement was placed.
2000 adjusted earnings on a pro-forma basis, that is net income after taking account of the impact of the new
French Regulations and excluding goodwill amortization and the impact of exceptional operations, would have been lower by €248 million, or 10%, as compared to the 2000 adjusted earnings as reported of €2,540 million. This impact was principally due to the €211 million charge associated with the Disability Income reinsurance arrangement in the U.S. life operations (as previously discussed above), which would have been treated as an exceptional operation in 2000.
(1) 2000 per ordinary share data restated for the effect of the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May
– provision of euro 125 million recorded during the period in connection with the sale of Banque Worms, which was completed in April 2001. (3) Adjusted earnings represents AXA’s consolidated net income before goodwill amortization and exceptional operations. Adjusted earnings is a non-
French GAAP and U.S. GAAP are new or modified in 2001 following (i) the implementation of new French
Changes in Accounting Principles under U.S. GAAP ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES On January 1, 2001, AXA adopted Statement of Financial Accounting Standards (“FAS”) No. 133, as amended
Accounting for hedging activities: French GAAP permits hedge accounting in respect of a derivative that hedges (i) the net exposure to a pool of assets and liabilities, (ii) the net risk exposure relating to net interest spread on customer accounts in respect of banking activities or net policyholder crediting risk exposure on insurance contracts, and (iii) certain embedded features in existing contracts. Under U.S. GAAP, the FAS 133 basis for hedge accounting is more prescriptive specifically as it relates to the nature and extent of the type of risk exposure that can be hedged.
• Fair Value Hedges exist when the derivative is designated as hedging the changes in fair value exposures, including foreign currency fair value exposures. The entire change in fair value of the derivative is recorded in income along with the associated gain or loss on the hedged item attributable to the risk being hedged.
• Cash Flow Hedges exist when the derivative is designated as hedging the exposure to variable cash flows, including foreign currency cash flows. The change in fair value of the derivative attributable to the effective portion of the hedge is recorded in “Other comprehensive income” (a separate component of shareholders’
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FAS 133 and, therefore, have no hedge designation and are referred to as “free standing derivatives” with the change in fair value recorded in income effective from January 1, 2001. However, certain existing hedge arrangements met the criteria for measurement and recognition as fair value hedges under FAS 133. In accordance with the transition provision of FAS 133 to recognize the difference between the carrying values and fair values of the free standing derivative instruments at January 1, 2001, the after tax cumulative-effecttype credit to income was €18 million at January 1, 2001.
As required, prior period reclassifications have been made to include the Closed Block assets and liabilities on a line-by-line basis in AXA’s condensed consolidated balance sheets in note 34. Previously such items were reported as single asset and liability line items in the Balance Sheet (Closed Block Assets and Close Block Liabilities).
ACCOUNTING FOR TRANSFERS OF FINANCIAL ASSETS FAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FAS No. 125” (“FAS 140”) became effective for AXA in respect of transfers and servicing of financial assets and extinguishment of liabilities after March 31, 2001. FAS 140 addresses the recognition and measurement of servicing assets and liabilities and the extinguishments of liabilities including sales,
If the goodwill is negative, it will no longer be set up as a deferred credit and included in income over the estimated useful life but rather recognized as an after-tax extraordinary gain in the income statement in the period of acquisition under FAS 141.
In addition, under FAS 141 certain other intangible assets are recognized apart from goodwill if the intangible either (i) reflects a contractual-legal right, or (ii) is separable, that is, capable of being separated, sold, divided, transferred (regardless of intent / existence in the market and either individually or with a group of related assets and liabilities). Prior to FAS 141, only intangibles that could be identified and named could be recognized as an asset apart from goodwill. AXA’s intangible assets principally related to the value of purchased life business in-force, for which the measurement and recognition will not be effected by adoption of FAS 141.
FAS 141 was effective for business combinations with an acquisition date on or after July 1, 2001, and did not have a significant impact on AXA’s operating results or financial condition given that no significant business combinations have been completed since July 1, 2001. For all other business combinations completed by AXA
before July 1, 2001, the adoption date of FAS 141 is January 1, 2002 and, therefore, will be presented in AXA’s consolidated financial statements for the year ended December 31, 2002. See note 34, which includes “New
Accounting Pronouncements Not Yet Adopted” for further details on the potential impact on AXA’s consolidated financial condition and consolidated operating results in future periods.
