GMDB features provide a guaranteed death benefit which may be higher than the contract account balances of the unit-linked contract, depending on performance of the unit-linked assets. GMIB features provide a guaranteed lifetime annuity which may be elected by the contract-holder after a stipulated waiting period, and which may be larger than what the contract account balance could purchase at then-current annuity purchase rates.
Guaranteed annuity purchase rates provide contract-holders with a guarantee that at a future date the accumulated balance on their contract will be sufficient to purchase a lifetime annuity at currently defined rates. The risk to AXA in these features is either that longevity will improve significantly so that contract-holders electing to exercise this benefit will live longer than assumed in the guaranteed purchase rates, or that investment returns during the payout period will be lower than assumed in the guaranteed purchase rates. Reserves are established for these features on the basis of actuarial assumptions related to projected benefits and related contract charges. The determination of this estimated liability is based on models which involved numerous estimates and subjective judgments, including those regarding expected rates of return and volatility, contract surrender rate, mortality, and benefit election rates. There can be no assurance that ultimate experience will not differ from management’s estimates. In addition to providing for risk through establishing reserves, AXA also manages these risks through asset-liability management programs including interest rate floors to protect against a decline in interest rates.
15.1. BREAkDOWN OF PROvISIONS FOR RISkS AND CHARGES Provisions for risks and charges included the following items: December 31, 2006 (in Euro million) December 31, 2008 December 31, 2007 Restated (a)
At December 31, 2008, the “Other Provisions for risks and charges” was composed of the following elements: • Provision for tax liability of €437 million notably driven by a reclassification of current tax to provision for tax liability in the united
15.2. CHANGE IN PROvISIONS FOR RISkS AND CHARGES (EXCLUDING EMPLOYEE BENEFITS AND SHARE-BASED COMPENSATION) Changes in provisions for risks and charges (excluding employee benefits and share-based compensation) are set out below: Contingent liabilities Other Lawsuits Liability relating provisions Restructuring contingency warranty to business for risks (in Euro million) provisions provisions provisions combinations and charges TOTAL
Impact of foreign exchange fluctuations 2 2 (3) – (53) (51)
Impact of foreign exchange fluctuations (7) (6) 1 – (43) (56) (14)
Debt component of subordinated convertible notes, 3.75% due 2017 (€) 1,259 1,212 1,168
U.S. registered redeemable subordinated debt, 8.60% 2030 (US$) 848 797 960
Other financing debts instruments issued under euro 100 million 143 36 11
Derivatives relating to other financing debts instruments issued (a) (52) (60) (92)
16.2. FAIR vALUE MEASUREMENT OF FINANCING DEBT December 31, 2008 December 31, 2007 December 31, 2006
(in Euro million) Carrying value Fair value Carrying value Fair value Carrying value Fair value
Financing debt instruments issued at cost 6,666 6,643 4,698 4,722 3,894 3,962
Derivatives on financing debt instruments issued (a) (103) (103) (163) (163) (206) (206)
The Group does not hold any financing debt designated as at fair value through profit or loss (fair value option or trading instruments).
Data used when calculating the fair value of financing debt (financing debt instruments issued or financing debt owed to credit institutions) are period-end market data that reflect (i) market interest rates by currency, (ii) AXA’s average spread by maturity and currency, distinguishing subordinated and senior debt and (iii) options included in issue contracts, such as issuer redemption options. The fair value of subordinated convertible bonds is equal to the quoted price for these instruments at the end of the period. Therefore, reported fair value includes the value of the conversion option, which is included as a component of equity.
More than 1 year up (in Euro million) 12 months or less to 5 years More than 5 years (a) Total carrying value
Minority interests of controlled investment funds and other puttable instruments held by minority interest holders 5,108 7,751 7,224
(a) Also includes speculative derivatives relating to other financial liabilities. (b) In accordance with IFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items impacting the allocation of Winterthur purchase price.
Minority interests in funds under this caption, totaled €4,847 million at December 31, 2008 (€7,192 million at December 31, 2007 and €6,100 million at December 31, 2006).
“Debts relating to investments under lending agreements and equivalent” totaled €25,522 million at December 31, 2008, a decrease of €3,546 million (€5,061 million decrease at constant exchange rates) mainly attributable to Japan (€–3,231 million) due to less short-term repurchase agreement transactions.
(in Euro million) December 31, 2008 December 31, 2007 December 31, 2006
CDO (Collateralized Debt Obligations) and Real Estate vehicles 333 827 1,275
HOHO 1: class A Senior Class A Mortgage-backed notes, maturity 2030, 3 month Euribor + 0.31%, Floating – – 190
HOHO 1: class C Junior Class C Subordinated Mortgage-backed notes, maturity 2030, 8%, Fixed rated – – 5
HOHO 2: class A1 Senior Class A1 Mortgage-backed notes, maturity 2080, 3 month Euribor + 0.26%, Floating – – 263
HOHO 3: class A Senior Class A Mortgage-backed notes, maturity 2083, 3 month Euribor + 0.13%, Floating – – 707
HOHO 4: class B Subordinated Class B Floating rate notes, maturity 2083, 3 month Euribor + 0.35%, Floating – – 10
OTHER DEBT INSTRUMENTS ISSUED (OTHER THAN FINANCING DEBT) 966 1,560 4,715
Convertible LOANS SGBT Luxemburg fixed interest rate 0.4%/ytd due 2014 (AXA France) 200 – –
Derivatives on other issued debt (excluding financing debts) – Other financial services in Belgium 26 – –
ERIV: CORTEFIEL Mortgage loan based on Euribor 3 month + 0.85 point, maturity date: 2013 + 2x1 year 100 100 165
REOF2: HSHNordBank – Mortgage loan based on Euribor 3 month + 0.65, maturity date: 2012 122 124 –
APIV+EHV: CALYON_Mortgage loan APIV+EHV: CALYON_Mortgage loan based on Libor CH 3 month + 1.20 point, maturity date: 2015 48 – –
OTHER DEBT (OTHER THAN FINANCING DEBT) – OWED TO CREDIT INSTITUTIONS 4,294 3,207 2,658
OTHER DEBT INSTRUMENTS ISSUED, NOTES (OTHER THAN FINANCING DEBT) AND BANk OvERDRAFTS 6,676 6,260 8,711
At December 31, 2008, other debt instruments issued (other than financing debt) and bank overdrafts totaled €6,676 million, an increase of €416 million compared to December 31, 2007, or €441 million at constant exchange rates mainly due to: • a €960 million increase at AXA SA related to margin calls from banks under collateral agreement; • a €200 million increase from AXA France new convertible loan; • a €149 million increase from the real estate company Alternative Property Income Venture.
Bank; • a €169 million decrease on AllianceBernstein’s short term commercial paper.
Including other debt designated as at fair value through profit or loss 403 895 4,255
Fair value Fair value Fair value determined Fair value determined Fair value determined Fair value directly by estimated directly by estimated directly by estimated reference using reference using reference using to an active valuation to an active valuation to an active valuation (in Euro million) market technique Total market technique Total market technique Total
Other debt owed to credit institutions designated as at fair value through profit or loss – – – – – – 126 – 126
Other debt owed to credit institutions (other than financing debt) (a) – – – – – – 126 – 126
Payables to policyholders, brokers and general agent 4,314 4,314 4,116 4,116 6,248 6,248
Current accounts payable to other companies (a) 4,324 4,330 4,128 4,128 3,941 3,941
Payables arising from direct outward reinsurance operations 6,211 6,220 6,024 6,024 5,849 5,849
Carrying value of other debt instrument issued, notes and bank overdrafts by contractual maturity as at December 31,
More than 1 year up (in Euro million) 12 months or less to 5 years More than 5 years Total carrying value
18.1. TAX EXPENSE 18.1.1. Breakdown of tax expense between current and deferred tax The income tax charge was split as follows: December 31, 2006 (in Euro million) December 31, 2008 December 31, 2007 Restated (a)
A deferred tax release of €–2,646 million in 2008 (versus €–344 million in 2007 and €825 million in 2006), corresponding to tax due on foreign income is disclosed in the table above, including €–1,249 million related to policyholders’ tax (versus €–189 million in 2007 and €169 million in 2006).
Policyholders’ tax is a specific tax levied on the life business of the united Kingdom and Australian insurance companies charged to policyholders.
Income from operating activities, gross of tax expenses (excluding discontinued activities and result from investments consolidated using equity method) 385 7,681 7,593
Impact of rate differences on notional tax charge (3) (118) (68)
Impact of differences in tax rate and impact of taxes not linked to pre-tax income (b) (932) (45) 77
Tax losses of prior years used in the current year without DTA recognized previously (22) (45) (51)
Derecognition/Recognition of DTA on temporary differences of prior years (other than tax losses) (a) 27 (32) (4)
Excluding policyholders’ tax, the effective tax rate would have been approximately 22% as of December, 31 2008 (same as 2007 and 2006).
The change in permanent differences on financial income and expenses was mainly due to significant non-deductible financial impairments and realized capital losses on equities.
Deferred tax Assets/ (Liabilities) concerning: • Deferred tax through profit or loss 11,333 9,981 1,352 (725) (897)
• Deferred tax through reserves relating to the fair value adjustment of cash flow hedge derivatives – 44 (44) (3) (28)
• Deferred tax through reserves relating to gains and losses on defined benefits pension plans 351 53 298 (67) 224
Net deferred tax excluding policyholders’ tax 13,324 11,604 1,720 (1,401) (2,395)
Policyholder tax – Net deferred tax assets / (liabilities) 304 254 50 (982) (1,268)
Deferred tax through reserves relating to the fair value adjustment of cash flow hedge derivatives (3) – (41) – – (44)
Net deferred tax assets / (liabilities) excluding policyholders’ tax (1,401) 1,950 1,090 (84) 164 1,720
Policyholder tax – Deferred tax through reserves relating to the fair value adjustment of available for sale assets 2 – 2 (1) – 3
Policyholder tax – Net deferred tax assets/ (liabilities) (982) 962 2 69 – 50
Deferred tax through reserves relating to gains and losses on defined benefits pension plans 224 – (283) (1) (7) (67)
Deferred tax through reserves in relation to stock options 142 – 1 (13) (34) 97
Net deferred tax assets / (liabilities) excluding policyholder tax (2,395) 363 792 70 (232) (1,401)
Policyholder tax – Net deferred tax assets/ (liabilities) (1,268) 183 3 94 7 (982)
Movements Movements Change in through profit through Forex scope and (in Euro million) Opening or loss OCI impact other variations Closing
Deferred tax through profit or loss (380) 194 – 56 (767) (897)
Policyholder tax – Deferred tax through profit or loss (1,026) (157) – (23) (61) (1,268)
Policyholder tax – Deferred tax through reserves relating to the fair value adjustment of available for sale investments (7) – 7 – – –
Policyholder tax – Net deferred tax assets / (liabilities) (1,033) (157) 8 (24) (63) (1,268)
Total net deferred tax assets / (liabilities) (3,580) 37 660 55 (834) (3,663)
DTA recognized on tax loss carryforward 331 50 33 90 44 10 28 376 – 963
TOTAL recognized DTA by expected date of use 2,608 496 416 548 2,068 267 2,302 4,618 – 13,324
DTA recognized on tax loss carryforward 261 57 48 25 30 16 11 10 – 457
TOTAL recognized DTA by latest date of possible use 356 57 103 112 170 21 248 995 5,933 7,995
Unrecognized DTA on tax loss carryforward – 2 82 20 14 12 (14) – 114 229
This note includes all types of derivatives excluding derivative instruments that meet the definition of equity instruments (see Note 13 for details) or derivative instruments held by consolidated investment funds in the “satellite investment portfolio” (see Note 1.7.2) which are recognized at fair value in accordance with IAS 39.
Maturity of notional amount as at December 31, 2008 (a) Notional amount Positive fair value Negative fair value Net fair value
Puts sold – – – – – – 137 – 137 –
Note 4 to the consolidated financial statements refers to Risk Management within the Group, and describes its main principles and guidelines. In general, derivatives are used by the various entities and by the Company for economic hedging purposes, with the exception of certain credit derivatives. However, the notion of hedge accounting within the meaning of IAS 39 only applies to a small portion of derivatives used by the Group. The overall objectives of the economic hedging implemented by AXA are described briefly below, along with details of any items that qualify for hedge accounting in the meaning of IAS 39.
Economic hedging strategies are defined and managed by AXA’s local operations. Such economic hedging strategies include (i) managing interest-rate exposures on fixed maturity investments, long-term debt and guaranteed interest rates on insurance contracts, (ii) managing foreign-currency exposures on foreign-currency denominated investments and liabilities, and (iii) managing liquidity positions (including the ability to pay benefits and claims when due) in connection with asset-liability management and local regulatory requirements for insurance and banking operations.
As at December 31, 2008 and based on notional amounts, (i) 45% of the derivative instruments used consisted in swap contracts (50% and 47% respectively at the end of 2007 and 2006), (ii) 27% were option products, mainly caps, floors and collars (28% and 29% respectively at the end of December 2007 and 2006), (iii) 20% were futures and forwards, mainly other than foreign currency products (17% and 19% respectively at the end of 2007 and 2006) and (iv) 7% were credit derivatives (5% and 4% respectively at the end of 2007 and 2006). Credit derivatives are mainly used as an alternative to corporate debt security portfolios, when coupled with government debt securities, but also as a protection on single corporate names or specific portfolios.
At December 31, 2008, interest-rate swaps accounted for 67% of all swaps used by AXA (versus 61% at the end of 2007 and 2006). They are used mainly by: (i) the Company to limit its interest-rate exposure on debt issued or amounts borrowed (notional value of €60,338 million compared to €46,481 million and €39,602 million respectively at the end of 2007 and 2006), (ii) AXA Bank Europe to hedge interest-rate risk exposures arising in the context of its ordinary banking activities, in order to achieve an appropriate interest-rate spread between its interest-earning assets and interest-bearing liabilities (notional value of €8,470 million versus €10,799 million and €11,864 million respectively at the end of 2007 and 2006, the decrease being mainly due to negative difference between the total notional amount of new trading deals and the matured ones),
(iv) AXA Japan (notional amount of €4,751 million versus €3,226 million and €4,202 million respectively at the end of 2007 and 2006) to limit its risk exposure to interest-rate on its invested assets (debt securities held directly and through consolidated mutual funds). The increase in notional value in 2008 at AXA Japan was mainly driven by the sales of Accumulator-type products,
At December 31, 2008, 81% of the total notional amount of swaps did not qualify for hedge accounting under IAS 39 (81% at the end of 2007 and 86% at the end of 2006), and included €75,573 million for the Company (€61,291 million at the end of 2007 and €51,203 million at the end of 2006), €10,352 million for AXA Bank Europe (versus €13,901 million at the end of 2007 and €16,728 million at the end of 2006) mainly composed of interest-rate swaps and total return swaps that generate short-term profit, and €7,871 million for AXA Germany Life & Savings (versus €618 million and €1,083 million respectively at the end of 2007 and 2006) due to the active financial risk management program associated with the guaranteed minimum benefits on variable annuity products.
The notional amounts of swaps used in cash flow hedge relationships totaled €1,447 million (€1,578 million at the end of 2007 and €1,230 million at the end of 2006), including €581 million in Germany Life & Savings in CDO investments and €501 million of interest-rate swaps in Belgium Life & Savings.
The notional amount of interest rate caps and floors at December 31, 2008 was €44,936 million or 50% of the total notional amount of all options (€42,481 million or 66% and €49,690 million or 72% respectively at the end of 2007 and 2006), the increase being mainly attributable to (i) AXA SA (€+2,600 million) to cover the Group against inflation risk borne by the Property & Casualty business, and (ii) AXA France Life & Savings (€+1,868 million) to protect portfolio yield against an interest rate increase, partly offset by (iii) €–3,282 million in the united States due to the expiration of one floor contract. The net fair value of caps and floors was €500 million (€11 million at the end of 2007 and €–184 million at the end of 2006).
Swaptions represented 10% of the total notional amount of options as at December 31, 2008, mainly (i) in Switzerland Life & Savings for €2,235 million (€2,767 million at the end of 2007) including €2,209 million (€1,767 million at the end of 2007) used to hedge the reinvestment risk in the Swiss Individual Life & Savings business, (ii) in Germany Life & Savings (€2,000 million in 2008 versus €1,500 million at the end of 2007) to hedge interest rate risk, (iii) in Belgium Life & Savings for €1,975 million to hedge against a fall in rates in the traditional life fund and in a specific corporate life fund (€1,147 million and €627 million respectively) and against the risk of customer higher surrenders following an increase in interest rates in segregated funds (Crest for €200 million), and €1,968 million at AXA Bank Europe to hedge variable mortgages which are characterized by an embedded cap that can be activated at each repricing date of the loan.
On a consolidated basis, the notional amount of futures and forwards at December 31, 2008 was €64,249 million (€39,649 million at the end of 2007 and €46,124 million at the end of 2006). Their market value was €961 million (€225 million at the end of 2007 and €–927 million at the end of 2006). AXA’s united States insurance operations use futures for a total notional amount of €24,780 million (versus €4,204 million in 2007 and €2,684 million in 2006), the change in notional amount versus 2007 being due to an increase in the hedging activity related to the GMxB dynamic risk hedging program. Swiss entities also held future and forward contracts for a total notional amount of €20,841 million (€16,780 million at the end of 2007), including €4,324 million (€4,297 million at the end of 2007) designated as fair value hedges and €16,517 million (€12,483 million at the end of 2007) that did not qualify for hedge accounting under IAS 39.
Currency future and forward contracts accounted for 55% of these instruments (based on notional amounts at December 31, 2008), compared to 76% at the end of 2007 and 81% at the end of 2006. Swiss entities use such contracts for a total notional amount of €20,796 million, including €4,234 million designated as fair value hedges, to hedge exchange-rate risk arising from their investments in equities and debt securities denominated in foreign currency (mainly € and uS$). AXA Japan also uses futures and forward foreign currency contracts (for a total notional amount of €6,641 million) to hedge exchange-rate risk arising from its investments in uS and European fixed-maturity debt securities, mainly held in controlled funds. In accordance with IAS 21 and IAS 39, the translation difference relating to these debt securities is recognized in profit & loss and offsets most of the change in market value of associated derivative instruments, which is also recognized in profit & loss. In substance, therefore, these contracts act as hedges without the need to use hedge accounting within the meaning of IAS 39.
(c) Macro hedge and other derivatives. (d) Carrying value (see (a)), but including effect of hedging instruments (IAS 39), economic hedging instruments not acting as hedging under IAS 39, macrohedge and other derivatives. (e) Notably includes policy loans, lease receivables and other loans. (f) Other investments held through consolidated investment funds designated as at fair value through profit or loss. (g) Derivatives instruments used in hedge of net investment in a foreign operation, and not attached to a debt on the face of the balance sheet.
Investment property designated as at fair value through profit or loss 2,398 – – 2,398 – – – – 2,398 – – 2,398
Debt securities held for trading 102 – – 102 1,040 – (164) 875 1,141 – (164) 977
Equity securities available for sale 14,768 353 346 15,468 1,457 – 2,502 3,959 16,226 353 2,848 19,427
Equity securities designated as at fair value through profit or loss 10,460 – 43 10,503 255 3 – 259 10,715 3 43 10,761
Equity securities held for trading 28 – 61 89 179 – – 179 207 – 61 268
Non controlled investment funds held for trading 147 – – 147 – – – – 147 – – 147
Derivative instruments hedging net investment in a foreign operation (assets) (g) – – – – – – – – – – – –
Non controlled investment funds designated as at fair value through profit or loss 2,260 – 38 2,298 134 – – 134 2,394 – 38 2,433
Loans designated as at fair value through profit or loss 39 – – 39 1 – – 1 40 – – 40
(e) Notably includes policy loans, lease receivables and other loans. (f) Other investments held through consolidated investment funds designated as at fair value through profit or losss. (g) Derivatives instruments used in hedge of net investment in a foreign operation, and not attached to a debt on the face of the balance sheet.
Equity securities available for sale 33,249 37 64 33,350 2,550 – (5) 2,546 35,799 37 59 35,896
Equity securities held for trading 127 – – 127 325 – – 325 452 – – 452
Macro hedge and speculative derivatives – – – – 7 – – 7 7 – – 7
Derivative instruments hedging net investment in a foreIgn operation (assets) (g) – – – – – – – – – – – –
(d) Carrying book value (see (a)), but including effect of hedging instruments (IAS 39), economic hedging instruments not acting as hedging under IAS 39, macrohedge and other derivatives.
Macro hedge and other derivatives (175) – – (175) 875 – – 875 701 – – 701
Loans designated as at fair value through profit or loss 378 – – 378 2,815 – (48) 2,768 3,194 – (47) 3,146
Macro hedge and speculative derivatives – – – – 8 – – 8 8 – – 8
(e) Notably includes policy loans, lease receivables and other loans. (f) Other investments held through consolidated investment funds designated as at fair value through profit or loss. (g) Derivatives instruments used in hedge of net investment in a foreign operation, and not attached to a debt on the face of the balance sheet. (h) In accordance with IFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items affecting the allocation of Winterthur purchase price.
Non controlled investment funds available for sale 4,593 6 – 4,599 226 – – 226 4,819 6 – 4,825
Non controlled investment funds held for trading 80 – – 80 33 – – 33 113 – – 113
Liabilities arising from insurance contracts (a) 330,555 – (1,083) 329,473 310,709 – (98) 310,611 323,361 (21) (67) 323,274
Liabilities arising from insurance contracts where the financial risk is borne by policyholders 85,916 – (84) 85,831 113,654 – – 113,654 108,984 – – 108,984
Financing debt owed to credit institutions 1,216 – – 1,216 175 – – 175 95 – – 95
Derivatives relating to other financial liabilities – – 120 120 5 5
Derivative instruments hedging net investment in a foreign operation (liabilities) (d) – – – – – – – – – – – –
(b) Financing debt, other debt instruments issued, notes and bank overdrafts, and Payables arising from banking activities issued are disclosed in the balance sheet net of the impact of derivatives. As a result, the amount showing in the column “value including effect of derivatives” is their carrying value.
Other derivative instruments on investments (a) 518 2,840 3,358 293 533 827 64 (258) (195)
Total – derivative instruments relating to insurance and investment contracts – – – – – – – – –
Total net value of derivative instruments – assets (1) 3,888 2,143 257
Other derivatives on insurance & investment contracts (a) (25) (1,144) (1,169) (27) (174) (201) 1 (130) (129)
Fair value determined Fair value estimated Fair value determined Fair value estimated Fair value determined Fair value estimated directly by reference using valuation directly by reference using valuation directly by reference using valuation (in Euro million) to an active market (1) techniques (2) Total to an active market (1) technique (2) Total to an active market (1) technique (2) Total
Total – derivative instruments relating to investments 730 3,279 4,008 1,304 847 2,151 138 138 276
Other derivatives – Reinsurance (a) – – – – – – – – –
Macro hedge – Reinsurance – – – – – – – – –
Macro hedge – asset – 19 19 – – – – – –
Total derivative instruments relating to insurance and investment contracts (32) (1,144) (1,176) (27) (160) (187) (19) (143) (163)
Derivative instruments relating to financing debt and other financial liabilities (hedge accounting) 44 (145) (101) (626) (15) (642) 2 (781) (780)
Other derivative instruments relating to financing debt and other financial liabilities 3 577 580 510 83 593 16 75 90
(in Euro million) December 31, 2008 December 31, 2007 December 31, 2006 (c)
(a) Net of intercompany eliminations. (b) Includes SPEs and CDOs previously disclosed in the Other Financial services segment which was renamed “Banking”. (c) As described in Note 1.10, the contribution of discontinued operations is stated on a separate line of the income statement.
Given the Group’s scale and diversity, none of its clients’ accounts for more than 10% of its business.
Liabilities Liabilities Liabilities Liabilities Liabilities Liabilities Gross arising from arising from Gross arising from arising from Gross arising from arising from written insurance investment written insurance investment written insurance investment (in Euro million) premiums contracts (a) contracts (a) premiums contracts (a) contracts (a) premiums contracts (a) contracts (a)
Retirement/annuity/investment contracts (individual) 25,829 160,150 38,203 28,264 172,219 42,716 26,038 172,276 34,705
Retirement/annuity/investment contracts (group) 2,861 27,549 7,362 3,388 23,287 6,909 2,986 22,880 7,445
Life contracts (including endowment contracts) 18,661 142,948 356 18,095 143,163 910 12,837 152,432 1,464
(c) In accordance with IFRS 3, i.e. within 12 months following the acquisition date, the Group adjusted certain items impacting the allocation of Winterthur purchase price.
(d) As described in Note 1.10, the contribution of discontinued operations is stated on a separate line of the income statement.
(in Euro million) December 31, 2008 December 31, 2007 December 31, 2006 December 31, 2008 December 31, 2007 December 31, 2006
Claim reserves premium TOTAL TOTAL Claims expense including IBNR reserves Liabilities Liabilities (in Euro million) reserves IBNR reserves and expenses & others Technical Technical
Total – Property & Casualty excluding International Insurance 26,931 6,495 1,209 34,813 12,259 47,072 46,210
Total – Property & Casualty including International Insurance 32,381 10,643 1,401 44,673 13,345 58,018 58,514
Investment properties as at fair value through profit or loss 211 46 (685) – (428)
Debt securities designated as at fair value through profit or loss (a) 2,278 (525) (4,447) – (2,694)
Equity securities designated as at fair value through profit or loss (b) 657 (581) (4,365) – (4,289)
Non controlled investment funds available for sale 165 (22) – (723) (579)
Assets backing contracts where the financial risk is borne by policyholders 517 (43,687) (43,169)
(d) The column “change in fair value of investments designated as at fair value through profit or loss” includes €–106 million loss recognized for AXA Japan. As a reminder, AXA Japan closes its books at the end of September. According to IFRS principles whereby the financial statements of the subsidiary shall be adjusted to reflect the effects of significant events that would have been recognized with a closing date aligned on the AXA Group, AXA Japan’s 2008 accounts were adjusted with the provisional loss from October to December 2008. This adjustment reflects mainly the further increase of the credit spreads during this period.
Debt securities designated as at fair value through profit or loss (a) 2,256 106 (1,481) – 881
Equity securities designated as at fair value through profit or loss (b) 785 2,585 (1,632) – 1,738
Assets backing contracts where the financial risk is borne by policyholders 801 7,476 8,277
Debt securities designated as at fair value through profit or loss (b) 2,068 195 (1,322) – 941
Assets backing contracts where the financial risk is borne by policyholders 527 15,158 15,685
(a) As described in Note 1.10, the contribution of discontinued operations is stated on a separate line of the income statement. (b) Includes debt securities held by consolidated investment funds, designated as at fair value through profit or loss. (c) Includes equity securities held by consolidated investment funds, designated as at fair value through profit or loss.
Premiums ceded and unearned premium ceded (1,253) (1,451) (1,212) 321 (3,595)
Property & International Inter-segment (in Euro million) Life & Savings Casualty Insurance eliminations TOTAL
As described in Note 1.10, the contribution of discontinued operations is stated on a separate line of the income statement. As a consequence, the financing debt expenses in 2006 was restated to €473 million, and included income and expenses relating to hedging derivative instruments on financing debt, mainly at AXA SA (€142 million).
(c) Claims handling expenses are included in the “Technical charges relating to insurance activities” profit & loss caption. (d) Investment management expenses are included in the “Net investment income” profit & loss caption. (e) Amount detailed in Note 25.
(a) As described in Note 1.10, the contribution of discontinued operations is stated on a separate line of the income statement. (b) Including redundancies and early retirement costs (triggering event = set up of the plan), and employees’ profit sharing in France.
Some plans do not have benefits linked to salary increase or to inflation.
25.2.4. Balance sheet information The balance sheet information for employee benefits captures the difference between the DBO, the fair value of the corresponding invested plan assets, and any unrecognized past service cost. When this difference is positive, a contingency and loss reserve is recognized in the balance sheet as a liability. When it is negative, a prepaid asset is recognized in the balance sheet. In addition, in accordance with IAS 19, a category of assets referred to as “separate assets” is also recorded in the balance sheet. As defined by IFRS, separate assets are assets that may not be used to offset the DBO. Separate assets are insurance contracts issued by AXA to back its defined benefit pension plans. The accounting consequence of these separate assets is a potential increase in the accrued liability or decrease in the prepaid asset. These assets are shown separately in the following table. These funds are dedicated to specific insurance contracts and are not available to general creditors, so their economic nature is not different from plan assets. However, as the separate account assets are available to the pension plan through an insurance contract, IFRS requires their classification as separate assets despite their economic nature. AXA Group has adopted the Statement of Recognized Income and Expense (SoRIE) option available under IAS 19. under the SoRIE option, actuarial gains and losses are recognized in full in the period in which they occurred, but outside of profit or loss, and are presented on a separate line of the SoRIE in shareholders’ equity (see Statement of consolidated shareholders’ equity). Actuarial gains and losses result from experience adjustments (the effects of differences between the previous actuarial assumptions and what actually occurred) and changes in actuarial assumptions. They also include differences between the expected and actual returns on plan assets. unrecognized past service cost represents non-vested benefits on the date of a change in the amount of benefits following an amendment to the plan. It is amortized on a straight-line basis over the average vesting period.
During the fiscal year 2007, AXA reviewed the treatment of separate assets and insurance contracts backing the pension obligation in the united States and in Switzerland in light of prevailing practice that has developed in the industry. In the united States, the insurance contract was amended to add a transferability clause, and so it is now treated as plan assets rather than separate assets as shown in prior years. In Switzerland, where the issue arose after the acquisition of Winterthur, AXA amended its practice to eliminate the insurance contract rather than treat it as a plan asset as was originally presented.
Amendments (including acquisitions and disposals) (a) (150) (261) 3 625 46 12 18 (7) 18
Impact of foreign currency fluctuations (493) (737) (268) 513 19 (54) (66) 113
Benefit obligation at the end of the year (A) 11,729 12,955 14,734 11,421 511 506 604 716
Fair value of plan assets at the beginning of year 7,057 8,216 4,693 3,869 3 9 14 9
Actual return on plan assets (1,498) 477 395 689 (1) (3) (4) 3
Net transfer In/(Out) (including acquisitions and disposals) (a) (b) (c) (27) (811) 3,220 88 – (3) – 1
Actual return on separate assets (25) 12 221 206 – – – –
Net transfer In/(Out) (including acquisitions and disposals) (a) (b) 48 (1,724) (85) (82) – – – –
Impact of foreign currency fluctuations (5) (69) (227) 274 – – – –
Plans with a negative net position (Liability) (7,015) (6,017) (6,440) (6,655) (506) (501) (595) (703)
Net position (excluding separate assets) (6,995) (5,818) (6,430) (6,654) (506) (501) (595) (703)
(b) This amount includes the effect of the reclassification of assets in the United States as plan assets rather than separate assets in 2007. (c) This amount includes the effect of the elimination of the insurance contract in Switzerland in 2007.
For pension plans where the fair value of plan assets exceeds the benefit obligation the aggregate fair value of plan assets and aggregate benefit obligation were €188 million and €168 million, respectively, as at December 31, 2008. For these plans, a surplus is recognized to the extent that it is recoverable, either through future contribution reductions or a refund to which the Group has an unconditional right.
For pension plans where the benefit obligation exceeds the fair value of plan assets, the aggregate benefit obligation and fair value of plan assets were €11,561 million and €4,474 million, respectively, as at December 31, 2008.
Expected return on plan assets (470) (489) (314) (269) – – – –
Expected return on separate assets (35) (33) (172) (189) – – – –
25.2.6. Net economic funding position The evolution in the net economic funding position from January 1, 2008 to December 31, 2008 captures both the change in the liability recorded in the Group’s balance sheet and the change in separate assets, as presented in the table below: Pension benefits Other benefits
Pension and other benefits expense (306) (371) (225) (257) (37) (40) (23) (66)
Impact of foreign currency fluctuations (247) 123 83 (81) (20) 54 66 (64)
(b) This amount includes the effect of the elimination of the insurance contract in Switzerland in 2007.
Balance sheet liability at the beginning of the year (5,818) (6,430) (6,654) (5,666) (501) (595) (703) (572)
Net transfer of separate assets to plan assets (c) 10 1,695 155 82 – – – –
Impact of foreign currency fluctuations (242) 191 272 (355) (20) 54 66 (64)
Balance sheet liability at the end of the year (6,995) (5,818) (6,430) (6,654) (506) (501) (595) (703)
Fair value of separate assets at the end of the year 789 739 2,480 2,697 – – – –
Net economic funding position at the end of the year (6,206) (5,079) (3,950) (3,957) (506) (501) (595) (703)
25.2.8. Change in actuarial gains and losses recognized in the balance sheet in the SoRIE component of shareholders’ equity The SoRIE is an integral part of the statement of changes in shareholders’ equity. It includes actuarial gains and losses as well as net income for the period (see Note 13). The table shows the change in the SoRIE component, before deduction of deferred tax and policyholder benefits, between January 1, 2005 and December 31, 2008 due to adjustments arising on plan liabilities and adjustments arising on plan assets.
SoRIE at the beginning of the year 308 (720) (1,112) (445) 45 (4) (28) –
SoRIE at the end of the year (955) 308 (720) (1,112) 67 45 (4) (28)
During 2008, the change in the SoRIE component of shareholders’ equity after deduction of deferred tax and policyholder benefits was €–695 million (€612 million in 2007, €252 million in 2006 and €–415 million in 2005). The main driver of the change in 2008 was the negative actual return on plan assets and separate assets. As at December 31, 2008, the cumulative impact amounted to €–595 million (€101 million at the end of 2007).
25.2.9. Near-term cash flows (benefits paid and employer contributions) a) Benefits paid
b) Employer contributions to plan assets and separate assets The estimated amount of 2009 employer contributions for pension benefits is €246 million (€184 million estimated in 2007 for 2008). The estimated amount for other benefits is €1 million (€0 million estimated in 2007 for 2008). These amounts are subject to uncertainty as they will be driven by economics of future years.
25.2.10. Asset mix at the end of 2008 The table below shows the plan asset mix at the end of 2008: Total Group Europe North America Other
As pension liabilities have a long-term nature, a mix of bond, equity, and real estate investments is used in the plan assets. The percentage of equity securities is generally higher in the Anglo-Saxon countries, where investment strategy is often determined by the Plan trustees. This asset mix generates some degree of volatility in returns, but, over the long-term, is expected to provide a higher return than pure bond investments. A higher return is consistent with long term past experience, but may not be the case in the future.
and an asset of €26 million (as at December 31, 2008) included in the balance sheet under the caption “Other long term assets”.
All figures 100%, gross of tax (in Euro million) 2008 (a) 2007 2006 (c)
(a) For 2008, the total cost of €171.9 million excluded the positive impact of a €45 million reserve release related Long Term Incentive instruments at AXA Investment Managers.
(b) The 2007 cost of the AXA SA stock option plans shown above excluded the cost of the stock options granted to the employees of AXA Netherlands, which was sold in 2007. The expense corresponding to the amortisation period before the transaction was included in the results arising from discontinued operations. The remaining cost (including the cost triggered by accelerated vesting given to the employees) was deducted from the capital gain of the transaction. 2006 profit and loss was not restated for the €0.2 million expense related to AXA SA stock options for AXA Netherlands.
(c) For 2006, the total cost of €155.3 million did not include the cost generated by the liquidity guarantee granted by AXA SA to old AXA IM stock option plans, which amounted to a non-recurring cost of €30 million.
The fair value of AXA SA stock options is calculated using the Black & Scholes option pricing model. The effect of expected early exercise is taken into account through the use of an expected life assumption based on historical data. AXA SA share price volatility is estimated on the basis of implied volatility, which is checked against an analysis of historical volatility to ensure consistency. The expected AXA SA dividend yield is based on the market consensus. The risk-free interest rate is based on the Euro Swap Rate curve for the appropriate term.
Weighted average fair value per option at grant date in Euro (a) 3.23 6.8 6.48 4.15
(a) For employees who have been granted more than 5,000 options in 2007 and in 2008, the vesting of the final instalment is subject to the fulfilment of certain conditions regarding the performance of the AXA shares compared to the DowJones Europe Stoxx Insurance index. The options with performance criteria were valued at €3.54 per option granted in 2008 and €6.67 per option granted in 2007, based on a Monte-Carlo model. The options without performance criteria were valued at €3.76 per option granted in 2008 and €7.02 per option granted in 2007, based on the Black & Scholes model.
The 0.7 million options shown for 2006 in the “granted” line of the table above was largely due to the adjustment made to offset the dilution resulting from the capital increase done to finance the acquisition of Winterthur, as employees and associates now receive AXA S.A. shares rather than ADR options.
The following table shows information for grants after November 7, 2002: post november 7, 2002 aXa adr stocK option plans
The fair value of AXA ADR stock options is calculated using the Black & Scholes option pricing model. The effect of expected early exercise is taken into account through the use of an expected life assumption based on historical data. AXA ADR volatility is based on AXA SA ordinary shares volatility, adjusted for the uS$/€ exchange rate volatility. The expected dividend yield on AXA SA shares is based on the market consensus. The risk-free interest rate is based on the u.S. Treasury bond curve for the appropriate maturity.
AXA GROuP SHAREPLAN AXA offers to its employees the opportunity to become shareholders through special employee share offerings. In countries that meet the legal and fiscal requirements, two investment options are available: the traditional plan and the leveraged plan.
At the end of the 5 years restricted period, the employees can, depending on their residence country, do any one of the following: (1) receive the cash value of their assets; (2) receive the value of their assets in the form of AXA shares; or (3) transfer their assets invested in the leveraged plan into the traditional sub-fund
On September 15, 2008, the AXA Group made an employee share offering at €17.18 per share for the traditional plan (discount of 20% to the reference price of €21.47 representing the average over the twenty trading days preceding the date of announcement) and €18.43 per share for the leveraged plan. Subscriptions amounted to 24.7 million shares, increasing the share capital by €460.3 million. This offering represented a total cost of €16.7 million taking into account the five-year lock-up period.
In 2008, the cost of the lock-up period was measured at 18.48% for the traditional plan and 13.61% for the leveraged plan (due to different discounts). In addition to the lock-up cost, the opportunity gain offered to the employees under the leveraged plan was measured at 2.68%.
The table below shows the main features of the plan, the amounts subscribed, valuation assumptions, and the cost of the plan for 2008, 2007 and 2006.
Amount subscribed by employee (in Euro million) 29.3 42.4 74.0 47.0 51.8 32.0
Total amount subscribed (in Euro million) 29.3 431.0 74.0 478.3 51.8 323.7
Retail / institutional volatility spread N/A 6.60% N/A 4.60% N/A 4.20%
[b] Cost of the lock-up for the employee 18.48% 13.61% 13.45% 13.15% 13.41% 14.32%
AXA MILES On July 1, 2007, AXA granted 50 free shares per employee to all employees of the Group. In total, 2.3 million shares were granted to 46,899 employees in 24 countries on the 2+2 plan (i.e. two-year vesting period with a subsequent two-year restriction period), and 3.2 million shares were granted to 64,839 employees in 30 countries on the 4+0 plan (i.e. four-year vesting period with no subsequent restriction period).