ACCOUNTING FOR GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, FASB issued Statement of Financial Accounting Standards No. 142 “Goodwill and Other
Intangible Assets” (“FAS 142”). FAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets, including intangible assets that are acquired individually or with a group of other assets but not acquired in a business combination. Goodwill will no longer be amortized. Intangible assets that have indefinite useful lives will not be amortized but will be subject to at least an annual testing for impairment. Intangible assets that have finite useful lives, such as the value of purchased life business in force
For all other business combinations completed by AXA before July 1, 2001, the adoption date of FAS 142 is
December 31, 2002. See note 34, which includes “New Accounting Pronouncements Not Yet Adopted “for further details on the potential impact on AXA’s consolidated financial condition and consolidated operating results in future periods.
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Scope of Consolidation • Under U.S. GAAP, majority-owned companies, based on voting rights directly or indirectly of more than 50%, are fully consolidated.
• Under U.S. GAAP, the equity method of accounting is used for investments in companies in which AXA’s ownership interest approximates 20% and is not greater than 50%, including those companies proportionately consolidated under French GAAP.
• Under French GAAP, AXA accounts for its investments in investment companies and real estate companies
(including mutual funds) owned by insurance subsidiaries using the cost method. Under U.S. GAAP, such entities are consolidated if AXA has exclusive control over the fund or company; otherwise the equity method of accounting is used. In consolidating mutual funds or investments in investment companies for
relate primarily to (i) the different methods of determining the purchase price attributable to the issuance of ordinary shares of AXA and settling / exchanging outstanding employee share options, (ii) the differences in the underlying accounting principles used for determining the value of net assets acquired between French
GAAP and U.S. GAAP, and (iii) the portion of goodwill charged directly to shareholders’ equity when ordinary shares of AXA were issued in respect of transactions that were completed before the adoption of the new
• In connection with an acquisition of a target company, not of a minority interest, under both French
VALUE OF NET ASSETS ACQUIRED TO DETERMINE GOODWILL Under French GAAP, the portion of assets acquired and liabilities assumed, other than in connection with a buyout of minority interests, are recorded at their estimated fair value. The insurance liabilities are maintained at the predecessor’s carrying value if the measurement basis is consistent with AXA’s French accounting principles. The portion of assets acquired and liabilities assumed in connection with a buyout of minority interests are maintained at carrying value at date of acquisition. Under U.S. GAAP and in respect of all acquisitions including the buyout of minority interests, the portion of assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquisition.
DETERMINATION OF IDENTIFIABLE INTANGIBLE ASSETS French GAAP provides for the recognition of the present value of future profits of purchased life insurance business in-force (VBI) as an intangible asset. Under U.S. GAAP, the values assigned for all specifically identifiable intangible assets are recorded at date of acquisition. Such intangible assets may include, but are not limited to, customer and contract lists and specific to life insurance, VBI.
GOODWILL Under French GAAP and in respect of acquisitions completed prior to January 1, 2001, a portion of goodwill could have been charged directly to shareholders’ equity to the extent that ordinary shares were issued by the parent company in connection with the transaction, with the remaining amount recorded as a goodwill asset.
REVISION TO GOODWILL Under French GAAP, revisions can be made to the goodwill calculation up to the end of financial year following the acquisition. Under U.S. GAAP, revisions can be made to the goodwill calculation up to 12 months from the date of acquisition only with respect to known contingencies at date of acquisition.
• securities classified as “available for sale’’ are reported at fair value with changes in unrealized gains and losses included in “Other Comprehensive Income” (a separate component of shareholders’ equity).
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ASSETS ALLOCATED TO UK “WITH-PROFIT” CONTRACTS The assets supporting the UK “with-profit” contracts consist primarily of fixed maturity and equity securities.
fund. Therefore, changes in the estimated market value of these assets held in the “with-profit” fund impact the valuation of the fund and, therefore, the valuation of the underlying insurance liabilities.