Number of employees at grant date Number of AXA Miles granted
The free shares are valued using the CNC approach described in the AXA Group Shareplan section using assumptions adapted to the structure of the plan (2+2 or 4+0 plan), based on a market price of €32 per share on July 1, 2007 and an estimated 5% pre-vesting lapse rate.
The total cost of the AXA Miles is amortized over the vesting period (i.e., over 2 years for the 2+2 plan and over 4 years for the 4+0 plan) starting on July 1, 2007. On that basis, the expense recognized in the profit & loss for the year ended December 31, 2008 was €48.1 million. The accumulated cost already recognized as at December 31, 2008 represented 55% of the total cost of this plan.
AXA issued Performance units to executive officers and other key employees outside France in 2004, 2005, 2006, 2007 and 2008. During the vesting period, the Performance units initially granted are subject to non-market performance criteria. If the number of Performance units definitely acquired is less than one thousand, the employing entity pays in cash, 100% of the calculated value. If the number of Performance units definitely acquired is more than one thousand the employing entity pays in cash, 70% of the calculated value and the remaining 30% is simultaneously invested on behalf of the beneficiaries in AXA shares restricted for a minimum period of two years (equity-settled). The value of each Performance unit is equal to the average AXA share price before the settlement (which is cash rather than equity-settled in most cases). For the cash-settled instruments, the expected payment at the maturity date of the instrument is revised at each closing dates and amortized over the vesting period (prorata temporis).
The total cost of the Performance units recorded in earnings in 2008 was €21.3 million ( €5.0 million for the equity-settled portion and €16.3 million for the cash-settled portion).
Main share-based compensation plans issued by AXA subsidiaries are described below: AXA ASIA PACIFIC HOLDING STOCK OPTION PLAN AXA APH grants stock options based on AXA APH shares, with both market and non-market performance conditions. These plans are valued according to the IFRS applicable in Australia. The total cost for this plan in 2008 was €6.3 million.
25.4. COMPENSATION OF MANAGEMENT AND OFFICERS In 2008: • Short-term benefits: compensation paid to members of the Management Board in respect of 2008 totaled €9.5 million, including fixed salary, bonuses, directors’ fees and benefits in kind. • Share-based compensation: the expense recognized in 2008 in respect of share-based compensation granted to Management
Long-term benefits: Amounts provisioned or recognized by AXA SA and its subsidiaries for the payment of pensions or retirement benefits to its corporate officers (members of the Management Board, Chairman of the Supervisory Board and the employees’ representative on the Supervisory Board) totaled €31.6 million as at December 31, 2008 (€34.8 million as at December 31, 2007)
25.5. SALARIED WORkFORCE At December 31, 2008, the Group employed 109,304 salaried people on a full-time equivalent basis (103,534 at the end of 2007 and 96,009 at the end of 2006).
As of January 1, 2007, the effect of convertible bonds is no longer integrated in the calculation of diluted net income per ordinary share.
Indeed, to neutralize the dilutive impact of the 2017 convertible bonds, AXA purchased from a banking counterparty, call options on AXA shares with an automatic exercise feature. This feature is such that one option is automatically exercised upon each conversion of a convertible bond. Each issuance of a new share resulting from the conversion of the bond will be offset by the delivery by the bank to AXA (and subsequent cancellation) of an AXA share. The issuance of a share in respect of the conversion of the bond and the cancellation by AXA of the AXA share received will offset each other. As a result of this transaction, there will no longer be a change to the outstanding number of AXA outstanding shares created by the convertible bond conversion.
Increase in capital (excluding stock option exercised) (a) 2 2 97
Potentially dilutive instruments: • Subordinated convertible Notes – February 8, 2000 due 2017 – – 28
FULLY DILUTED – WEIGHTED AvERAGE NUMBER OF SHARES D 2,044 2,061 2,032
FULLY DILUTED NET INCOME PER ORDINARY SHARE (d) (e) F = E / D 0.44 2.73 2.49
(c) Except for number of shares (million of units) and earnings per share (Euro). (d) Revised net income EPS taking into account interest payments related to perpetual debts classified in equity, including foreign exchange impacts. Previously disclosed EPS excluded such adjustments. Basic net income EPS amounted to €2.77 and fully diluted net income EPS to €2.75 as at December 31, 2007 and €2.61 and €2.56 respectively as at December 31, 2006.
(e) Basic and diluted net income per share from discontinued operations represented €0.06 for full year 2006 and €0.23 for full year 2007.
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 a single business, subject to legal and management arrangements established to maintain the legal distinction between their respective businesses. Certain of the costs and expenses of operating these businesses (other than commissions) are shared by these subsidiaries and the Mutuelles AXA and allocated among them through a Groupement d’Intérêt Economique or “GIE” which is a type of French inter-company partnership more fully described below. There are no agreements between the Mutuelles AXA and the Group’s insurance subsidiaries that restrict in any way their ability to compete with one another.
In addition, the Company may enter into various other types of transactions with its subsidiaries and affiliates from time to time in connection with liquidity, solvency and capital management initiatives designed to promote efficient use and fungibility of the Group’s capital resources. These transactions may involve loans or other types of credit arrangements, acquisitions or sales of assets, securities or other financial instruments (including swaps or other types of derivatives), securitization transactions, and/or similar types of arrangements or transactions to which the Company may be a direct party and/or guarantor.
Supervisory Board other than (i) one loan to a member of AXA’s Management Board (loan originated in 2002 in the original principal amount of €200,000 bearing interest at a rate of 4.58% annually and with a 10-year term) and (ii) one loan to another member of AXA’s Management Board (loan originated in 1999 in the original principal amount of €152,449 bearing interest at a rate of 4.50% and with a 10-year term). These loans were made in the ordinary course of business by one of the Group’s banking subsidiaries at prevailing market terms and conditions at the time of origination.
• The son of a member of the Supervisory Board was employed by a subsidiary of the Company during 2008 and remains an employee of that subsidiary as of the date of this Annual Report. In addition the son of a member of the Management Board worked as a summer intern at another subsidiary of the Company. Both of these arrangements were on arms-length terms and conditions.
• Various members of the Company’s Supervisory Board and Management Board as well as various other executive officers and directors of companies forming a part of the AXA Group may, from time to time, purchase insurance, wealth management or other products or services offered by AXA in the ordinary course of its business. The terms and conditions of these transactions are substantially similar to the terms and conditions generally available to the public or to AXA employees generally.
NOTE 28 > CONTINGENT ASSETS AND LIABILITIES AND uNRECOGNIzED CONTRACTuAL COMMITMENTS
Consistent with principles set forth in Note 1.3.1 “Scope and basis of consolidation” to the financial statements, (i) AXA’s investments in or other arrangements with non-consolidated special purpose entities (SPEs) do not allow AXA to exercise control over such SPEs; and (ii) SPEs controlled by AXA are consolidated as disclosed in Note 2.2 to the financial statements.
(a) 2007 and 2006 numbers were revised to include commitments received by ELLA Bank related to the National Bank of Hungary bond and collaterals on properties (2007: €1,990 million) and the US Life & Savings related to reinsurers (2007: €1,519 million and 2006: €1,600 million).
Commitments received by AXA totaled €44,605 million at the end of 2008, an increase of €1,451 million compared to the end of 2007, mainly due to an increase in other commitments (€+1,176 million). These commitments broke down as follows: Financing commitments received increased by €38 million to €8,193 million at the end of 2008, and mainly consisted of: • AXA SA credit facilities (€6,187 million), • AllianceBernstein credit lines (€1,086 million) mainly including credit facilities (€573 million) and revolving credit facilities
Guarantee commitments received increased by €131 million to €4,975 million at the end of 2008, and mainly consisted of: • guarantees received from customers of AXA Bank Europe (Belgium) and Belgium Life & Savings (€3,429 million), and of
AXA Banque (French bank) (€1,021 million) principally in the form of mortgages and credits to small business; • guarantees received from credit institutions by AXA Banque (€281 million), and by Italy Property & Casualty (€103 million) in the case of the failure of general agents.
Pledged securities and collaterized commitments received decreased by €222 million to €27,291 million at the end of 2008, and mainly consisted of: • Mortgage security interests taken by AXA Bank Europe for home loans and other business loans (€14,182 million). • €3,218 million in ELLA Bank (Hungarian bank) related to the National Bank of Hungary bonds and collaterals on properties. • Collaterized commitments in Switzerland Life & Savings (€2,949 million), mainly relating to mortgage loans.
• €2,675 million in Japan, including securities received as guarantees for cash deposits given in security lending transactions
(€2,065 million) and for short-term security borrowings (€610 million). Commitments were also given on these products. • €2,269 million in the uS Life & Savings related to an eventual failure in the payment by reinsurers mainly for disability income business.
Other commitments received totaled €2,216 million at the end of 2008, broken down as follows: • €1,151 million received by France Life & Savings mainly due to real estate funds; • €719 million received by AXA SA due to a loan guarantee under a $1 billion loan agreement; • €156 million commitments received by AXA Bank Europe related to foreign exchange and money market activities.
The €1,176 million increase in other commitments received was mainly due to €+719 million received by AXA SA, and €+374 million increase in commitments received by France Life & Savings.
Pledged securities and collaterized commitments 12,309 90 51 403 12,854 14,601 15,821
Guarantee commitments given increased by €520 million, mainly due to an increase in guarantees given by AXA SA mainly related to credit lines granted to the Group’s entities (€+1,258 million), partly offset by a €593 million decrease in gap guarantees on structured products given by AXA Banque.
• Securities pledged by AXA Bank Europe to financial institutions in respect of security repurchase agreements (€3,470 million).
Pledged assets and collaterized commitments given decreased by €1,747 million in 2008 mainly due to a €1,662 million decrease in Japan, mainly on securities pledged under stock lending transactions.
Letters of credit given totaled €542 million at the end of 2008 and were mainly related to the run-off activities of reinsurance operations (€473 million).
Other commitments given totaled €12,314 million at the end of 2008 and consisted mainly of: • €1,796 million commitments given by the German entities relating mainly to future investments in Private equity funds
• €775 million of commitment given by Japan to private equity funds. • €1,704 million commitments given by the Switzerland Life & Savings and Property & Casualty, including notably €1,083 million commitments to private equity funds, and €598 million commitment to building contractors for renovation or new buildings. • €319 million in Belgium insurance entities mainly due to commitments to private equity funds. • €1,000 million guarantee given by AXA SA to EDF, the French electricity company, as part of a Group life insurance contract. • €877 million of unamortized balance on AXA’s subordinated debt instruments: AXA issued the following subordinated debt
(i) €1,524 million at 2.5% issued in February 1999 and due in 2014, and (ii) €1,099 million at 3.75% issued in February 2000 and due in 2017. The difference between the issue price and the redemption price (in the event of non-conversion for the debt maturing in 2017) is amortized over the life of the instrument at the effective interest rate for each debt.
the terms of this agreement, the AXA Group undertakes to hold at least 2,583,300 shares of Schneider stock and the Schneider Group undertakes to hold at least 8,816,681 AXA ordinary shares. The number of shares held under this cross-shareholding agreement will be adjusted as needed to reflect the impact of certain capital transactions, including, but not limited to: capital increases, free allotments of stock, stock splits or similar transactions.
29.1 STATUTORY AUDITORS Incubent auditors PricewaterhouseCoopers Audit: 63, rue de Villiers – 92208 Neuilly-sur-Seine, represented by Messrs. Yves Nicolas and Eric Dupont, first appointed on February 28, 1989. The current appointment is for a term of 6 years, until the annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2011.
Alternate auditors Mr. Patrick Frotiée: 63, rue de Villiers – 92208 Neuilly-sur-Seine, first appointed on May 17, 1995. The current appointment is for a period of 6 years, until the annual General Meeting of the shareholders called to approve the financial statements for the fiscal year 2011.
30.2. MATTERS CONCERNING AXA SUBSIDIARIES 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: 30.2.1. United States Matters In the united States, AXA’s u.S. subsidiaries are involved in a number of lawsuits, investigations and other actions in various states and jurisdictions where they do business. A detailed description of these matters involving AXA Financial, Inc. and its subsidiaries (including AXA Equitable Life Insurance Company and AllianceBernstein) is included in the annual reports on Form 10-K for the year ended December 31, 2008, respectively, of AXA Financial, Inc. (SEC file no. 1-11166), AXA Equitable Life Insurance Company (SEC file no. 0-25280) and AllianceBernstein (SEC file no. 001-09818) filed with the SEC (collectively, the “Subsidiary SEC Reports”). While not incorporated by reference herein, the Subsidiary SEC Reports are publicly available and management encourages readers of the financial statement to consult the Subsidiary SEC Reports for a full description of all the various litigations and related matters in which these subsidiaries are involved. Copies of the Subsidiary SEC Reports can be obtained through the SEC’s EDGAR system (www.sec.gov).
Among the matters discussed in the Subsidiary SEC Reports are the following: AXA Financial and AXA Equitable Matters A number of lawsuits have been filed against insurers in the united States involving insurers’ sales practices, alleged agents misconduct or misrepresentation, alleged failure to properly supervise agents, compensation of intermediaries and numerous other matters. Some of these actions have resulted in the award of substantial judgments against insurers (including material amounts of punitive damages) or in substantial settlements. In certain jurisdictions, juries have substantial discretion in awarding punitive damages.
Act for failure to pay minimum wage and overtime and violation of similar provisions under state labor laws in the respective states. In September 2007, the parties agreed to consolidate in the Northern District of California all four pending actions: Meola v. AXA Advisors and AXA Equitable; Lennon v. AXA Advisors, et al.; Bolea v. AXA Advisors, LLC and AXA Equitable, et. al.; and Dhruv v. AXA Advisors, LLC, et al. Plaintiffs seek compensatory damages, restitution of all wages improperly withheld or deducted, punitive damages, penalties, and attorneys’ fees. In February 2009, the parties filed a motion for preliminary approval of a proposed settlement agreement with the Court. In March 2009, the Court preliminarily denied without prejudice the parties’ motion for preliminary approval of the proposed settlement. The Court requested that the parties re-file the motion revising certain portions of the notices by the end of March 2009.
In addition to the matters set forth above, AXA Financial, AXA Equitable and AllianceBernstein, as well as certain of AXA’s other u.S. subsidiaries, are involved in various other types of lawsuits (both class action and individual), regulatory inquiries, investigations or actions, including in connection with the ownership and/or management of real estate, asset management activities, corporate transactions, employee benefit disputes, alleged discrimination in employment practices, as well as other matters. For additional details on these matters, please see the Subsidiary SEC Reports.
Although the outcome of any lawsuit cannot be predicted with certainty, particularly in the early stages of an action, management believes that the ultimate resolution of the matters described above should not have a material adverse effect on the consolidated financial position of AXA, taken as a whole. However, due to the nature of such lawsuits and investigations and the frequency of large damage awards in certain jurisdictions (particularly the united States) that bear little or no relation to actual economic damages incurred by plaintiffs, AXA’s management cannot make an estimate of loss, if any, or predict whether or not these matters will have a material adverse effect on the AXA’s consolidated results of operations in any particular period.
In connection with AllianceBernstein’s acquisition of the business of Sanford C. Bernstein Inc. in 2000, AXA Financial Inc. entered into a purchase agreement under which certain former shareholders of Sanford C. Bernstein have the right to sell (“Put”) to AXA Financial, subject to certain restrictions set forth in the agreement, limited partnership interests in AllianceBernstein L.P. (“AllianceBernstein units”) issued at the time of the acquisition. As of the end of 2008, AXA Financial, either directly or indirectly through wholly owned subsidiaries, had acquired a total of 32.7 million AllianceBernstein units for an aggregate market price of $1,631 million through several purchases made pursuant to the Put. At December 31, 2008, AXA’s ownership in AllianceBernstein L.P. was approximately 62.4%. On January 6, 2009, the purchase of the last tranche of 8.16 million AllianceBernstein units was completed for a total price of approximately $150 million pursuant to the final installment of the Put, increasing the ownership of AXA in AllianceBernstein L.P. by approximately 3% to 65.4%.
The financial impact for AXA of the klaus storm in France and Spain in early 2009 is expected to be approximately €–0.2 billion before tax.
(1) The total capital increase of AXA APH could reach up to approximately AUD890 million, depending upon market conditions. In that case, AXA APH will reimburse a higher amount of outstanding debt to AXA SA.
To the Shareholders of AXA SA 25, Avenue Matignon 75008 Paris
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December 31, 2008, on: • the audit of the accompanying consolidated financial statements of AXA SA , as attached to the present report; • the justification of our assessments; • the specific verification required by law.
• Certain consolidated balance sheet items that are specific to insurance and reinsurance business are estimated on the basis of statistical and actuarial data, such as actuarial reserves, deferred acquisition costs and their amortization, the value of business in force and future policyholders’ benefits. The methods and assumptions used to calculate the carrying values of these items are described in Notes 1.13, 1.6.4 and 1.6.2 of the notes to the consolidated financial statements. We have assessed the reasonableness of the assumptions used to calculate these values, particularly with respect to the Group’s experience and its regulatory and economic environments. We also assessed the overall consistency of these assumptions.
• Deferred tax assets and liabilities are recorded and measured using the methods described in Note 1.16.1 of the notes to the consolidated financial statements. We have verified that the valuation methods used take into account the nature of tax differences, business plans established by the Group and, when accounting policies permit, its intentions.
PricewaterhouseCoopers Audit Mazars Yves Nicolas – Eric Dupont Patrick de Cambourg – Jean-Claude Pauly
DESCRIPTION OF AXA’S CAPITAL STOCK Transactions involving AXA’s registered share capital 418
AXA’s AMERICAN DEPOSITARY SHARES (“ADSs”) AND AMERICAN DEPOSITARY RECEIPTS (“ADRs”) Material contracts 424
French taxation on sale or redemption of AXA ordinary shares or ADRs 428
We summarize below certain material provisions of applicable French law and of our memorandum and articles of association (“statuts”). You may obtain copies of our statuts in French from the Greffe of the Paris Trade and Companies Register (Registre du Commerce et des Sociétés).
MEMORANDUM AND ARTICLES OF ASSOCIATION The Company is a holding company organized under the laws of France as a Société Anonyme (SA) (a form of limited liability company), with a Supervisory Board and a Management Board. The Company’s principal office is located at 25, avenue Matignon, 75008 Paris, France and AXA is registered with the Paris Trade and Companies Register (Registre du Commerce et des Sociétés) under number 572 093 920.
Retirement Any member of the Management Board who, during a fiscal year, reaches the age of sixty-five while in office is automatically deemed to have resigned at the end of that fiscal year unless the Supervisory Board chooses to extend his/her term of office for up to a maximum of three years.
Under the Company’s statuts the age limit for members of the Supervisory Board is seventy. Notwithstanding the foregoing, members of the Supervisory Board who have exceeded this age limit can be appointed by the shareholders for a two-year period, renewable once. In any case, however, the number of Supervisory Board members who have exceeded the age of seventy cannot represent more than one third of the active members of the Supervisory Board.
Shareholding Article 10 A-2 of AXA’s statuts provides that each member of the Supervisory Board must own at least 100 AXA ordinary shares during his/her or her term of office.