As a consequence, this led to AXA’s presentation of “U.S. GAAP, except for adjustment for the change in unrealized investment gains and losses on assets allocated to UK “with-profit” contracts” in the reconciliations of consolidated net income and consolidated shareholders’ equity from French GAAP to U.S. GAAP whereby the changes in market value of the assets allocated to UK “with-profit” contracts were included in income: a presentation that AXA believed was more meaningful under the circumstances.
These investments continue to be stated at market value, however, the changes in market value of these investments are no longer recognized in “Other comprehensive income” (a separate component of shareholders’ equity), but are recognized in income. Consequently, AXA’s presentation of “U.S. GAAP, except for adjustment for the change in unrealized investment gains and losses on assets allocated to UK “with-profit”
Future Policy Benefits Under French GAAP, insurance liabilities for life & savings business, also referred to as future policy benefits, are calculated in accordance with the applicable local regulatory and accounting rules if consistent with the
French accounting principles used by AXA. The future policy benefits are actuarially determined using actuarial assumptions relating to investment yields, mortality, morbidity and expenses. Contracts are assumed to remain in-force until their contractual maturity date or the death of the insured. Under U.S. GAAP, future policy benefits for traditional life policies, that is for contracts with significant mortality or morbidity risk, are computed using a net level premium method on the basis of actuarial assumptions as to mortality, persistency and interest based on the insurance company’s experience, with a margin for adverse deviation; such actuarial assumptions are established as of the date of policy issue. When the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits
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120, “Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Such reserves are not permitted to be recognized as a liability under U.S. GAAP until such losses are incurred.
Plan of Financial Reorganization of AXA Equity & Law (“the Plan”)
PROFIT RECOGNITION FOR UK “WITH-PROFIT” BUSINESS AS A RESULT OF THE PLAN Under French GAAP, the profit recognized by AXA in respect of the UK “with-profit” business represents 10% of the bonus declared by the actuary and represented a change in methodology under French GAAP in 2001.
Plan. As a result, the reconciliation of net income from French GAAP to U.S. GAAP includes a decrease of €310 million under the caption “Future Policy Benefits (net of reinsurance)”.
Shares Issued by a Subsidiary (Dilution Gains) When a subsidiary of AXA issues shares, this decreases (dilutes) AXA’s ownership interest in that subsidiary and is treated as a partial disposal of the investment in that subsidiary.
Under French GAAP, in the event that a subsidiary issues shares and there is a specific plan to repurchase such shares (at the time shares were issued), this gain is recorded in income with a corresponding charge to establish a provision, on a pre-tax basis. There is no impact on AXA’s consolidated net income and shareholders’
French GAAP to U.S. GAAP. The cumulative effect of changes in French accounting principles were recorded as adjustments to opening shareholders’ equity under French GAAP. See note 32 for further information on the impact on AXA’s consolidated opening shareholders’ equity at January 1, 2001. Consequently, certain differences in accounting principles in prior years are not representative of the differences that will exist in future periods as indicated below.
Equalization Reserves. In prior periods and under French GAAP, equalization reserves included both reserves for future unusual losses and catastrophe risk reserves, which were established in accordance with local regulatory requirements in certain jurisdictions in which AXA operates. As a result of the new French regulations, equalization reserves are limited only to future catastrophe risks, reserves are no longer permitted under French GAAP for future unusual losses in any one period. These equalization reserves are not recognized as a liability under U.S. GAAP, until such loss is incurred and, therefore, such liabilities are eliminated under U.S. GAAP.
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on January 1, 2001. Future policy benefits as presented in AXA’s reconciliations of consolidated net income and consolidated shareholders’ equity from French GAAP to U.S. GAAP include this new difference in accounting.
Intercompany Transactions. Effective for intercompany transactions on or after January 1, 2001 and under the new French regulations, realized gains and losses on intercompany sales of assets are eliminated in their entirety, unless there is an other-than-temporary impairment that is to be recorded as a loss immediately, which is similar to U.S. GAAP. No difference exists between French GAAP and U.S. GAAP in 2001 and thereafter.
Contracts (see note 20 “Net Investment Result”). Under U.S. GAAP, such gains are proportionately recognized when the Savings Contracts are issued or the fund shares are sold to entities not included in the consolidated financial statements.
Other Differences Restructuring Provisions. Under French and U.S. GAAP, the nature of costs that can be included in restructuring provisions is generally similar. However, U.S. GAAP requires that certain conditions exist before recording a restructuring provision which are not required under French GAAP. Among such conditions is the
Share-Based Compensation (other than in respect of business combinations). Under French GAAP, the accounting of share-based compensation is limited to share option plans and depends on whether the share option plan (i) relates to the purchase of shares in the open market or the increase in AXA share capital,
(ii) provides for a guarantee of liquidity, or (iii) is issued by AXA (the Company) or another AXA entity.
Under U.S. GAAP, the accounting for share-based compensation includes share options and other share-based compensation, such as employee share purchase programs. The accounting depends on whether the sharebased compensation has performance-based conditions, will be settled in cash and for non-performance related share-based compensation is issued at a significant discount from the market price at date of grant.
– Under French GAAP share-based compensation is not recorded in respect of certain share option plans issued by AXA (the Company) that do not provide a guarantee for liquidity whereas under U.S. GAAP
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Pension Plans. Under French GAAP, AXA uses an actuarial methodology that is consistent to the measurement and recognition basis prescribed under U.S. GAAP, with the exception of the recognition of an additional minimum pension liability that is not recognized under French GAAP. For U.S. GAAP purposes, AXA
has adopted FAS 87, Employer’s Accounting for Pensions, as of January 1, 1989. At the date of adoption a transition asset, reflecting the overfunded status of AXA Equity & Law’s pension plan, was recorded and is being amortized over the remaining fifteen-year average service life of employees. If the accumulated benefit obligation exceeds the fair value of plan assets, an additional minimum pension liability is recorded such that the total liability in the balance sheet is at least equal to the unfunded accumulated benefit obligation. The after-tax amount is, in general, recorded in “Other Comprehensive Income” (separate component of shareholders’ equity).
Deferred Tax. Under both French GAAP and U.S. GAAP, the impact of a change in enacted tax rates on deferred tax assets and liabilities is recorded in income. Due to certain significant differences in the underlying accounting principles between French GAAP and U.S. GAAP, particularly in respect of the value of fixed maturity and equity investments (held at amortized cost or historical cost under French GAAP and generally at market value under U.S. GAAP), the impact of the change in tax rates on income under French GAAP and
Treasury Shares. Under French GAAP, treasury shares are reported as an asset if certain conditions are satisfied, as stated in note 2. Under U.S. GAAP, the cost of treasury shares is reported as a deduction from shareholders’ equity. If such shares are then reissued, the proceeds received are correspondingly reported as a change in shareholders’ equity. Therefore, any gains or losses from holding such shares are recorded as adjustments to shareholders’ equity.
Material Differences between French GAAP and U.S. GAAP The impact on consolidated net income of material differences between French GAAP and U.S. GAAP are as follows: F-100 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-100 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Investment accounting and valuation (excluding UK “with-profit” related assets) (58) (31) (182)
The assets supporting the UK with-profit contracts consist primarly of fixed maturity and equity securities. Under French GAAP, in accounting for UK with-profit contracts, revenue and expense are matched in net income by including both changes in the estimated fair values of assets allocated to UK with-profit contracts and corresponding increases or reductions in the liability for UK withprofit policyholder benefits. US GAAP, which was developed in an environment that differs from the one in which the UK with-profit contract was developed, required the change in unrealized investment gain on assets allocated to UK with-profit contracts be excluded from net income (as such assets, principally fixed maturity and equity securities were classified as “available-for-sale”) and, therefore, such change was eliminated from net income above. However, the recognition of the corresponding change in the liability for with-profit policyholder benefits was recorded in net income. Accordingly, AXA believed this exclusion resulted in amounts that did not fully reflect the economic effect of the UK with-profit contracts. An increase in the fair value of these assets resulted in an increase in the liability for policyholder benefits and a reduction in AXA’s consolidated U.S. GAAP net income. The adjustment below for the years ended December 31, 2000 and 1999 to arrive at “U.S. GAAP, except for adjustment for the change in unrealized investment gains on assets allocated to UK with-profit contracts” reinstated the change in unrealized investment gains and losses on assets allocated to UK with-profit contracts to be included in net income to fully reflect the economic effect. Under the transition rules of FAS 133, AXA reclassified its fixed maturity and equity securities supporting the UK “with-profit” business from “available-for-sale” to “trading ”, whereby effective from January 1, 2001, the unrealized investment gains and losses are to be included in net income. The aftertax cumulative effect of such change in accounting principle was included in the 2001 reconciliation of net income above and totaled euro 2,698 million (euro 3,853 million before tax).