TRANSACTIONS INvOLvINg AXA’S REgISTERED SHARE CAPITAL As of December 31, 2008, AXA had 2,089,158,169 ordinary shares outstanding, each with a par value of €2.29. All these ordinary shares were fully paid and non assessable and began earning dividends on January 1, 2008. The following table sets forth changes in the number of outstanding ordinary shares from December 31, 2005 to December 31, 2008: Amount of share Number of Issue or Number of capital after shares issued merger shares after the transaction Date Transaction or cancelled premium (in €) the transaction (in €)
2006 share capital reduction (through the cancellation of shares) following the merger of FINAXA into AXA – 337,490,816 – 5,379,990,858 1,869,195,640 4,280,458,016
New equity issue reserved for employees of AXA (sharePlan 2007) 22,088,600 501,196,189 2,121,724,740 4,858,749,655 share capital reduction by cancellation of shares – 63,103,647 – 1,754,535,072 2,058,621,093 4,714,242,303
Amount of share Number of Issue or Number of capital after shares issued merger shares after the transaction Date Transaction or cancelled premium (in €) the transaction (in €)
Increases in AXA’s share capital may be affected by the issuance of additional ordinary shares which may be: • for cash; • in satisfaction of indebtedness incurred by AXA; • for assets contributed to AXA in kind; • by capitalization of existing reserves, profits or premiums; • upon conversion, exchange or repayment of securities giving access to shares through AXA shares; • upon the exercise of share warrants or other similar securities consisting of rights to subscribe for ordinary shares, such as stock options; or • in place of a cash dividend.
The extraordinary meeting of shareholders may delegate to the Management Board the right to carry out any increase in share capital. The Management Board may further sub-delegate this right to AXA’s Chairman of the Management Board.
Cross shareholdings and holding of AXA shares by AXA subsidiaries With the exception of treasury shares that may be held by subsidiaries but which are non-voting, French law prohibits a company from holding AXA shares if AXA holds more than 10% of that company’s share capital. French law also prohibits AXA from owning any interest in a French company holding more than 10% of AXA’s share capital. In the event of a cross-shareholding that violates this rule, the Company owning the smaller percentage of shares in the other company must sell its interests. Until sold, these shares are not entitled to voting rights. Failure to sell the shares held in violation of this rule is a criminal offence under French law.
DIvIDENDS AXA may distribute dividends to its shareholders from net income in each fiscal year after deductions for depreciation and provisions, as increased or reduced by any profit or loss carried forward from prior years, and as reduced by the legal reserve fund allocation described below.
Under AXA’s statuts, at an ordinary annual general meeting, the shareholders may grant an option to each shareholder to receive dividends in either cash or additional ordinary shares.
FORM, HOLDINg AND TRANSFER OF SECURITIES French regulations provide that AXA ordinary shares are not represented by share certificates but by book-entry only.
Registered ordinary shares must be converted into bearer shares before being traded on the Euronext Paris and, accordingly, must be registered in an account held by an accredited intermediary. A shareholder may initiate a transfer by giving selling instructions to the relevant accredited intermediary. Ordinary shares held in bearer form may be transferred through accredited financial intermediaries and may be traded without further requirement. A fee or commission is payable to the broker involved in the transaction, regardless of whether the transaction occurs within or outside France. Normally, no registration duty is payable in France, unless a transfer instrument has been executed in France.
DISCLOSURE REqUIREMENTS wHEN HOLDINgS EXCEED SPECIFIED THRESHOLDS French law provides that any person or entity that, directly or indirectly, acting alone or in concert with other shareholders, becomes the owner of more than 5%, 10%, 15%, 20%, 25%, 33%, 50%, 66%, 90% or 95% of the outstanding share capital or voting rights of AXA (including through ownership of ADRs evidencing ADSs), or whose holding falls below any of these thresholds, must notify AXA and the AMF in writing within five trading days of exceeding or falling below the relevant level and indicate the number of ordinary shares and voting rights it holds.
French law imposes additional reporting requirements on persons who, acting alone or in concert with others, acquire more than 10%, 15% 1, 20% or 25% 1 of the outstanding shares or voting rights in AXA. These persons must file with the AMF and AXA a report disclosing their intentions for the 12-month period (6-month period as from July 31, 2009) following the acquisition. The report must specify whether the acquirer intends to continue purchasing shares, to acquire control of AXA or to seek election of nominees to the Management Board or Supervisory Board. This report must be filed within five trading days from the date that either of these thresholds has been crossed. The report is published by the AMF. Upon any change of intention, the acquirer must file a new report.
In order to facilitate compliance with the notification requirements concerning thresholds, a holder of ADRs evidencing ADSs, may deliver any such notification with respect to ADRs evidencing ADSs to The Bank of New York Mellon, which will, as soon as practicable, forward the notification to AXA and the AMF.
If a shareholder (including an owner of ADRs evidencing ADSs) fails to comply with these notification requirements, the shareholder will be deprived of voting rights attached to the shares he holds (or underlying its ADRs) in excess of the relevant threshold at all shareholders’ meetings held until the end of a two-year period following the date on which the shareholder has complied with the notification requirements. Failure to comply with the notification requirements set forth in AXA’s statuts will trigger the same voting limitations upon a request, registered in the minutes of the relevant shareholders’ general meeting, by one or more shareholders holding 5% or more of the share capital.
vOTINg RIgHTS Each AXA ordinary share entitles its holder to one vote at all meetings of AXA shareholders, subject to the provisions concerning double voting rights described below. As a result of the decision of the General Meeting of the shareholders of the Company held on May 26, 1977, each ordinary share fully paid and held in registered form by the same person for at least two full fiscal
years entitles its holder to double voting rights with respect to such ordinary share at any meeting of AXA shareholders, whether ordinary or extraordinary. The double voting right will automatically terminate for any share that has been converted into a bearer share or for which ownership has been transferred. Any transfer of shares as a result of merger, split-up, inheritance, division of community property by spouses or donation to a spouse or heir will not affect the double voting rights of such shares.
In the event of a capital increase by capitalization of existing reserves, profits or premiums, shares granted freely to any shareholder as a result of the holding by that shareholder of shares entitled to double voting rights will also carry double voting rights. Double voting rights may be terminated at any time upon the decision of an extraordinary general meeting of shareholders, provided that such decision is confirmed by a two-thirds majority of the holders of double voting rights voting separately.
At least 15 days (or 6 days if convened, in the event that the Company is subject to a tender offer, for purposes of approving measures the implementation of which would be likely to cause such tender offer to fail) prior to the date set for the meeting on first call, and at least 6 days (or 4 days if convened, in the event that the Company is subject to a tender offer, for purposes of approving measures the implementation of which would be likely to cause such tender offer to fail) before any second call, the Company shall send a final notice containing, among other things, the final agenda, place, date and other information in respect of the meeting by mail to all registered shareholders who have held shares for more than one month prior to the date of this final notice and publish this final notice in a newspaper as well as in the BALO.
CONvERTIbLE/EXCHANgEAbLE bONDS For information on convertible/exchangeable bonds and notes issued by the Company, see Note 13 “Shareholders’ equity, minority interests and other equity” of the Consolidated Financial Statements included in Part V of this Annual Report.
The rights of AXA ADR holders differ from those of ordinary share holders in certain important respects and management encourages ADR holders and investors considering the purchase of ADRs to consult the deposit agreement for a complete description of their rights as ADR holders as well as the rights and duties of the depositary and the custodian. Please also see Part IV, “Risks related to ownership of AXA ADSs or ordinary shares”.
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, except as disclosed in this Annual Report.
Furthermore, any such transaction allowing such person, or group of persons acting in concert, to hold ordinary shares evidencing an aggregate in excess of 5% of AXA’s voting right requires that person to provide prior notice to the French Ministry of the Economy.
No prior authorization 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.
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, Non-U.S. or other tax consequences (including French tax consequences) to Non-U.S. Holders as a result of the ownership or disposal of ordinary shares or ADRs evidencing ADSs.
This summary is not a complete description of all of the tax consequences of the ownership or disposition of ordinary shares or ADRs evidencing ADSs. It is based on the current tax laws and regulations of France and the United States, including, among others, the United States Internal Revenue Code of 1986, as amended (which we refer to below as the “Code”), its legislative history, temporary, existing and proposed Treasury Regulations, Internal Revenue Service rulings and judicial opinions as well as the Convention Between the Government of the United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital dated August 31, 1994 (which we refer to below as the “Treaty”), all as currently in effect on the date of the 2008 Annual Report and all subject to change, possibly with retroactive effect. In addition, this summary is based in part upon the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.
The summary is not intended to apply to holders of ordinary shares or ADRs evidencing ADSs in particular circumstances, such as: • dealers in securities, • traders in securities who elect to apply a mark-to-market method of accounting to their securities holdings, • financial institutions, • regulated investment companies, real estate investment trusts or grantor trusts, • tax-exempt organizations, • insurance companies, • persons holding ordinary shares or ADRs evidencing ADSs as part of a hedging, straddle, conversion or other integrated transaction, • persons whose functional currency is not the U.S. dollar, • certain U.S. expatriates, • persons subject to the U.S. alternative minimum tax, and • holders of ordinary shares or ADRs evidencing ADSs that own directly or indirectly or are deemed to own, five percent or more of either the total voting power or the total value of the AXA Shares or that carry on a trade or business in France through a permanent establishment or fixed base for the purpose of which ordinary shares or ADRs have been acquired or held.
Furthermore, although this summary generally applies to relevant holders whether or not they are employees of AXA or its affiliates, this summary does not describe all the tax considerations relevant to persons who acquired ordinary shares or ADRs evidencing ADSs pursuant to the exercise of an incentive stock option.
French Resident Holders, who are individuals and who receive dividends, are taxed on 60% of the amount of the dividends received and are entitled to a tax credit (“crédit d’impôt”) equal to 50% of the amount of dividends they received. The crédit d’impôt is subject to an overall annual cap of €230 or €115, depending on the marital status of the individual holder.
(ii) the financial institution managing their securities account provides to the French paying agent, among other information, a list of the eligible Non-French Resident Holders and a copy of the certificate of residence. These documents must be sent as soon as possible and, in all cases, before the end of the third month computed as from the end of the month of the dividend payment date.
Where the Non-French Resident Holder’s identity and tax residence are known by the French paying agent, the latter may release such Non-French Resident Holder from providing the tax administration of his State of residence with the abovementioned certificate of residence and apply the reduced withholding tax rate.
In addition, as discussed in more detail above, individual U.S. Holders who are eligible for benefits under the Treaty and who receive dividends may be entitled to the refund of the crédit d’impôt (less applicable withholding tax) equal to 50% of the amount of dividends they received, with an overall annual cap of €230 or €115, depending on the marital status of the individual. French tax authorities have not yet issued guidance with respect to the procedures to be used to obtain such a refund of the crédit d’impôt.
For purposes of this discussion, an “Eligible U.S. Holder” is a U.S. Holder whose ownership of ordinary shares or ADRs evidencing 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, • is entitled to Treaty benefits under the limitation on benefits provisions in Article 30 of the Treaty, and • complies with certain procedural rules to obtain Treaty benefits.
U.S. Pension Funds and other tax-exempt entities created and operating their activities in accordance with the provisions of Sections 401(a), 403(b), 457 or 501(c) (3) of the Code are subject to the same general filing requirements except that, in addition, they have to provide a certificate issued by the IRS or any other document stating that they have been created and are operating their activities in accordance with the provisions of the above-mentioned sections of the Code. This certificate must be provided only once after the first application for the 15% withholding tax rate at source and at the specific request of the French tax authorities.
The Depository is obligated to provide certificates of residence together with instructions to all U.S. Holders of ADRs registered with the Depository. The Depository is also obligated to use reasonable efforts to follow the procedures established by the French tax authorities for U.S. Holders to benefit from the 15% French withholding tax rate at source or, if the French paying agent withheld at the 25% rate, recover the excess 10%, and obtain, with respect to dividend distributions to U.S. Holders who are individuals,
the refund of the crédit d’impôt, in accordance with the procedures established by the French tax authorities. To effect such benefit, recovery and/or refund, the Depository is obligated to cause timely and properly completed forms and certificates to be filed timely with the appropriate French tax authorities.
FRENCH TAXATION ON SALE OR REDEMPTION OF AXA ORDINARY SHARES OR ADRS Under the Treaty, no French tax is levied on any capital gain derived from the sale of AXA ordinary shares or ADRs evidencing ADSs by a U.S. Holder who: • is a resident of the United States under the Treaty, • is entitled to Treaty benefits under the limitation on benefits provisions of Article 30 of the Treaty, and • does not have a permanent establishment in France to which the 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 ordinary shares or ADRs are effectively connected.
FRENCH ESTATE, gIFT AND wEALTH TAXES A transfer of ordinary shares or ADRs evidencing ADSs by gift by, or by reason of death of, a U.S. Holder that would be subject to French gift or inheritance tax under French domestic tax law will not be subject to such French tax by reason of the Convention between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Estates, Inheritances and Gifts, dated November 24, 1978 unless: • the donor or decedent is domiciled in France within the meaning of that Convention at the time of making the gift, or at the time of his or her death, or • the ordinary shares or ADRs were used in, or held for use in, the conduct of business through a permanent establishment or a fixed base in France.
Under French tax law and the Treaty, the French wealth tax generally does not apply to U.S. Holders that are not individuals or in the case of natural persons, who, directly or indirectly, own alone or with their parents, ordinary shares or ADRs that do not represent a substantial interest our Company.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS 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 even though it was not in fact received, 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. Dividends paid to a non-corporate U.S. Holder in taxable years beginning before January 1, 2011, that constitute qualified dividend income will be taxable to the holder at a maximum rate of 15%, provided that the holder has a holding period in the shares or ADSs of more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and meets other holding period requirements. Dividends paid by AXA with respect to the shares or ADSs will generally be qualified dividend income. If a U.S. Holder has the option to receive a distribution either in cash or in the form of ordinary shares, and such U.S. Holder chooses to receive 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 ordinary shares. Dividends paid to a corporate U.S. Holder 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. Holder exceeds the U.S. Holder’s allocable share of AXA’s current and accumulated earnings and profits, the excess will be
applied first to reduce the holder’s basis in his or her ordinary shares or ADRs, and then, any remaining excess would constitute capital gain from the deemed sale or exchange of his or her ordinary shares or ADRs. See “Tax on sale or exchange of ordinary shares or ADRs” below.
For U.S. federal income tax purposes, dividends will be taxable to the U.S. Holder of ordinary shares or 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. The amount recognized as dividend income by a U.S. Holder will be equal to the U.S. dollar value of the distributed Euro determined at the spot Euro/U.S. dollar rate, or, in the case of a Stock Distribution, of the ordinary shares distributed, on the date the dividend is includible in the U.S. Holder’s income, regardless of whether the payment is in fact converted into U.S. dollars on the date of receipt. 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 for foreign tax credit limitation purposes.
In the case of an Eligible U.S. Holder, if the full withholding tax rate of 25% is applied, the refundable portion of the tax withheld by 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. See “French taxation of dividends – Application to U.S. Holders”, above, for the procedures for obtaining a tax refund.
Gain or loss arising from a sale or exchange of ordinary shares or ADRs will be capital gain or loss if the ordinary shares or ADRs are held as capital assets by the U.S. Holder, and if recognized by non-corporate U.S. Holders in taxable years beginning prior to January 1, 2011, are generally taxed at a maximum rate of 15% where the holder has a holding period greater than one year. In general, gain from a sale or exchange of ordinary shares or ADRs by a U.S. Holder will be treated as United States source income for foreign tax credit limitation purposes.
U.S. state and local taxes In addition to U.S. federal income taxes, U.S. Holders may be subject to U.S. state and local taxes with respect to their ordinary shares or ADRs evidencing ADSs. U.S. Holders should consult their own tax advisors regarding such matters.
Documents on display AXA files reports with the SEC that contain financial information about AXA and its results of operations. Documents that AXA files with the SEC are available at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information about the Public Reference Room may be obtained by calling the SEC for more information at 1-800-SEC-0330. All of AXA’s SEC filings made after September 20, 2002 are available to the public through the SEC’s EDGAR system at the SEC website ( In addition, documents publicly filed by AXA with the SEC are available at AXA’s website ( which also includes information about AXA’s business. The content of AXA’s website is not incorporated by reference into this Annual Report on Form 20-F. The public may also inspect any reports and other information we file with the Securities and Exchange Commission at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005.
Appendices APPENDIX I: CHAIRMAN OF THE SUPERVISORY BOARD’S REPORT Conditions of preparation and organisation of the Supervisory Board’s work 432
Statutory Auditors’ report on the report prepared by the Chairman of the Supervisory Board of AXA 441
APPENDIX III: STATEMENT OF THE PERSON RESPONSIBLE FOR THE ANNUAL REPORT (DOCUMENT DE RÉFÉRENCE) 446
APPENDIX IV: FINANCIAL AUTHORIZATIONS Financial authorizations to issue shares or other type of securities as of December 31, 2008 447
AXA’s Supervisory Board’s comments on the Management Board’s report and the financial statements 492
This Report presents, according to the provisions of Article L.225-68 of the French Commercial Code, the conditions of preparation and organization of the Supervisory Board’s work (Part 1) as well as the internal control and risk management procedures implemented by the Company (Part 2). The Report also presents the principles and the rules adopted by the Supervisory Board in order to determine the compensation and the advantages granted to the corporate officers (Part 3). Finally the Report indicates the Company’s corporate governance code of reference and specifies the provisions which have not been applied and why they have not been applied (Part 4).
PART 1 > CoNDITIoNS oF PRePARATIoN AND oRgANIZATIoN oF The SUPeRvISoRy BoARD’S woRk
For information on the conditions of preparation and organization of the Supervisory Board’s work please see Part III – “Corporate governance, executive compensation, major shareholders and related matters”, ”Supervisory Board” and “Supervisory Board Committees” Sections of the group’s Annual Report (Document de Référence) for the year ended December 31, 2008.
In this context, the following report provides a summary of the AXA group’s principal internal control mechanisms and procedures that permit management to conclude that the group has a sound and comprehensive system of internal control well adapted to its business and the specific risks inherent to its activities. This report is not intended to provide a comprehensive description of all internal controls and procedures in place within the Company and its subsidiaries, but rather to provide an overview of the group’s principal internal control mechanisms and procedures.
INTERNAL CONTROL AND RISK MANAGEMENT: OBJECTIVES The AXA group is engaged in the financial protection and wealth management business on a global scale. As such, it is exposed to a very wide variety of risks – insurance risks, financial market risks and other types of risk – which are described in detail in the group’s Annual Report (Document de Référence) for the year ended December 31, 2008. Please see, in particular, Part Iv – “Risk Factors”, “Certain disclosures about Market Risks and Related Matters”, Part II – Section 2.2 “Information on the Company” – “Additional factors which may affect AXA’s business” and Part v – “Consolidated Financial Statements” – Note 30 “Litigation”.
CORPORATE GOVERNANCE STRUCTURES Group Level Governance Structures Supervisory Board and Management Board AXA SA has a dual corporate governance structure consisting of a Supervisory Board and a Management Board. This structure provides a clear separation between the powers and responsibilities of (i) day-to-day executive management of the group which is the responsibility of the Management Board and (ii) supervision of executive management which is the responsibility of the Supervisory Board.
A detailed description of AXA’s corporate governance structures including composition of the Supervisory Board and Management Board, structure and composition of the Supervisory Board Committees and a description of the respective roles and responsibilities of its Supervisory Board and Management Board is set forth in Section 3.1 “Directors, Senior Management and employees” of the group’s 2008 Annual Report.
Maintenance of an effective internal control environment is part of the Management Board’s day-to-day operational management responsibility. Management reports significant internal control and risk related issues to the Audit Committee of the Supervisory Board on a regular and continuing basis to ensure that the Committee and the Supervisory Board have a clear view of material issues facing the group.