(1) 2000 and 1999 restated to present separately the impact of eliminating the unrealized investment gains (pre-tax and tax effect) attributable to the fixed maturity and equity securities backing the UK “with-profit” business, as such investments were classified as “available-for-sale” in 2000 and 1999. The impact totaled euro (477) million in 2000 and euro 1,030 million in 1999 (both on a net group share basis).
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The impact on consolidated shareholders’ equity of material differences between French GAAP and U.S. GAAP
Difference in value of shares exchanged (buyout of minority interests) (327) (265)
Consolidated Shareholders’ Equity in accordance with U.S. GAAP, except for adjustment for the change in unrealized gains on real estate assets allocated to UK “with-profit” contracts NA 31,834
PURCHASE ACCOUNTING – BUSINESS COMBINATIONS Significant transactions in 2000 The table below presents the determination of goodwill under both French GAAP and U.S. GAAP in respect of the acquisition of minority interests in Sun Life & Provincial Holdings (subsequently renamed AXA UK Holdings)
Sun Life & Provincial Holdings AXA Financial Inc. U.S GAAP French GAAP U.S GAAP4 French GAAP
Excess purchase price over the portion of net assets acquired3 1,178 1,971 6,390 7,300
(1) Net assets, which were previously attributed to minority interests in AXA’s consolidated balance sheet. (2) Under both French GAAP and U.S. GAAP, the goodwill asset is to be amortized over 20 years (asset management operations) and 30 years (insurance operations) for AXA Financial and 30 years for Sun Life & Provincial Holdings.
(3) Under French GAAP, the goodwill was determined based on the carrying value of the assets at date of acquisition. Under U.S. GAAP, the goodwill was determined based on the estimated fair value of the portion of net identifiable assets acquired at date of acquisition. Consequently, the determination of goodwill under U.S. GAAP was preliminary for both of these transactions as: – AXA Financial: The transaction was completed close to year end and, therefore, certain estimated fair values assigned to the portion of identifiable assets acquired and liabilities assumed were subject to change, which could impact the determination of the goodwill asset. (4) 2000 data restated to reflect the final estimated fair value attributed to the portion of net assets acquired, from €4,096 million as reported in 2000 to €3,956 million.
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• UAP (1997). The annual goodwill amortization under U.S. GAAP was €61 million higher than the annual goodwill amortization charge under French GAAP. This was primarily attributable to the fact that AXA issued and exchanged shares in connection with the transaction and, therefore, of the total amount of gross goodwill determined, €1,630 million was charged directly to retained earnings and reserves under French
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Universal Life Contracts and Investment Contracts. There is a difference in presentation of the Statement of Income between French GAAP and U.S. GAAP in respect of universal life contracts, investment contracts and limited pay contracts as set out below.
Under French GAAP total premiums received for all insurance contracts are recorded as revenues in AXA’s consolidated operating results, including for (i) life insurance contracts with flexible premiums, charges or guarantees (universal life contracts), and (ii) contracts with no or insignificant mortality or morbidity risk
(investment contracts including separate account unit-linked contracts). Benefits paid to the policyholder on these type of contracts are recorded as charges in AXA’s consolidated operating results. In addition and in respect of contracts with premiums paying over a period shorter than the term of the contract (limited pay contracts), the gross premium received is included in income in the period when due.
Under U.S. GAAP and in respect of universal life contracts and investment contracts, the policy charges, such as insurance administration and surrenders during the period, are recorded as revenues. The premiums received less policy charges along with the benefit payments are credited directly to or against the liability, using deposit accounting. Expenses include the interest credited to the policy account balances and benefit payments made in excess of account balances.