The Audit Committee has four members all of whom are independent in accordance with the criteria of the AFeP-MeDeF Report and the US Sarbanes oxley Act (“Sarbanes”). Three of the Committee members have been formally designated “financial experts” as required by Sarbanes.
The scope of the Audit Committee’s responsibilities is set forth in an Audit Committee Charter, approved by the Supervisory Board, which defines the Committee’s principal missions, including the following: • overseeing the activities and systems of internal control over events that expose the group to significant risk; • Monitoring the financial reporting process, the systems of internal control over financial reporting and the accuracy and integrity of the group’s financial reporting; • overseeing the qualifications and independence of the Statutory Auditors; and • overseeing the performance of the group’s internal audit function.
over the past years, AXA initiated a process designed to harmonize corporate governance standards throughout the group. This effort is focused, among other matters, on standardizing, to the extent practicable, principles relating to a number of corporate governance matters including board composition and size, directors’ independence criteria, Board Committees and their roles, and directors’ fees.
The group governance Standards require the Boards of AXA’s principal subsidiaries to establish an Audit Committee and a Compensation Committee in addition to any other Board committees that they consider necessary or appropriate for their specific businesses. The role, duties, and composition of these Committees (including the requirements for participation of independent directors) are specified in a detailed Audit Committee Standard and Compensation Committee Standard. The Audit Committee Standard requires the Audit Committees of group subsidiaries to have a significant component of independent directors in order to ensure that this Committee is strongly independent of management given its critical role in reviewing financial results and other financial information prepared by management, financial reporting and control processes, critical accounting policies, particular accounting issues, key risks and systems of internal control, fraud and similar issues.
These management structures and controls include the following: AXA Executive Committee – Quarterly Business Reviews AXA has a 18 member executive Committee which is an internal management committee composed of the members of AXA’s Management Board, the Ceos of the group’s principal subsidiaries and/or business units and selected other senior executives. while the executive Committee is an internal management committee which has no formal decision making authority, its plays an important role in assisting the Management Board to effectively manage the group’s operating businesses, consider strategic initiatives and in such other areas as the Management Board deems appropriate from time to time.
Group Management Services 1 (GMS) departments focused principally on internal control and risk related matters Several gMS Departments have responsibility for managing and/or monitoring some aspect of internal control and/or risk related matters, however, the following four gMS departments are primarily focused on these matters as part of their principal day-today management responsibilities: Group Risk Management Department The role of group Risk Management (gRM) is to identify, quantify and manage the main risks to which AXA is exposed. To this end, gRM develops and deploys a number of risk measurements, monitoring instruments and methods, including a set of standardized stochastic modeling tools.
when appropriate, this work leads to the implementation of decisions that affect the group’s risk profile, helping to reduce the volatility of AXA’s earnings through improved understanding of the risks taken and to optimize capital allocation.
As a central team, gRM coordinates risk management for the group and is supported by local risk management teams within each operating unit. The types of risk covered include operating risks, asset and liability risks, and asset/liability mismatch risks.
The principal control processes that fall under the responsibility of gRM are described below: • The local Risk Management departments carry out regular reviews of the technical reserves established by Property & Casualty and reinsurance operating units. gRM performs regular reviews of models followed throughout the group in order to ensure the consistency between actuarial and financial standards; • gRM conducts a decentralized review of risk-adjusted pricing and profitability for new products prior to launch; this review is centralized for variable annuity products with secondary guarantees, and submitted to the Management Board; • The asset/liability management policy, in place at operating unit level, is monitored and controlled through an annual detailed analysis of asset/liability matching. This work is undertaken to validate the strategic allocations of invested assets. In addition, a quarterly reporting process is used to monitor portfolio developments and detect deviations from strategic asset allocations as well as with respect to benchmarks determined with asset managers; • economic capital is estimated quarterly for each product line and operating unit and then aggregated at the group level. This is one of the main uses of the stochastic modeling tools developed and implemented by gRM. This work enables asset, liability and operational risks to be modeled together; • gRM proposes annually to the Management Board, with the support of AXA Cessions, the main features of the Property & Casualty and Life reinsurance coverage program of the group; • Credit and concentration risks in the group’s asset portfolios (equities and bonds) are managed by the Risk Management department and aggregated at the group level. gRM also monitors the corresponding exposures on a monthly basis, and ensures that local operating units comply with the concentration limits established by the group; and
• gRM coordinates the activity of decentralized operational risk teams to ensure proper and consistent identification, measurement and management of the most important operational risk.
The PBRC’s role encompasses principally the following: • establishing and distributing both consolidation and reporting standards and instructions; • Managing the group’s financial reporting system; • Producing the consolidated financial statements and analyzing key performance indicators; • Developing and using management control tools; • Coordinating the production of AXA’s Document de Référence filed with the AMF and AXA’s Form 20-F filed with the SeC, in compliance with IFRS and U.S. regulations; • Liaising with the Statutory Auditors and contributing to Audit Committee meetings as required; and • Steering convergence of accounting & financial reporting processes, systems and organizations for insurance activities in europe.
PBRC has defined and implemented a set of policies and procedures to ensure the consolidation process leading to the consolidated financial statements is timely and accurate. This consolidation process and its related controls are based on the following: DeFINITIoN oF STANDARDS AND MAINTeNANCe oF AN INFoRMATIoN SySTeM: group accounting standards, which are consistent with accounting and regulatory principles for consolidated financial statements, are set forth in the AXA group Accounting Manual and updated regularly by PBRC experts. These guidelines are submitted to AXA’s Statutory Auditors for review before being made available to AXA subsidiaries.
oPeRATINg CoNTRoL MeChANISMS: At entity level, AXA subsidiaries are responsible for entering and controlling accounting and financial data that comply with the AXA group Accounting Manual and reflect consolidation rules under IFRS accounting standards. In this respect, the CFo of each entity signs off on the accuracy of consolidated figures reported through Magnitude and their compliance with both the group accounting manual and instructions.
At PBRC level, accounting and financial information reported by entities are reviewed and analysed by teams that liaise with subsidiaries on a full-time basis. In particular, these teams review the compliance with the group Accounting Manual and group actuarial standards.
Statutory Auditors; • The main audit issues are addressed and resolved through “clearance meetings” in which local and central financial teams participate, as well as Statutory Auditors; • The principal options for closing the consolidated accounts are presented to the Management Board and then to the Audit
Committee; and • The auditing of accounting and financial data is finalized at the accounts closing stage in meetings attended by local and central financial teams, as well as local and central Statutory Auditors who present the outcome of their audit work.
As part of its Compliance responsibilities, the group Legal Department manages a wide range of compliance related matters including (i) quarterly reporting from group companies on significant compliance, litigation and regulatory matters, (ii) implementation of the group Compliance and ethics guide which applies to all AXA group employees worldwide and (iii) the group’s global Anti-Money Laundering Program.
Group Audit The primary mission of group Audit is to provide the Management Board and the Audit Committee with an independent and objective assurance on the comprehensiveness and effectiveness of internal controls as well as proposals to help improve the management of risks, enhance performance and identify business opportunities.
• undertakes missions selected by the Management Board and the Audit Committee on strategic and management issues to evaluate assumptions and achievement of objectives, strategies, and plans and, whether management are efficiently and effectively carrying out their functions of planning, organising, directing and controlling. opportunities for improving management
control, operational efficiency, profitability, and AXA’s image are identified and communicated to the Management Board, local Management and the Audit Committee.
Local internal audit teams are placed under the responsibility of a Chief Audit executive, who reports directly to the local Chief executive officer or Chief Financial officer or a member of the local executive Committee, and also to the local internal audit committee. These local teams also have a reporting line to the group Audit Department and focus mainly on identifying the key risks facing their business units, and on evaluating the design and operation of associated controls.
group Audit performs quality assurance reviews of the local internal audit teams and assures compliance with the Institute of Internal Auditors’ “Standard for the Professional Practice of Internal Auditing”.
The Committee is comprised of the following 10 gMS departments each of which is responsible for presenting to the Committee the significant risk within its scope: 1. group Risk Management (gRM); 2. group Corporate Finance and Treasury (DCFg); 3. group Audit; 4. group Legal and Compliance; 5. group Tax; 6. Planning Budgets Results Central (PBRC); 7. Information Technology (IT)/operational excellence; 8. AXA Cessions; 9. group human Resources; 10. group Communication.
INTERNAL CONTROL OVER FINANCIAL REPORTING As a result of its listing on the New york Stock exchange, AXA has been subject to the requirements of Sarbanes Section 404 since the year ending December 31, 2006, pursuant to which: • AXA’s management must perform a formal annual evaluation of the group’s ICoFR; • In AXA’s annual report filed with the United States Securities and exchange Commission (SeC) management must state its conclusions as to the effectiveness of the Company’s ICoFR, noting any material weakness; and • AXA’s Statutory Auditors are required to perform an “integrated audit” covering the group’s ICoFR and to express their view on the effectiveness of the Company’s ICoFR.
AXA has put in place a comprehensive Sarbanes 404 program, again coordinated by group Audit for 2008, designed to ensure that AXA’s Ceo and CFo can conclude that the group’s ICoFR is effective as of the end of each year. The program also aims to ensure that AXA’s Statutory Auditors can provide a clean opinion on AXA’s ICoFR as part of their annual integrated audit.
As part of its evaluation of the group’s ICoFR for the year ended December 31, 2008, management documented and tested more than 6,300 individual internal controls which are part of the group’s overall control environment designed to ensure the accuracy and completeness of the group’s consolidated financial statements on a continuing basis.
on the basis of the extensive due diligence performed as part of its Sarbanes 404 program as described above, management concluded that ICoFR was effective as of December 31, 2008.
AXA’s ICoFR as of December 31, 2008, was audited by PricewaterhouseCoopers Audit, which concluded the Company maintained, in all material respects, effective ICoFR as of December 31, 2008, based on criteria established in CoSo. 3
DISCLOSURE CONTROLS AND PROCEDURES In addition to its Sarbanes 404 program as described above, AXA SA is required to comply with Sarbanes Section 302. Pursuant to Sarbanes Section 302, AXA’s Chief executive officer and Chief Financial officer are each required to certify various matters in each annual report (Form 20-F) filed with the SeC. This annual Section 302 certification requires the Ceo and CFo to certify, among other matters, that: • They have reviewed the annual report; • To their knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact that would make the report misleading; • To their knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company for the periods presented; • They are responsible for establishing and maintaining “disclosure controls and procedures” and “ICoFR” for the Company; • They have designed such disclosure controls and procedures, or caused them to be designed, to ensure that material information relating to the Company and its consolidated subsidiaries, is made known to them on a timely basis; (2) “Internal Control – Integrated Framework”, publicly known as COSO (Committee Of Sponsoring Organizations), of the Treadway Commission, the name of the committee that designed this standard.
• These disclosure controls and procedures provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles; • They have evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in the annual report their conclusions as to effectiveness and disclosed to the Audit Committee and the Statutory Auditors (i) any material weaknesses or significant deficiencies and/or (ii) any fraud whether or not material, that involves management or other employees who have a significant role in the Company’s ICoFR identified.
In order to support the Sarbanes 302 certification, the group has an extensive internal process that is based on three pillars: (1) CFO Sign-Off Certificates required to be submitted by all local CFos to PBRC together with submission of subsidiary financial reporting/consolidation information to PBRC; (2) Sarbanes 404 Management Reports required to be submitted by the CFos of all “in-scope” group companies as part of the group’s Sarbanes 404 program described above; and (3) Sarbanes 302 sub-Certificates required to be submitted by AXA executive Committee members, regional CFos and certain other executives (including gMS Department heads) pursuant to which each of these executives is required to review the group’s annual report and formally certify (i) the accuracy and completeness of the information in the annual report with respect to the companies under his responsibility, and (ii) the effectiveness of disclosure controls and procedures and ICoFR at companies under his responsibility (with specific disclosure of any significant deficiencies or material weaknesses). In addition, as part of this “sub-certification” process, these executives are required to review and comment on a number of transversal disclosures in the annual report relating to risk and other matters.
For information on the principles and the rules adopted by the Supervisory Board in order to determine the compensation and the advantages granted to the corporate officers please see Part III – Section 3.2 “Full disclosure on executive compensation and share ownership” of the group’s 2008 Annual Report.
These recommendations were consolidated in a Corporate governance Code of Listed Corporations published by the AFeP (Association Française des Entreprises Privées) and the MeDeF (Mouvement des Entreprises de France) in December 2008 (hereafter the “AFEP / MEDEF Code”), which is available at AXA’s registered office or on its website (www.axa.com) under the “Corporate governance” Section.
Management Board and a Supervisory Board. These adjustments take into account the legal separation of powers between the Management Board and the Supervisory Board, and in particular the Supervisory Board’s prohibition, under French law, to interfere into the management of the Company.
• Section 19 of the AFEP / MEDEF Code relative to the termination of the employment contract of the Management Board’s Chairman: Mr. henri de Castries, Chairman of the Company’s Management Board, has been employed by AXA under an employment contract since he joined the group in 1989. Pursuant to the provisions of the AFeP / MeDeF Code, the Supervisory Board intends to consider the termination of its employment contract prior to the end of its term of office on october 11, 2009.
• Section 20.2.3 of AFEP / MEDEF Code relative to stock options and performance shares: (i) Holding of shares subsequent to subscription options or allotment of performance shares: In 2007, the Company decided to implement strict rules pertaining to shareholding requirements for members of AXA’s Management Board. This policy requires each member of the Management Board to hold, during the entire duration of his/her functions, a minimum number of AXA shares representing a multiple of his/her annual cash remuneration (fixed salary plus annual variable remuneration) received for the previous fiscal year. The Chairman of the Management Board is consequently required to hold the equivalent of his total cash remuneration multiplied by 3 and the other members of the Management Board are required to hold the equivalent of their total cash remuneration multiplied by 2. AXA ordinary shares or AXA ADRs or other quoted subsidiaries of the group are taken into account to calculate the number of shares actually held. each member of the Management Board is required to meet with this minimum shareholding requirement within a period of 5 years from (i) January 1, 2007 or (ii) the date of his/her first appointment to the Management Board. Considering the already high level of this shareholding requirements imposed upon members of the Management Board, the Supervisory Board, upon recommendation of its Compensation Committee, has decided that it was not necessary to set higher shareholding thresholds after the initial 5-year period. For the same reasons, the Supervisory Board has decided that it was not adequate to compel members of the Management Board to acquire a number of AXA shares once the compulsory holding period of their performance shares has expired.
Pursuant to the provisions of Article L.225-68 of the French Commercial Code, it is specified that the conditions for the shareholders’ participation to general meetings are detailed in Section 23 of AXA’s bylaws, copies of which are available at the Paris Trade and Companies Register (Registre du Commerce et des Sociétés du Tribunal de Commerce de Paris). AXA’s bylaws are also available on the Company’s website (www.axa.com). In addition, the information referred to in Article L.225-100-3 of the French Commercial Code are made public in the Report of AXA’s Management Board which is included in AXA’s Annual Report for 2008.
In our capacity as Statutory Auditors of AXA, and in accordance with article L.225-235 of the French Commercial Code, we hereby report to you on the report prepared by the Chairman of the Supervisory Board of your Company in accordance with article L.225-68 of the French Commercial Code for the year ended December 31, 2008.
It is our responsibility • to report to you on the information set out in the Chairman’s report on internal control procedures relating to the preparation and processing of financial and accounting information to establish the consolidated financial statements in accordance with IFRS, as adopted by the european Union, and
Other information we attest that the Chairman’s report sets out the other information required by article L.225-68 of the French Commercial Code.
Ambition 2012: AXA strengthens its brand strategy with the launch of a new signature (05/28/2008)
AXA completes the acquisition of a 36.7% stake in Russian insurer RESO GARANTIA (06/18/2008)
Announcement of the acquisition of the Château de Polisy’s earthenware tiling thanks to AXA Group’s corporate philanthropic contribution (09/01/2008)
AXA presents the results of the 3rd edition of the Carbon Disclosure Project France (10/01/2008)
9M08 Activity Indicators: Total Revenues down 0.9% to Euro 69,458 million (11/06/2008)
AXA to hold today in Paris its Autumn Investor Conference (11/25/2008)
Appointments: Peter S. Kraus becomes Chairman and CEO of AllianceBernstein, to join AXA’s Management Board in 2009. AXA’s Executive Committee welcomes two new members: Véronique Weill, Group Executive Vice-President IT & Operational Excellence and Dominique Carrel-Billiard, CEO of AXA Investment Managers (12/22/2008)
Extract of the minutes of the Management Board of 07/28/2008 regarding the increase of the share capital
Extract of the minutes of the Management Board of 01/05/2009 regarding the increase of the share capital
Documents at the disposal of the Shareholders Headquarters of the Company 25, avenue Matignon 75008 Paris — France
The Statutory Auditors’ certificate on the global amount of the sums entitled to the tax cut
The annual reports of the Management Board on the allocations of stock options and free allotments of shares
Disclosure of trading in the Company’s shares by members of the Management Board and the Supervisory Board 02/08/2008 Claude Bébéar 11/28/2008 Claude Brunet 03/14/2008 François Pierson 11/28/2008 Christopher Condron 03/25/2008 François Pierson 11/28/2008 François Pierson 03/25/2008 François Pierson 12/10/2008 Claude Brunet 04/02/2008 Claude Bébéar 12/12/2008 Norbert Dentressangle 04/02/2008 Christopher Condron 12/15/2008 Henri de Castries 04/03/2008 Claude Bébéar 12/15/2008 Denis Duverne 04/16/2008 Giuseppe Mussari 12/15/2008 Jean-René Fourtou 05/15/2008 Henri de Castries 12/16/2008 Claude Brunet 05/15/2008 Denis Duverne 12/17/2008 Henri de Castries 06/27/2008 François Martineau 12/17/2008 Denis Duverne 09/04/2008 Denis Duverne 12/17/2008 François Pierson 09/22/2008 Denis Duverne 12/22/2008 Henri de Castries 09/26/2008 Henri de Castries 12/22/2008 Denis Duverne 10/02/2008 Alfred Bouckaert 12/22/2008 François Pierson 11/27/2008 Jean-Martin Folz 12/22/2008 Jacques de Chateauvieux 11/28/2008 Henri de Castries 02/20/2009 Jacques de Chateauvieux 11/28/2008 Denis Duverne
Where the information Information published over the previous 12 months can be obtained
Form 6-K for August 2008: Press Release issued on August 7, 2008 by AXA, announcing first half 2008 performance
Form 6-K for February 2009: Press Release issued on February 19, 2009 by AXA, announcing its consolidated earnings for the full year 2008
I confirm that, to the best of my knowledge, the financial statements have been prepared in accordance with applicable accounting standards and fairly present the assets and liabilities, the financial position and the profit or loss of the Company and its consolidated subsidiaries, and that the Management Report, the various sections of which are mentioned on page 549 of this Annual Report, fairly presents the evolution of the business, the results and the financial position of the Company and its consolidated subsidiaries, and describes the principal risks and contingencies facing the group.
The Statutory Auditors have provided me with a letter of completion of assignment, in which they confirm that they have verified the information relating to the financial position and the financial statements contained in this Annual Report (with the exception of information pertaining to european embedded value which they have not reviewed but which they have checked for consistency with the work performed by the independant actuary Tillinghast [Towers Perrin] and dated February 18, 2009), and have reviewed the entire document.
PERSON RESPONSIBLE FOR FINANCIAL INFORMATION Denis Duverne Member of the Management Board, group Chief Financial officer
Maximum nominal Maximum nominal amount in case amount of of debt instruments the capital increase Securities in Euro in Euro Term Expiration
Shares or securities giving access to the capital, reserved for employees – 100 million (e) 18 months October 22, 2009
Performance shares (actions gratuites) (g) – 1% (f) 38 months June 22, 2011
Ordinary shares and other securities granting a claim to ordinary shares of the Company through subscription, conversion, exchange, redemption, presentation of a warrant or otherwise 6 billion (c) 2 billion (d) 26 months June 30, 2011
Ordinary shares or securities granting a claim to ordinary shares of the Company through subscription, conversion, exchange, redemption, presentation of a warrant or otherwise (b) 6 billion (c) 20% (f) 26 months June 30, 2011
Ordinary Shares reserved for a specific category of beneficiaries in connection with offerings for employees – 150 million (g) 18 months October 30, 2010
(a) Independent ceiling. (b) Including the issue of ordinary shares or securities (i) in the event of a public offer initiated by the Company, (ii) in consideration for contributions in kind for up to 10% of the share capital, or (iii) as result of a securities issue by subsidiaries of AXA.
(c) The aggregate nominal value of debt instruments associated with the issue of securities with or without preferential subscription rights may not exceed the global upper limit of €6 billion. This upper limit is separate and distinct from the limit on issuances of debt securities with no claim to the share capital of the Company (ceiling of €2 billion).
(d) The aggregate nominal value of the capital increase with or without preferential subscription rights may not exceed €2 billion in nominal value. (e) Common ceiling to all preferred shares’ issues and limited to an issue gross income (inclusive of the share premium) of €2 billion. (f) Up to €1 billion in nominal value. (g) Common ceiling.
USE IN 2008 OF THE VARIOUS FINANCIAL AUTHORIZATIONS PERTAINING TO CAPITAL INCREASES Equity issue reserved for employees By virtue of the authorization granted by the shareholders at their Annual general Meeting of April 22, 2008 (19th resolution), the Management Board increased the Company’s share capital in one offering, through the issue of shares to group employees under the SharePlan 2008 program. The shareholders waived their preferential subscription rights to facilitate this offering to employees. In the countries that met the legal and tax requirements for participation in SharePlan, two investment options were offered in 2008: • the traditional plan, offered in 36 countries, • the leveraged plan, offered in 36 countries.
on the closing of the 2008 SharePlan offering in November 2008, AXA issued a total of 24.7 million new ordinary shares each with a par value of €2.29, all of which were entitled to dividends for 2008. Most group employees participating in SharePlan are entitled to directly exercise their voting rights at AXA’s Shareholders’ Meeting.
Performance shares In 2008, by virtue of the authorizations granted by the shareholders at the Annual general Meetings of April 20, 2005 (25th resolution) and April 22, 2008 (16th resolution) 1,417,967 performance shares were granted by the AXA Management Board (1,367,967 shares by virtue of the 2005 authorization and 50,000 shares by virtue of the 2008 authorization). Prior to the vesting and definitive acquisition of these shares by the beneficiaries (which will occur in 2010 or 2012 depending on the country of the beneficiary’s residence), the AXA Management Board will decide whether these performance share grants will be fulfilled using existing or newly issued AXA ordinary shares.
Dividends received from european companies totaled €2,328 million, an increase of €498 million, resulting from the following factors: • The €1,053 million dividend from AXA holdings Belgium represented a rise of €943 million, which was due to the capital gain on the sale of the Netherlands activities in 2007.
• on the other hand, the dividend from AXA France Assurance decreased by €678 million to €737 million due to the nonrecurrence of large capital gains realized in 2006 and paid out in 2007.
The dividend received from financial subsidiaries rose by €13 million to €147 million, including €94 million from AXA Investment Managers.
Net financial expenses, including interest expenses net of interest income from loans and investments, totaled €826 million, compared to €538 million in 2007, represented an increase of €288 million.
Financial income increased by €47 million to €497 million, mainly due to: • Income from cash holdings rose by €121 million to €174 million, as a result of the €2.1 billion increase in the average cash position in 2008. • Income from loans and receivables rose by €37 million, due to loans granted by the Company to support the growth of its subsidiaries. • however, net income from swaps fell by €123 million to€88 million, mainly because of cancellation premiums paid on interestrate swaps on dollar hedges.
Financial charges increased by €335 million to €1,323 million. • Loans from subsidiaries to the Company, as part of the group’s cash pooling arrangement, generated €160 million of additional financial charges. • Interest on deeply subordinated notes increased by €56 million, mainly because of issuances that occurred in the fourth quarter of 2007, i.e £700 million and €750 million, generating additional financial charges of €78 million. This increase was partly offset by a €18 million decrease in coupons on other British pound-denominated debts, resulting from the rise in the euro value against the British pound.
• Interest payments on commercial paper grew by €97 million as a result of the €2 billion increase in the average outstanding amount, together with the rise in issuance spreads.
Operating charges amounted to €286 million, up €54 million, owing primarily to initiatives taken by the group to promote its brand and the financing of projects through the AXA Research Fund.
• Net capital losses on asset disposals, after releases of provisions on the securities sold, totaled €143 million and related mainly to the sale of AXA treasury shares.
• Allowances for provisions for financial investments amounted to €295 million, including €225 million relating to Colisée Re because of its exceptional dividend pay-out.
The net income tax benefit was €835 million, compared to a benefit of €40 million in 2007. This item mainly consisted of tax due by the companies that are part of the tax consolidation group (€949 million). No standard rate tax charges were recorded due to the tax loss arising mainly from exchange-rate impacts. Allowances for provisions covering the risk of tax repayments to subsidiaries belonging to the French tax group totaled €95 million.
ASSeTS Intangible fixed assets amounted to €322 million, and mainly included the AXA brand acquired upon AXA’s absorption of FINAXA as part of the 2005 merger and valued at €307 million based on brand royalties billed to group subsidiaries and to the Mutuelles AXA.
Investments in subsidiaries net of valuation allowances, totaled €51,568 million, versus €47,733 million at year-end 2007, representing an increase of €3,835 million. • In order to streamline ownership of group subsidiaries, AXA SA bought €1,433 million of AXA holdings Belgium shares, and €980 million of AXA Investment Managers shares from group subsidiaries. • In June 2008, AXA SA completed the purchase of a 36.7% stake in ReSo garantia, Russia’s second-largest property and casualty insurer, for €805 million. • AXA Life europe, a company created to write unit-linked life insurance contracts with guaranteed minimum features via branches in several european countries, received a capital injection of €395 million.
Tax receivables represented surplus corporate income tax payments made on account, and totaled €609 million.
Miscellaneous receivables totaled €424 million, including €244 million of tax receivable from entities part of the AXA tax consolidation group and financial income receivables.
Marketable securities fell by €315 million due to the sale of all mutual fund units managed by the group and purchased in 2007 by the Company, partly offset by the reclassification of treasury shares mentioned above.
Cash and cash equivalents amounted to €4,126 million, up €1,584 million as a result of a liquidity risk management adapted to prevailing market conditions and to margin calls from banks relating to collateral agreements.
Other shareholders’ equity, which includes deeply subordinated notes, amounted to €5,805 million compared to €6,323 million in 2007, representing a decrease of €518 million due to exchange rate fluctuation impact.
Unrealized foreign exchange gains amounted to €1,612 million in 2008, up from €1,118 million at December 31, 2007. This item reflected the positive effects derived from the revaluation of foreign currency denominated loans and liabilities at the balance sheet closing exchange rate. The increase in this item in 2008 arose from the positive impact of exchange rate movements on debts, mainly those denominated in British pound.
Liabilities As at december 31, As at december 31, As at december 31, (in euro million) 2008 2007 2006
Allowances for depreciation of buildings and deferred charges (12) (12) (10)
FINANCIAL RESULTS OVER THE PAST FIVE YEARS Year ending Year ending Year ending Year ending Year ending December 31, December 31, December 31, December 31, December 31, (in euro million) 2004 2005 2006 2007 2008 1 – CLOSING BALANCE SHEET SUMMARY
a) Gross revenues before sales tax 1,349 1,788 1,882 2,628 3,171 b) Pre-tax income from continuing operations, before depreciation, amortization and releases 660 1,061 1,067 1,420 1,561 d) Net after-tax income after depreciation, amortization and releases 519 1,137 1,433 1,765 (1,253)
a) After tax income, before depreciation, amortization and releases 0.33 0.65 0.75 1.08 0.90 b) After tax income, after depreciation, amortization and releases 0.27 0.61 0.68 0.86 (0.60)
SUBSIDIARIES AND PARTICIPATING INTERESTS Loans and cash Other advances given Guarantees and Last closing Closing date Share shareholders’ Percentage of Gross Book Value Net Book Value by the company commitments given revenues Last closing result Dividends and other capital equity capital held of securities held of securities held still outstanding by the company available (a) available received observations
AXA UK PLC (b) 1,291 3,298 65.64% 4,556 4,556 247 300 38 56 Dec. 31, 2008 5 Old Broad Street LONDON EC2N 1AD
AXA LIFE EUROPE 100 537 100.00% 637 627 415 1 (10) Dec. 31, 2008 Wolfe Tone House – Wolfe Tone Street – DUBLIN
AXA GLOBAL RISKS 21 28 100.00% 109 60 12 1 9 10 Dec. 31, 2008 140, Frenchurch Street EC3M 6BL LONDON
LOR PATRIMOINE 53 3 99.99% 53 53 1 Dec. 31, 2008 23, Avenue Matignon – 75008 PARIS
AXA LIFE HONG KONG 6 1 100.00% 90 6 Dec. 31, 2008 151 Gloucester Road – Wan Chai – HONG KONG
AXA HOLDING MAROC 209 23 100.00% 229 229 23 18 Dec. 31, 2008 120-122, avenue Hassan II – 21000 CASABLANCA
AXA HOLDINGS BELGIUM 453 1,665 100.00% 5,318 5,318 730 696 1,053 Dec. 31, 2008 25 Boulevard du Souverain – 1170 BRUXELLES
RESO GARANTIA 268 28.23% 805 805 150 Dec. 31, 2008 Ul, Svetlanskaya, 250/1, Vladivostok,Primorsky Territory Far Eastern federal district, 690000 Russian Federation
Loans and cash Other advances given Guarantees and Last closing Closing date Share shareholders’ Percentage of Gross Book Value Net Book Value by the company commitments given revenues Last closing result Dividends and other capital equity capital held of securities held of securities held still outstanding by the company available (a) available received observations
AXA TECHNOLOGY SERVICES 25 1 99.78% 73 26 244 2 1 2 Dec. 31, 2008 Les collines de l’Arche – 76 route de la Demi lune – 92057 PARIS LA DEFENSE
AXA CESSIONS 85 25 99.99% 105 105 4 868 12 15 Dec. 31, 2008 9, avenue de Messine – 75009 PARIS
SOCIETE BEAUJON 3 107 99.86% 77 77 127 11 1 Dec. 31, 2008 21, avenue Matignon – 75008 PARIS
AXA KONZERN AG 80 1,186 34.63% 2,120 2,120 417 388 Dec. 31, 2008 Colonia – Allée 10-20 51067 KOLN
BAO MINH INSURANCE CORPORATION 31 47 16.60% 53 53 66 5 Dec. 31, 2007 26 Ton That Dam,Districk 1, Ho Chi Minh City – VIETNAM
AXA ASIA PACIFIC HOLDING LIMITED (b) 362 1,170 44.10% 541 541 783 244 3 100 Dec. 31, 2008 447 Collins Street MELBOURNE Victoria 3000
Net income for the year ended December 31, 2008 was a loss of €1,253 million compared to a profit of €1,765 million in the previous year. This loss was mainly due to a €2,181 million allowance for an exchange-rate risk provision, arising from the Company’s policy of hedging net foreign currency investments in order to protect the group’s consolidated shareholders’ equity against currency movements.
The assets at December 31, 2008 were €64,208 million, compared with €55,608 million at December 31, 2007.
1. HIGHLIGHTS The significant account movements are presented in the tables in these notes.
Since January 1, 2002, AXA SA has applied CRC regulation 2000-06 relating to liabilities. Application of this regulation has had no impact on the company’s financial statements.
Stocks options and performance shares plans are described in Part III – Section 3.2 “Full disclosure on executive compensation and share ownership” of this Annual Report.
Financial assets consist in (i) investments in and receivables from subsidiaries and affiliates and (ii) other financial assets and loans.
Income The income statement distinguishes between ordinary operations and capital operations. • ordinary operations include dividends, revenues from other investments, financial expenses, operating expenses and income from transactions in investments. • Capital operations include gains or losses on the disposal of investments in subsidiaries and affiliates and portfolio management investments, impairment charges and reversals in respect of these securities and related receivables, gains and losses arising from exchange rate movements, charges and reversals of provisions for risks and charges, and exceptional income and expense.
To improve the transparency of the financial statements, (i) charges and releases of provisions for exchange rate risk are recognized in foreign exchange result, and (ii) charges and reversals of provisions for tax repayment risk are recognized in income tax benefit/expense.
2.4. Intangible assets Intangible assets amounted to €322 million, and mainly included the AXA brand contributed by FINAXA as part of the merger in 2005 and valued at €307 million based on brand royalties billed to group subsidiaries and to the Mutuelles AXA.
2.5. Financial assets Financial assets are measured at acquisition cost or transfer cost. At the balance sheet date, the acquisition cost is compared with the fair value, and the lower of these two values is then recognized in the balance sheet.
The fair value of investments in subsidiaries and affiliates is their going concern value for the firm. This may be determined as a function of either their share price or their shareholders’ equity, including unrealized gains, and prospects for the subsidiary.
2.6. Receivables Receivables are measured at nominal value. An impairment provision is charged in the event of risk of non-recovery.
These bonds have been recognized using the single transaction approach. The redemption premium, being the difference between the value at par and the redemption value of the bond issue, was not recognized as a liability at the time of the bond issue. Redemption premiums have been amortized since 2002 and will be until maturity of the issue, using the compound interest method. The yield to maturity used is the rate which enables future payment of the redemption premium, assuming the two bonds were issued on January 1, 2002, namely 2.84% for the 1999 issue and 3.29% for the 2000 issue. The charge for the year ending December 31, 2008 amounted to €95 million, and the existing provision at December 31, 2008 was €609 million. The unamortized balance of €685 million was recognized as an off-balance sheet commitment.
2.10. Employee benefits employee benefit liability is reviewed to ensure it covers future retirement benefit obligations and post-retirement benefits. Pursuant to this review and after benefits payment of €20 million in 2008, the employee benefit liability amounted to €3 million at December 31, 2008.
A translation variance asset relating to a debt which is hedged by the purchase of currency futures does not give rise to recognition of a provision. The same is true for loans which are hedged from origination through exchange rate swaps. If a loan or borrowing generates an unrealized translation loss, but is hedged, a provision for unhedged risk is registered.
2.14. Provisions for contingent liabilities The Company is the head of a tax consolidation regime group. The tax consolidation regime provides that tax savings should be recognized directly in the Company’s financial statements. however, a provision for the return of tax savings is recognized when there is a high probability that the benefit will accrue to subsidiaries as a result of the prospect of future taxable income resulting from the group’s strategic planning.
(a) Of which: • €2,413 million for the acquisition of AXA Holdings Belgium shares and AXA Investment Managers shares from Group subsidiaries. • €395 million of capital injection in AXA Life Europe. • €805 million for the purchase of 36.7% stake into RESO Garantia, Russia’s second largest property and casualty insurer. • €300 million capital injection into AXA Mediterranean Holding as part of the financing of the Seguros ING acquisition and the buy-out of the minority shareholders in the Turkish unit AXA Oyak. (b) Of which €140 million capital decrease of Colisée RE (formerly AXA RE). (c) The €1,477 million net increase arose mainly from the $3 billion (€2,156 million) of loans granted to AXA Financial to support its subsidiaries’ solvency ratio, partly offset by the repayment of €618 million of loans granted to entities.
(e) Of which a $1 billion (€719 million) credit facility granted to shareholders in RESO Garantia and guaranteed by these shareholders’ interests in RESO Garantia.
Provisions at Provisions at (in euro million) December 31, 2007 Allowances Releases December 31, 2008
Amount amortised at Charge for Net value at (in euro million) Gross value December 31, 2007 the period December 31, 2008
Starting January 1, 2007, acquisition expenses on investments in affiliates are capitalized (included in the purchase price) and are subject to amortization over five years.
3.11. Subordinated debts (in euro million) Value at December 31, 2008 Less than one year More than 5 years
3.12. Financing debt Value at (in euro million) December 31, 2008 Less than 1 year 1 to 5 years More than 5 years
(in euro million) Value Less than 1 year 1 to 5 years
4.2 Income tax benefit amounted to €835 million, compared to €40 million in 2007. This item mainly consists of tax due by the companies that are part of the tax consolidation group (€949 million). No standard rate tax charges were recorded due to the tax loss arising mainly from exchange-rate impacts. Allowances to provisions covering the risk of tax repayments to subsidiaries belonging to the French tax group totaled €95 million.
Income tax benefit 835 835 * A positive sign indicates tax benefit. (a) Dividends received from investments in subsidiaries are under the fiscal “parent-subsidiary” regime and are tax-exempt. (b) No tax benefit is recorded due to the Group tax loss.
Commitments to buy back shares and bonds from group entities 779 –
Subordinated convertible bond redemption premium (see § 2.9 of this note) 685 5.2. Commitments in respect of shareholder pacts Cross-Shareholding Agreements AXA has entered into cross-shareholding agreements with BNP Paribas and Schneider which are described hereafter.
AgReeMeNT wITh BNP PARIBAS on December 15, 2005, and after authorization by the AXA Supervisory Board on June 29, 2005, the AXA group and the BNP Paribas group entered into an agreement that replaces a prior agreement between them dated September 12, 2001.
In force for a period of five years starting from December 16, 2005, this agreement is renewable automatically for an initial period of two years and for successive periods of one year thereafter, unless one of the two parties decides to terminate the agreement earlier, in which case the terminating party is required to give three months notice prior to the next renewal date.
* 10% depreciation of the Euro. (a) External debt (excluding intra-group debt) before hedging.
(b) Loans are net of internal refinancing. (c) Both eligible and ineligible derivatives under IFRS. (i) A 1% rise in interest rates leads to a 2.6% decrease in the fair value of debt, a 0.4% increase in the fair value of loans, and a 89.6% rise in the fair value of derivatives. (ii) A 10% depreciation of the Euro leads to a 2.3% increase in the fair value of debt, a 5% decrease in the fair value of loans and a 912.4% decrease in the fair value of derivatives. The information on fair value presented above should be used with care: • Since these estimates are based on the use of measurements such as interest rates and spreads at the balance sheet date; such measurements may fluctuate over time.
• And because there are a number of possible ways to perform these calculations.
7. OTHER INFORMATION Affiliated companies (consolidated entities) (value net of provisions for impairment)
Report of Statutory Auditors on the Company’s financial statements (For the year ended December 31, 2008)
In compliance with the assignment entrusted to us by your general Meeting, we hereby submit our report for the year ended December 31, 2008 on: • the audit of the financial statements of AXA, as attached to this report, • the justifications of our assessments, • the specific verifications and information required under French law.
In our opinion, the financial statements give a true and fair view of the Company’s financial position and its assets and liabilities as at December 31, 2008 and of the results of operations for the year then ended, in accordance with accounting rules and principles applicable in France.
we have assessed whether the impairment tests performed by the Company, depending on the invested assets situation and the volatility of financial markets, are appropriate and we also assessed the reasonableness of the resulting provisions.
As required by law, we have verified that the information pertaining to equity and controlling interests of the Company, as well as pertaining to the identity of capital holders, has been duly disclosed in the aforementioned Management Board’s Report.