Society of the United States (“Equitable Life”). Under the terms of the demutualization, liabilities for certain participating policies in-force at the date of demutualization together with an amount of assets were segregated into the Closed Block for the purpose of determining policyholder dividends. The maximum contribution from the Closed Block that may inure to the benefit of Equitable Life’s shareholders was determined at the time the Closed Block was established. For most individual participating policies issued by
Mezzanine Capital. As stated in note 14 “Mezzanine Capital”, certain subordinated debt and mandatorily convertible bonds and notes are classified as mezzanine capital under French GAAP whereas such obligations would be classified as debt under U.S. GAAP.
TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY 493,065 485,599 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-106 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
At December 31, 2000 (in euro millions) U.S. GAAP Adjusted1 French GAAP
(1) The after-tax cumulative effect of change in accounting for derivative instruments and hedging activities, was a charge of euro 18 million. In addition, under the transition rules of FAS 133, AXA reclassified its fixed maturity and equity securities supporting the UK “with-profit” business from ”available-for-sale” to “trading”, whereby effective from January 1, 2001, the unrealized investment gains and losses are to be included in net income. The after-tax cumulative effect of such change in accounting principle was included in the 2001 reconciliation of net income above and totaled euro 2,697 million (euro 3,853 million before tax).
Variations of unearned premium reserves, net of reinsurance3 (435) (435) (445)
Insurance claims and claims expenses, net of reinsurance3 (37,142) (37,142) (64,053)
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Year ended December 31, 2001 (in euro millions) U.S. GAAP French GAAP
Unrealized investment gains and losses, net of tax (1,447) (1,346) (790) 372 (412)
Effect of restructurings and intercompany sales of consolidated subsidiaries (7) (14) (14) 10 10
At January 1, 2001 and under the transition rules of FAS 133, AXA recorded a reclassification of £19,806 million (or approximately €31,492 million at transition date) of Available-for-Sale securities as Trading securities, resulting in an after-tax cumulative-effect-type adjustment of €2,698 million from Other Comprehensive
totaled €1,578 million and €5,524 million, respectively. Such accumulated net unrealized investment holdings gains were: • net of deferred taxes of €909 million and €3,454 million, respectively; and
• net of amounts allocated for policyholders and minority interests of €2,897 million and €4,233 million, respectively.
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Under French GAAP, the potential conversion of these two subordinated convertible debt instruments of 64 million were included in the calculation of net income per ordinary share (diluted). These potential shares were treated as “anti-dilutive” under U.S. GAAP and, therefore, were excluded from the U.S. GAAP net income per ordinary share (diluted).
Dilutive securities issued by subsidiaries 0 (5) (32) 0 (5) (12)
Assumed conversion of convertible bonds – 29 45 – 29 45
(2) Weighted average of outstanding ordinary shares after the elimination of the weighted average number of ordinary shares held in Treasury. (3) 2000 and 1999 weighted average of ordinary shares outstanding and per share data have been restated to take account of the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May 9, 2001.
(4) In 2000, the assumed exercise of stock options includes the AXA Financial stock options, which were exchanged into AXA ADR’ s upon completion of the transaction. (5) 1999 data was restated as the subordinated convertible debt issued in 1999 became anti-dilutive as a result of the U.S. GAAP accounting treatment for DLJ as discontinued operations and its impact on the calculation of net income per ordinary share on a diluted basis.
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Fixed maturity and equity investments For purposes of U.S. GAAP, at December 31, 2001 and 2000, AXA had fixed maturities and equity investments
(including holdings in mutual funds) classified as available-for-sale with an amortized cost / historical cost of €185,000 million and an estimated fair value of €188,561 million (2000: €181,017 million and €210,985 million, respectively).
Given that AXA’s hedging strategies are designed to comply with French GAAP measurement and recognition requirements, AXA’s consolidated net income as determined in accordance with U.S. GAAP is subject to increased volatility in future periods. Significant differences could arise between AXA’s consolidated net income and shareholders’ equity under French GAAP as compared to U.S. GAAP in future periods.
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French subsidiaries recorded, as a reduction of its shareholders’ equity, an additional minimum pension liability
In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123 (“FAS 123”)
“Accounting for stock-based compensation” which requires disclosure of the cost to AXA of share options granted on or after January 1, 1995 based on the fair value of the options on the date they were granted.