Acquired / Disinvested business and others 11 (371) (359) (576) (1,536)
Change in shares issued and treasury shares – 156 156 (881) (2,087)
(a) To align with CFO Forum guidance in respect of “Group EV” calculation published in June 2008 as part of the MCEV Principles (b) 2007 published Group EV included E22,752 million of Value of Inforce (VIF) and E12,088 million of Tangible Net Asset Value (TNAV). With the same methodology, 2008 TNAV would have been E6,141 million.
Total operating return on Group EV was relatively stable at 12% compared to 14% in 2007 for the restated group ev, despite a drop in the New Business value (NBv) reflecting a decrease in volume combined with adverse financial market conditions impacting all regions.
The Life & Savings ANAv is derived by aggregating the local regulatory (statutory) balance sheets and reconciling with the Life & Savings IFRS shareholders’ equity with the following main adjustments: • addition of unrealized capital gains/losses not included in shareholders’ equity, • elimination of the value of intangibles, • elimination of unrealized capital gains/losses included in the projection of future cash-flows (vIF), • adjustment for the differences between AXA’s consolidated accounting basis and local regulatory bases.
Net unrealized capital gains/losses not included in IFRS shareholders’ equity 1,846
Unrealized capital gains/losses projected in the VIF & other Stat-GAAP adjustments (965)
Life & Savings eev is obtained by adding the Life & Savings vIF to the Life & Savings ANAv: (euro million – group share) 2007 2008
“Life & Savings Present value of expected Premium” (PveP) is a measure of the new business volume which includes the present value of the future premiums expected to be received over time for business sold in the current year. The “PveP Margin” is the ratio of NBv to PveP.
The Life & Savings vIF calculation by nature involves many assumptions about the future. For Life & Savings eev, AXA has adopted a “market-consistent” approach to setting asset return assumptions. each cash flow is discounted at an appropriate discount factor, so that starting with E1 of bond or of equity, projecting expected cash flows and discounting, will simply give E1 of value. Mechanically, this can be described in a shortcut as assuming that, in the future, all assets will earn the risk-free rate (referred to as the “reference rate” in the embedded value methodology) defined by the current market. however, cash flows are projected not only in a single scenario, but rather a stochastic set of scenarios is created, with the set maintaining the market-consistent condition that E1 of any asset projected into the future gives a present value of E1. Future earnings available to shareholders are assessed across this range of stochastic scenarios, with the present value being the Life & Savings vIF. our major assumptions include: • Actuarial assumptions reflect best estimates based on recent experience. • No productivity gains in the future are assumed, while a 2.0% average inflation rate was assumed in 2008 (2.2% in 2007).
• expenses are adjusted for non-recurring expenses and one-time strategic spending. • Some benefit from future mortality improvement on Life business is included, while annuity business does have an allowance for the costs of longevity increasing in all markets. • Non-financial risks are provided for through the cost of holding capital consistent with the necessary amount to obtain a AA
In addition to providing a comparison basis to other valuation techniques, the vIF IDR for 2007 also provides an element of the movement analysis between 2007 and 2008.
The following table presents a detailed analysis of the movement of the Life & Savings eev between 2007 and 2008: (euro million – group share) Life EEV 2007/2008
Operating performance from existing business considers the movements in eev relating to the business inforce at the beginning of the year, excluding the investment impacts that are shown below. The total operating performance of E2,502 million is analyzed in several components: • Expected existing business contribution of E2,748 million is the expected contribution from existing business assuming assets earned the rates in the illustrative investment scenarios used to calculate IDR for the prior year. • Operational experience changes of E303 million is the impact of actual versus expected experience for items like mortality, expenses, lapse rates, etc.
• Operational assumptions changes of E–549 million is the impact on vIF of changes in future assumptions for items like mortality, expenses, lapse rates, etc.
Current year investment experience of E–17,176 million includes (i) the variance in experience during 2008 from the one expected in the illustrative real world investment scenario at the end of 2007, and (ii) the change in value created by reflecting year-end 2008 yield curves and investment conditions in the eev rather than those of year-end 2007.
Change in investment assumptions is zero. This line would reflect changes to investment assumptions such as volatilities and correlations between asset classes, which are not directly driven by investment market data observed at year-end. In 2008, no such changes were made.
Exchange rate movements impact of E361 million reflects the evolution of foreign currencies versus the euro, not taking into account the mitigating impact of the currency hedging program implemented by AXA SA.
Life & Savings EEV of acquired/disinvested business and others of E–11 million reflects the part of eev for the new acquisitions within the Life & Savings segment in 2008, offset this year by an exceptional adjustment in Japan.
Downward parallel shift of 100 basis points in reference interest rates (2,639) (279)
10% higher value of equity markets at start of projection 1,085 97 10% lower value of equity markets at start of projection (1,047) (113)
Overall and permanent decrease of 10% in expenses 1,355 97 5% lower mortality rate for annuity business (326) (18)
Upward shift of 25% of the volatility on equity markets (1,153) (197)
Upward shift of 25% of the volatility on bonds (815) (72)
TOWERS PERRIN’S OPINION An independent actuarial consultancy firm, Towers Perrin, was hired by AXA to perform a review on the Life & Savings eev, and issued the following statement of opinion: “Tillinghast, the insurance consulting business of Towers Perrin, has reviewed the methodology and assumptions used in the Life & Savings european embedded value (eev) at December 31, 2008, and the 2008 Life & Savings New Business value (NBv) for the principal life operations of the AXA group. our review included the analysis of movement in embedded value from December 31, 2007, and the sensitivities.
Towers Perrin has concluded that the methodology and assumptions comply with the eev Principles. In particular: • The methodology makes allowance for the aggregate risks in the covered business through AXA’s market consistent methodology as described in the ev Report (available on www.axa.com). The methodology uses reference rates in excess of swap rates to allow, on a uniform basis within major territories, for the current dislocated market conditions and includes a stochastic allowance for the cost of financial options and guarantees. It should be noted that in calibrating the stochastic scenarios, asset volatilities are based on market data averaged over a one year period; • The operating assumptions have been set with appropriate regard to past, current and expected future experience; • The economic assumptions used are internally consistent and consistent with observable market data; and • For participating business, the assumed bonus rates, and the allocation of profit between policyholders and shareholders, are consistent with the projection assumptions, established company practice and local market practice.
In arriving at these conclusions, Towers Perrin relied on data and information provided by AXA. This opinion is made solely to AXA in accordance with the terms of Towers Perrin’s engagement letter. To the fullest extent permitted by applicable law, Towers Perrin does not accept or assume any responsibility, duty of care or liability to anyone other than AXA for or in connection with its review work, the opinions it has formed, or for any statement set forth in this opinion.”
AgeNDA ORDINARY RESOLUTIONS First resolution Approval of the Company’s financial statements for 2008 – parent only
Third resolution earnings appropriation and declaration of a dividend of €0.40 per share
Fifth resolution Re-appointment of Mr. Jacques de Chateauvieux to the Supervisory Board
Sixth resolution Re-appointment of Mr. Anthony hamilton to the Supervisory Board
Ninth resolution Appointment of Mr. Ramon de oliveira to serve as a member of the Supervisory Board
Tenth resolution Authorization granted to the Management Board to purchase shares of the Company
EXTRAORDINARY RESOLUTIONS Eleventh resolution Delegation of authority to the Management Board in order to increase the share capital by means of capitalization of reserves, earnings or premiums
Thirteenth resolution Delegation of authority to the Management Board in order to increase the share capital by issuing ordinary shares or securities giving a claim to ordinary shares of the Company or one of its subsidiaries, without preferential subscription rights of shareholders
Fourteenth resolution Authorization granted to the Management Board, in the event of an issue of shares or securities without preferential subscription rights, to set the issue price under the conditions defined by the Shareholders and up to a maximum of 10% of the share capital
Fifteenth resolution Authorization granted to the Management Board to increase the amount of the initial issue of shares or securities, with or without preferential subscription rights, decided respectively by virtue of the twelfth to fourteenth and sixteenth to eigthteenth resolutions
Sixteenth resolution Delegation of authority to the Management Board in order to increase the share capital by issuing ordinary shares or securities giving a claim to the Company’s ordinary shares, in the event of a public exchange offer initiated by the Company
Seventeenth resolution Delegation of authority to the Management Board in order to increase the share capital by issuing ordinary shares or securities giving a claim to ordinary shares in return for contributions in kind up to a maximum of 10% of the share capital, outside the event of a public exchange offer initiated by the Company
Twentieth resolution Authorization granted to the Management Board in order to increase the share capital by issuing ordinary shares or securities giving a claim to the Company’s ordinary shares, reserved for employees enrolled in the employer-sponsored Company savings plan
Twenty-first resolution Authorization granted to the Management Board to increase the share capital of the Company by issuing ordinary shares, without preferential subscription rights, in favor of a category of beneficiaries
Twenty-third resolution Delegation of authority to the Management Board in order to increase the share capital of the Company by issuing preferred shares, with suppression of the ordinary shareholders’ preferential subscription rights in favor of AXA Assurances IARD Mutuelle and AXA Assurances vie Mutuelle
Twenty-fifth resolution Delegation of authority to the Management Board in order to increase the share capital of the Company by issuing preferred shares, without preferential subscription rights of ordinary shareholders
Twenty-seventh resolution Authorization to comply with all formal requirements in connection with this Meeting
The first items on the agenda pertain to the approval of AXA’s parent Company (1st resolution) and consolidated (2nd resolution) financial statements. AXA’s parent Company financial statements for the year ended December 31, 2008 show a loss of €1,253 million, compared to a profit of €1,765 million for the preceding fiscal year. The consolidated financial statements for fiscal year 2008 show a net income group share of €923 million, compared with €5,666 million for the preceding fiscal year. For more information on AXA’s financial statements for 2008 and on the business of the Company during the 2008 and since the beginning of 2009, please refer to the Management Board Report that is included in the 2008 Annual Report (Document de Référence) filed with the AMF (Autorité des Marchés Financiers) and which is made available in accordance with applicable laws and regulations, in particular on AXA’s website (www.axa.com).
The Management Board has further decided to recommend the payment of a dividend of €0.40 per share this year, representing a global distribution of €835,663,267.60, that is a decrease of 66% compared to the previous fiscal year. This dividend will be charged on the reserve for contingencies which is at the free disposal of your Meeting.
This dividend would be paid out on May 12, 2009 and the ex-dividend date would be on May 7, 2009. In accordance with the AXA Bylaws, this proposal for appropriation of earnings and the date for the dividend payout were approved by the Supervisory Board of your Company at its meeting on February 18, 2009.
The proposed dividend entitles eligible recipients to the 40% tax relief set forth in paragraph 2° of Article 158.3 of the French general Tax Code (Code Général des Impôts). It applies to all natural persons deemed to be French resident for tax purposes, and it amounts to €0.16 per share. As a reminder, Article 117 quater of the French general Tax Code, as it results from the 2008 Finance Act (loi de finances pour 2008), provides that natural persons who are deemed to be French resident for tax purposes, and whose income is eligible for the 40% tax relief may, barring certain exceptions, opt to have an 18% flat deduction at source, calculated on the basis of the gross amount of income received.
The flat deduction at source, which is completed immediately, is paid by the institution responsible for payment within the first two weeks following the date of the dividend payout. The welfare taxes (CSg, CRDS and welfare deduction) due by the persons who are deemed to be French residents for tax purposes are, in any case, paid at the date of the dividend payout.
In the 4th resolution, you are being asked to approve the special report of the Statutory Auditors on the so-called “regulated agreements”. It is specified under this resolution that no new regulated agreements were entered into during the fiscal year 2008. Two regulated agreements which were authorized in years prior to 2008 remained in force in 2008: (i) the shareholders agreement with the BNP Paribas group and (ii) the shareholders agreement with the Schneider group.
on December 15, 2005 the AXA group and the BNP Paribas group entered into an agreement concerning minimal and stable cross-shareholdings. The parties have agreed to a reciprocal repurchase option in the event of a hostile takeover attempt, by a third party, over the share capital of either AXA or BNP Paribas. In these circumstances, and pursuant to the agreement, the AXA group would be entitled to repurchase, partly or entirely, the outstanding shareholding of BNP Paribas in AXA on the date it exercises its repurchase option. Reciprocally, the BNP Paribas group will enjoy the same repurchase option over the outstanding shareholding of AXA in BNP Paribas.
Code, (ii) granting free shares to some or all eligible corporate officers, employees, former employees and general insurance agents enrolled in a company savings plan sponsored by the Company or the AXA group, (iii) granting free shares to some or all employees or eligible corporate officers of the Company or the AXA group pursuant to the provisions of Articles L.225-197-1 et seq. of the French Commercial Code, or, (iv) assigning shares to some or all employees, former employees, eligible corporate officers and general insurance agents of the Company or the AXA group in connection with the implementation of a employee savings plan pursuant to the applicable laws and regulations, or any other employee savings plan, c) holding shares for the purpose of subsequent payment or in exchange in the event of potential external growth acquisitions, in compliance with market practice accepted by the AMF, d) delivering shares upon exercise of rights attached to securities representing debt instruments giving a claim on the Company’s share capital, e) canceling some or all of these shares, provided that the Management Board is duly authorized by the Shareholders, in an extraordinary resolution, to reduce the capital through the cancellation of the shares acquired pursuant to a share repurchase program, or f) in general, performing all operations admissible by the laws and regulations in force, provided that the Shareholders are beforehand informed, by any means admitted by the regulations, in the case the Management Board wish to use this share repurchase authorization for any other objective that has not been expressly listed above.
The Management Board recommends that this authorization, which replaces and renders null and void the unused portion of the authorization granted by the Shareholders at their Meeting of April 22, 2008, under the 15th resolution, shall be granted for a period of 18 months, starting from the date of your Meeting.
The Shareholders, at their Meeting of May 14, 2007, granted to the Management Board, by delegation of authority, the necessary financial authorizations allowing it to increase the share capital. These authorizations expire in July 2009.
The global nominal upper limit of capital increase by issues of ordinary shares and preferred shares that may be carried out pursuant to the delegations of authority proposed to your general Meeting accordingly amount to €3 billion (excluding capital increases that may be carried out pursuant to Company savings plans by virtue of the 20th and 21st resolutions, those capital increases being limited to €150 million).
In the 15th resolution, the Management also requests from your general Meeting, pursuant to the provisions of Article L.225135 -1 of the French Commercial Code, an authorization to increase the initial amount of a capital increase (carried out with or without preferential subscription rights of Shareholders in application of the 12th to 18th resolutions) within the limit of 15% of the initial issue and at the same price as the one set for the initial issue. This authorization may apply, in particular, if the Management Board notices an extra demand for subscriptions and, as a consequence, resolves to grant a “green shoe” option conforming to market practice. The additional amount of capital increase likely to result from the 15th resolution being deducted from the respective upper limits of the 12th to 18th resolutions, could not, under any circumstances, lead to increase the upper limits detailed hereinbefore.
The Management Board would establish in accordance with the law, at the time it use your delegations, an additional Report detailing the definite and final conditions of such issue. This report, as well as the Statutory Auditors’ Special Report, would be subsequently made available at the Company’s registered office and then reported to you on the occasion of the following ordinary general Meeting.
In the event of a capital increase by free allotment of shares, the Management Board could resolve that the odd lot of the allotment rights shall not be negotiable nor assignable, and that the corresponding shares shall be sold, with the proceeds of such sale being distributed among the owners of the allotment rights in accordance with the conditions set forth in the applicable laws and regulations.
Issue of ordinary shares or securities giving a claim to ordinary shares of the Company or one of its subsidiaries, with preferential subscription rights of shareholders (12th resolution) In the 12th resolution, your Management Board requests from your general Meeting a delegation of authority to issue ordinary shares or securities giving a claim to ordinary shares of the Company or one of its subsidiaries, with preferential subscription rights. The maximum nominal amount of the capital increases that may be carried out by virtue of this resolution would not exceed €2 billion.
The securities giving a claim to ordinary shares of the Company or a subsidiary that would be issued by virtue of this resolution may, in particular, consist in debt instruments, be combined with the issue of such debt instruments, or consist in instruments enabling the issue of such debt instruments.
The Shareholders have the right to exercise, under the conditions set forth in the law, their preferential subscription rights in order to subscribe to issued shares or securities, on the basis of their exact right and as of a right, if applicable and provided for by the Management Board.
Pursuant to this financial authorization, the Management Board would determine the category of the securities issued and would set their subscription price, with or without payment of a premium, the method of paying up, the date – even retroactive – as of which they shall earn dividends, and the conditions according to which the securities issued by virtue of this delegation shall give a claim to ordinary shares of the Company or a subsidiary.
In the event the issues of ordinary shares or securities giving a claim to the share capital being undersubscribed, the Management Board may implement, without prejudice to its option to restrict the capital increase to the subscribed amount if the unsubscribed shares or securities giving a claim to the share capital represent less that 3% of the share capital, in the order it considers appropriate, one and/or several of the following options: • limit the capital increase to the amount of subscriptions, provided that such amount is at least equal to the three quarters of the increase resolved; • freely allocate some or all of the unsubscribed securities; • offering all or a portion of the unsubscribed securities to the public.
Indeed, in order to be able to seize the opportunities offered on the market and to optimize the collection of the Company’s ownfunds, your Management Board considers useful to have the possibility to carry out capital increases, without preferential rights of subscription of the Shareholders. In this regard, your Management Board would like to bring your attention on the ordinance n°2009-80 dated January 22, 2009 relative to public offers and containing various finance-related provisions (Ordonnance n° 2009-80 du 22 janvier 2009 relative à l’appel public à l’épargne et portant diverses dispositions en matière financière). This ordinance expressly provides, from now on, for the possibility to conduct private placements to qualified investors or a restricted circle of investors under the meaning to the French Monetary and Financial Code, concurrently to a public placement, or exclusively, in the case of preferential subscription rights being suppressed. The provision of the ordinance will enter into force on April 1st, 2009 and since your general Meeting is convened on April 20, 2009, the 13th resolution takes into account the new provisions such as resulting from the ordinance.
The nominal amount of the capital increases that may be carried out by virtue of this resolution could not exceed 20% of the share capital as at the date of your Meeting under the limit of €1 billion, in deduction of the global upper limit of €2 billion referred to in the 12th resolution. It is further specified that, pursuant to the new provisions of Article L.225-136 of the French Commercial Code resulting from the ordinance, the nominal amount of immediate or deferred capital increases resulting from issues that would be carried out exclusively through private placement shall not exceed the upper limit set forth in the laws and regulations in force at the time of the issue. At the present time, this upper limit is set at 20% of the share capital per year.
The Management Board could establish a priority subscription period on the basis of their exact right and/or as of a right to the benefit of the Shareholders, within the conditions set forth in the laws and regulations.
In the event the issues of ordinary shares or securities giving a claim to the share capital being undersubscribed, the Management Board may implement, without prejudice to its option to restrict the increase to the subscribed amount if the unsubscribed shares or securities giving a claim to the share capital represent less that 3% of the share capital, in the order it considers appropriate, one and/or several of the following options: • limit the capital increase to the amount of subscriptions, provided that such amount is at least equal to the three quarters of the increase resolved; • freely allocate some or all of the unsubscribed securities; • offering all or a portion of the unsubscribed securities to the public.
In the 14th resolution, in accordance with the provisions of Article L.225-136 of the French Commercial Code, you are however proposed to authorize the Management Board to set the issue prince as follows, within the limit of 10% of the share capital for each 12-month period: The issue price may not be less than, at the discretion of the Management Board, (a) the volume-weighted average quoted price of the share on euronext Paris over the trading day preceding the setting of the issue price or (b) the volume-weighted average quoted price of the share on euronext Paris set over the trading day at the time the issue price is set, in each case minus a maximum discount of 5%.