Years ended December 31, (in euro millions, except per share amounts) 2001 20001,3 19991
ordinary share; for example, the pro forma financial data does not take account of options granted before
AXA for the years ended December 31, 2000 and 1999 and assumes that the acquisitions of the minority interests in AXA Financial and in Sun Life & Provincial Holdings (SLPH) had taken place on January 1, of each year: Years ended December 31, (in euro millions, except for share data) 2000 1999
(1) Total revenues of SLPH and AXA Financial and their subsidiaries were already included in AXA’s consolidated total revenues before the buyout of minority interests, as total revenues are before attribution to minority interests.
(2) The pro forma financial information eliminates the after tax income from the DLJ discontinued operations (including the gain on the sale of DLJ) for the years ended December 31, 2000 and 1999 for comparability purposes.
The effects of other acquisitions that occurred in 2001, 2000 and 1999 were not material and, accordingly, have been excluded from the pro forma presentation.
142 in respect of accounting for business combinations, goodwill and intangible assets became effective for
• AXA’s intangible assets that meet the definition of an intangible asset under FAS 141 are deemed to have finite useful lives and will continue to be amortized over their useful lives.
Consequently, AXA’s consolidated operating results in future periods may be subject to volatility compared to prior periods, as any goodwill impairment would likely occur on an irregular basis and vary in amount.
In August 2001, FAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” was issued.
Principle Bulletin (“APB”) Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business, and eliminates (i) the requirement that discontinued operations be measured at net realizable value, and (ii) the accrual for future operating losses.
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35 - Events Subsequent to December 31, 2001 DEFINITIVE CHANGEOVER TO EURO All the operational entities of the Group involved in the conversion to Euro have successfully completed this complex and multiform operation. Since January 1, 2002, the management reporting systems, the accounting systems and the customer administration systems have been operating fully in the Euro currency.
HEALTH INSURANCE (FRANCE) In France, the French Supreme Court (Cour de Cassation) has recently extended the notion of employers’
Ordinary shares, euro 2.29 nominal value per ordinary share: 3,971 3,809 1,848 million shares authorized and 1,734 million shares issued at December 31, 2001 and 2,102 million shares authorized and 1,665 million shares issued at December 31, 2000 (on a post 4-for-1 stock split basis).
Adjustments to reconcile net income to net cash provided by operating activities: Net realized investment (gains) losses (127) 10 (50)
Cash flows from investing activities: Maturities and sales of investments 2,826 978 1,170
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2. Long-term Debt and Other Obligations At December 31, 2001 and 2000, long-term debt and borrowings amounted to €2,337 million and €424 million, respectively. At December 31, 2001 aggregate maturities of long-term debt and borrowings based on required payments at maturity for 2002, the following four years and thereafter are €535 million in 2002, €9 million in 2003, €571 million in 2004, €162 million in 2005, €10 million in 2006, €1,050 million in 2007 and thereafter.
3. Material Differences Between French GAAP and U.S. GAAP The parent company condensed financial statements for the Company are prepared in accordance with generally accepted accounting principles in France. These accounting principles differ in certain material respects from accounting principles generally accepted in the United States of America.
Under the French statutory basis of accounting, the cost method of accounting is used, whereas, under
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Shareholders’ equity in accordance with French GAAP (consolidated basis) 24,780 24,323
2. Amended and Restated Deposit Agreement, dated as of April 27, 2001, among AXA, The Bank of
Company’s Registration Statement on Form F-4 filed on November 21, 2000 (registration no. 33350438 ) and incorporated herein by reference.
Financial, filed as exhibit 2.1 to the Company’s Registration Statement on Form F-4 filed on
Financial, Inc., filed as exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2001, filed on August 13, 2001 and incorporated herein by reference.
8. List of the Company’s consolidated subsidiaries at December 31, 2001 is provided in note 3 to the consolidated financial statements included as Item 18 in this annual report.
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Item 2 Item 3 Item 4 Item 5 Item 6 Item 7
(c) Employment Agreement, dated May 11, 2001, between Christoper M. Condron, and AXA Financial, Inc., filed as exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2001, filed on August 13, 2001 and incorporated herein by reference.
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