This decision would entail a waiver by the Shareholders of their preferential subscription rights to shares or securities, in favor of the owners of the securities tendered in the public exchange offer.
Issue of ordinary shares and securities giving a claim to ordinary shares in return for contributions in kind up to a maximum of 10% of the share capital (17th resolution) In the 17th resolution, your Management Board requests from your general Meeting a delegation of authority in order to issue ordinary shares or securities giving a claim to ordinary shares of the Company or one of its subsidiaries, in return for the contributions in kind made to the Company in the form of capital shares or securities giving a claim to the capital. The nominal amount of a capital increase, immediately or in the future, that may be carried out by virtue of this resolution would not exceed 10% of the share capital, in deduction of the upper limit referred to in the 13th resolution.
This delegation would entail a waiver by the Shareholders of their preferential subscription rights to shares or securities issued, in favor of the owners of the securities which result from the contributions in kind.
Issue of ordinary shares as a result of an issue of securities by subsidiaries of the Company (18th resolution) In the 18th resolution, the Management Board requests from your general Meeting a delegation of authority in order to issue ordinary shares of the Company, as a result of issue of securities giving a claim to the Company’s ordinary shares by subsidiaries of the Company. The total nominal amount of issues carried out by virtue of this resolution would not exceed 20% of the share capital as at the date of your Meeting under the limit of €1 billion, in deduction of the upper limit referred to in the 13th resolution.
This decision would result in the waiver, in favor of the owners of securities issues by the subsidiaries, by the Shareholders of their preferential subscription rights to the Company’s ordinary shares to which the securities issued by the subsidiaries may give a claim to. The Shareholders would not have a preferential subscription rights to these securities.
Issue of securities that entitle to an allotment of debt instruments without a claim on the Company’s share capital (19th resolution) In the 19th resolution, your Management Board requests from your general Meeting a delegation of authority in order to issue securities that entitle to an allotment of debt instruments, without capital increase. The total nominal amount of this issue would not exceed €2 billion, this upper limit being distinct and separate from the debt instruments that would be issued pursuant to the 12th to 17th resolutions or in accordance with Article L.228-40 of the French Commercial Code. This delegation of authority covers the securities entitling to an allotment of debt instruments that are not referred to by the 12th to 17th resolutions and that consist in securities entitling to the allotment of debt instruments such as, for example, bonds with bond warrants attached.
Under the 20th resolution, the Shareholders are requested to grant full authority to the Management Board, for a 18-month period and with the option of sub-delegation to any person authorized by law, to issue ordinary shares or securities giving a claim to the Company’s ordinary shares reserved to corporate officers, employees, former employees or general insurance agents enrolled in the employer-sponsored savings plan(s) of the Company or the AXA group, pursuant to the provisions of Articles L.225-138-1 and L.225-129-6 of the French Commercial Code, and Articles L.3332-1 et seq. of the French Labor Code. The total nominal amount of this issue would not exceed €150 million. This authorization would also entail a suppression of the preferential subscription rights of shareholders to shares or securities, possibly on free allotment, in favor of corporate officers, employees or general insurance agents. It also entails a waiver of their preferential subscription rights on the shares to which such securities may give a claim to.
In accordance with the laws and regulations in force, the subscription price of the issued shares shall not be more than 20% lower than the average quoted price of the AXA’s share on euronext Paris over the twenty trading days prior to the day on which the Management Board formally determines the opening date of the subscription period, nor be higher than this average.
As continuation of the 20th resolution, the 21st resolution proposes to authorize the Management Board, for a period of 18 months, to proceed to one or several capital increases reserved to a bank or a subsidiary of such bank which, at the request of the Company, participates in the implementation of a structured offer for employees, corporate officers or general insurance agents of entities affiliated to the Company within the meaning of Articles L.225-180 of the French Commercial Code and L.3344-1 as well as L.3344-2 of the French Labor Code, incorporated outside France.
The total nominal amount of shares that may be issued by virtue of this authorization would be limited to €150 million, it being specified that this maximum amount would be common to the 20th and 21st resolutions in such way that the amount capital increase resulting from the 20th and 21st resolutions would not exceed €150 million in nominal.
At the time the Management Board use the authorizations hereinbefore, complementary reports will be established by the Management Board and the Statutory Auditors, in compliance with the legal provisions in force.
It is proposed to grant to the Management Board three delegations of authority to carry out (i) one or several issues of preferred shares with preferential subscription rights for existing shareholders (24th resolution), (ii) one or several issues of preferred shares without preferential subscription rights (25th resolution) and (iii) one or several issues of preferred shares reserved for the sole benefit of AXA Mutuelles (AXA Assurances IARD Mutuelle and AXA Assurances vie Mutuelle) (23rd resolution). with respect to the delegations of authority under (ii) and (iii) above relating to issues without preferential subscription rights for existing shareholders, it is proposed that you waive such preferential subscription rights. In accordance with applicable law, the delegation of authority relating to issues reserved for the AXA Mutuelles is subject to an independent auditor’s report reviewing the particular advantages (avantages particuliers) relating to the preferred shares.
Subject to certain conditions, the preferred shares may be repurchased at the option of AXA.
ISSUe PRICe The issue price of any issue of preferred shares shall be determined by the Management Board in its decision to issue any preferred shares in accordance with the provisions of the Bylaws. The issue price shall be equal to the volume-weighted average quoted price of the AXA ordinary share over the twenty trading days preceding the decision to issue and/or, in the event of issues of preferred shares that are fungible with existing listed preferred shares, shall be at least equal to the minimum price authorized by applicable laws and regulations. The nominal value of the preferred shares shall be the same as that of the ordinary shares.
PReFeRReD DIvIDeND Pursuant to the resolutions proposed relating to preferred shares, a preferred dividend payable to holders of preferred shares shall be proposed to the Annual Shareholders’ Meeting each year. The preferred dividend shall be determined by the Management Board in its decision to issue any preferred shares, in accordance with the provisions of the Bylaws. This dividend shall be determined within a range of a multiple of 1.2 to 1.8 of the dividend paid on ordinary shares in respect of the prior fiscal year.
In all cases, the total preferred dividend distributed to holders of preferred shares in a fiscal year shall not exceed 90% of the earnings available for distribution for such fiscal year.
RePURChASe Preferred shares may be repurchased by AXA in accordance with the Bylaws, in particular at any time after the fifth anniversary of their issue date, subject to the prior approval of the French insurance regulator (Autorité de Contrôle des Assurances et des Mutuelles). Such shares may be repurchased at their issue price, increased in certain cases by an amount calculated by reference to the minimum dividend payable (between 6% to 8% of the current amount) and decided by the Management Board in its decision to issue such preferred shares.
The modifications to the Bylaws relating to the creation of different categories of preferred category B shares (which can give rise to new categories of preferred shares in the case of successive share issues) are set out in the annex to this report. Category A shares shall consist of all existing ordinary shares of the Company.
This authorization was granted to the Management Board for a period of 18 months as from the date of the Shareholders’ Meeting in question, for the purpose of increasing the Company’s share capital in one or more issues, acting on the basis of its own deliberations, by issuing shares reserved for group employees or former employees, provided they are members of the AXA group employee savings plan (Plan d’Epargne d’Entreprise du Groupe) or the International employee Stock Purchase Plan (IeSPP), up to a maximum nominal amount of €100 million.
of euronext Paris S.A. for a period of 20 trading days ended the last day prior to the decision of the Company’s Management Board fixing the dates of the subscription period,
• for the leveraged plan, 85.85% of the arithmetical average of the opening stock price quotes for the AXA shares on the Compartment A of euronext Paris S.A. for a period of 20 trading days ending the last day prior to the decision of the Company’s Management Board fixing the dates of the subscription period, with the exception of the leveraged plan in germany, where the price will equal 100% of the above mentioned average.
The Management Board decided to set the dates of the subscription period for Shareplan 2008 as follows: • from September 24, 2008, inclusive, to october 9, 2008, inclusive, except for employees in Belgium; and • from September 24, 2008, inclusive, to october 23, 2008, inclusive, for employees in Belgium.
The capital increase is expected to occur on November 28, 2008.
2. Impact of the proposed issue The following table shows the impact of an issuance of a maximum of 43,668,122 new shares on a shareholder who owns 1% of AXA’s share capital 1 and who does not subscribe to the capital increase: Shareholder’s interest in the share capital (%)
After the issue of a maximum of 43,668,122 new shares 0.98%
• In case the capital increase would be entirely subscribed via the leveraged plan (excluding germany): Interest in consolidated shareholders’ equity as of June 30, 2008 (per share)
(1) Based on the number of shares comprising AXA’s share capital as declared by the Company to the Autorité des marchés financiers (AMF) on August 8, 2008, i.e. 2,064,029,718.
AXA SUPeRvISoRy BoARD’S CoMMeNTS oN The MANAgeMeNT BoARD’S RePoRT AND The FINANCIAL STATeMeNTS
Dear Shareholders, your Supervisory Board met eigth times in 2008. In accordance with applicable regulations and AXA’s Bylaws, the Board completed all the checks and controls on the operations and business of the Management Board it deems appropriate, based on the works of its four special-purpose Committees (Selection, ethics, governance and human Resources Committee, which held four meetings; Compensation Committee, which held four meetings; Finance Committee, which held five meetings; Audit Committee, which held six meetings).
your Supervisory Board, in particular, sought to ensure that its own organization contributed to the good corporate governance of the Company.
In addition, the Supervisory Board reviewed the financial resolutions put to the vote at your Meeting, and requiring its prior authorisation. These resolutions were approved by the Supervisory Board, which does not have any objection or specific remark in respect thereof.
The term of office of Mr. henri Lachmann, first appointed as a member of the Supervisory Board in 1996, is set to expire at the close of this Meeting. The Shareholders are accordingly asked to replace him. The Supervisory Board, following the recommendation of its Selection, ethics, governance and human Resources Committee, has rendered a favorable opinion on the appointment of Mr. Ramon de oliveira whose expertise in the financial and insurance sectors will further enhance the Supervisory Board’s work. The Supervisory Board wishes to cordially thank Mr. henri Lachmann for the quality of his contributions to the Board.
The exceptional circumstances of 2008 both in the financial markets and for the general economy, has caused AXA to strengthen its risk management and to enhance the design and profitability of certain of its life & savings products. Confronted with an economic environment and continuing uncertainty in financial markets during 2009, AXA will endeavor to reduce the factors contributing to operational and financial vulnerabilities, while also positioning itself to profit from the recovery.
we would like to thank specially the employees of the AXA group and the Management Board for the quality of their work and their high commitment to the success of the Company.
on the basis of its report, your Management Board proposes to your general Meeting: • to authorize it, for a 26-month period, to resolve the following issues, in France or abroad, and set their final terms and, as the case may be, to waive your preferential subscription rights: – issue ordinary shares and/or securities giving a claim on ordinary shares of the Company, or, pursuant to Article L.228-93 of the French Commercial Code, of a company in which the Company holds directly or indirectly more than half of the capital, with preferential subscription rights (12th resolution),
– issue of ordinary shares as a result of an issue, by subsidiaries of the Company, of securities giving a claim to the Company’s ordinary shares (18th resolution),
• €6 billion for debt instruments giving a claim on ordinary shares of the Company, issued pursuant to the 12th to 17th resolutions.
Since the amount of the issue price is not set, we do not express any opinion as to the finals terms according to which the issues can be carried out, and consequently, as to the proposal for suppression of the preferential subscription rights of the 13th, 14th, 16th and 17th resolutions.
Special Report of Statutory Auditors on the issue of securities entitling to an allotment of debt instruments (General Meeting of the Shareholders on April 30, 2009 – 19th resolution)
In our capacity as the Statutory Auditors of AXA, and in accordance with the terms of our appointment pursuant to the French Commercial Code, and in particular pursuant to its Article L.228-92, we hereby submit our report on the proposed delegation of authority to your Management Board in order to issue securities that entitle to an allotment of debt instruments, without increase of the Company’s share capital, on which you are being asked to deliberate and vote.
we performed our work in accordance with the standards of our profession applicable in France. These standards require that we verify the contents of the Management Board’s report on such transaction.
PricewaterhouseCoopers Audit Mazars yves Nicolas – eric Dupont Patrick de Cambourg – Jean-Claude Pauly
Special Report of Statutory Auditors on capital increase without preferential subscription rights, reserved for employees enrolled in the employer-sponsored Company savings plan
(General Meeting of Shareholders on April 30, 2009 – 20th resolution)
In our capacity as Statutory Auditors of AXA, and in accordance with Articles L.225-135 et seq. of the French Commercial Code, we hereby submit our report on the proposed authorization to the Management Board in order to resolve a capital increase without preferential subscription rights, up to a nominal amount of €150 million, by issuing ordinary shares or other securities with a claim to the share capital of the Company, reserved for corporate officers, employees or former employees and general insurance agents of your Company and affiliated companies or economic interest groups within the meaning of Article L.225180 of the French Commercial Code who are enrolled in AXA’s employer-sponsored Company savings plan(s), on which you are being asked to deliberate and vote.
on the basis of its report, your Management Board proposes that you authorize it, over a period of 18 months, to resolve one or several capital increases and that you waive your preferential subscription rights on any shares or securities with a claim to the share capital of the Company to be issued. As the case may be, it would set the final terms of such transactions.
your Management Board is required to prepare a report in accordance with Articles R.225-113 and R.225-114 of the French Commercial Code. our role is to express our opinion as to the fairness of the figures resulting from the financial statements, on the proposal for suppression of the preferential subscription rights, and on other information pertaining to the issue contained in this report.
It is specified that: • the aggregate nominal amount which may result from this resolution and the 21st resolution shall not exceed the above mentioned nominal amount of €150 million; • the maximum discount set shall not exceed 20% off an average quoted price of share on euronext Paris over the twenty trading days preceding the day on which the Management Board formally resolve the opening date of the subscription period; • the Management Board may reduce or eliminate the aforementioned discount, as it deems appropriate, in particular to take into account the new international accounting standards, or, inter alia, locally applicable legal, accounting, tax or social regulations; • the Management Board may also substitute all or part of the discount by allotting ordinary shares or other securities with a claim to the capital.
we performed our work in accordance with the standards of our profession applicable in France. These standards require that we verify the fairness of the information contained in the report of the Management Board and the fairness of the terms and conditions under which the issue price is being determined.
Notwithstanding subsequent review of the terms and conditions under which any of these capital increases may be decided, we have nothing to report concerning the methods used to set the issue price of securities to be issued, as disclosed in the Management Board report.
Since the amount of the issue price is not set, we do not express any opinion as to the final terms and conditions under which the capital increase will be carried out, and consequently, as to the proposal for suppression of the preferential subscription rights.
In compliance with Article R.225-116 of the French Commercial Code, we will prepare a complementary report, as the case may be, when your Management Board will make use of this authorization.
Special Report of the Statutory Auditors on the capital increase without preferential subscription rights, reserved for a category of beneficiaries
In our capacity as Statutory Auditors of AXA, and in accordance with the terms of our assignment pursuant to Articles L.225135 et seq. of the French Commercial Code, we hereby submit our report on the proposed increase of the share capital without preferential subscription rights, up to a maximum nominal amount of €150 million, and reserved for a category of beneficiaries, on which you are being asked to deliberate and vote.
It comes under the responsibility of your Management Board to prepare a report in accordance with Articles R.225-113 and R.225-114 of the French Commercial Code. we are required to give our opinion on the fairness of the figures resulting from the financial statements, on the proposal for suppression of the preferential subscription rights and on other information pertaining to the issue contained in this report.
we performed our work in accordance with the standards of our profession applicable in France. Those standards require that we plan and perform procedures to verify the fairness of the information provided in the report of the Management Board and the fairness of the terms and conditions under which the issue price is being determined.
Notwithstanding subsequent review of the finals terms under which the proposed capital increase may be conducted, we have no particular observations to make with respect to the methods used to determine the issue price that are described in the report of the Management Board.
Special Report of the Statutory Auditors on the reduction of share capital by cancellation of repurchased shares
The Management Board requests you to delegate to it, for a period of eighteen months, full authority so as to cancel the shares purchased under the proposed share repurchase program up to a maximum of 10% of the share capital per 24-month period.
we have no matters to report concerning the reasons and the conditions of the proposed capital reduction.
Special Report of the Statutory Auditors on the preferred shares issue with waiver of preferential subscription rights of Shareholders reserved for AXA Assurances IARD Mutuelle and AXA Assurances Vie Mutuelle (Extraordinary General Meeting, April 30, 2009 – 23rd resolution)
In the case where all or a part of the preferred dividend will not be paid for the fiscal year, the preferred dividend will not be carried forward for future fiscal years.
In any event, the total preferred dividend paid to preferred shareholders during any fiscal year may not exceed 90% of the earnings available for distribution of the relevant fiscal year.
No dividend may be paid to the holders of ordinary shares if the preferred dividend for the relevant fiscal year has not been paid in full.
The preferred shares may be repurchased by AXA in accordance with the terms set out in the Bylaws and in particular, at any time as from the fifth anniversary of their issue date, subject to the prior approval by the French insurance regulator (Autorité de Contrôle des Assurances et Mutuelles). They shall be repurchased at their issue price increased by, in certain cases, a rate corresponding to the rate set by the Management Board, at the time of its decision to carry out the issue, to calculate the minimum dividend (i.e. comprised between 6% and 8%).
Notwithstanding subsequent review of the terms and conditions under which any of these capital increases may be decided, we have no particular observations to make with respect to the share capital increase envisaged, the methods used to determine the issue price that are described in the Management Board report, nor on the information given, in such report, relating to the characteristics of the preferred shares.
In our capacity as Statutory Auditors of your company, and in accordance with Article L.228-12 of the French Commercial Code, we hereby submit our report on the proposed B category preferred shares issue of up total gross issue proceeds of €2 billion subject to such amount not exceeding €1 billion in total nominal amount, a transaction that is being submitted for your consideration and vote.
your Management Board is required to prepare a report in compliance with Article R.228-17 of the French Commercial Code. our role is to assess the proposed capital increase and certain other disclosures pertaining to the issuance and contained in this report.
In addition, this preferred dividend may not be less than the minimum dividend nor greater than the maximum dividend set by the Management Board at the time of its decision to carry out the issue. The minimum dividend shall be between 6% and 8% of the current amount of the relevant preferred share in respect of the prior fiscal year (this amount corresponds to the issue price of the preferred share, as reduced in the event of absorption of losses) and the maximum dividend will be between 10% and 14% of the same amount.
we have performed our work in accordance with the standards of our profession applicable in France. These standards require us to examine and verify the content of the Management Board report on the characteristics of the preferred shares and the terms and conditions to determine their issue price.
In our capacity as Statutory Auditors of your company, and in accordance with Articles L.228-112 and L.225-136 of the French Commercial Code, we hereby submit our report on the proposed B category preferred shares issue of up total gross issue proceeds of €2 billion subject to such amount not exceeding €1 billion in total nominal amount, a transaction that is being submitted for your consideration and vote.
your Management Board is asking that you, acting on the basis of its report, delegate to it, with the power to sub-delegate, the full authority to decide the terms of this transaction over a period of 26 months from this general meeting and is proposing that you renounce your preferential subscription rights to any preferred shares to be issued within the limitations provided in the bylaws and resolutions submitted for your vote and consideration.
In the case where all or a part of the preferred dividend will not be paid during the fiscal year, the preferred dividend will not be carried forward for future fiscal years.
we have performed our work in accordance with the standards of our profession applicable in France. These standards require us to examine and verify the content of the Management Board report on this transaction on the reasons for waiving the preferential subscription rights, the characteristics of the preferred shares and the terms and conditions to determine their issue price.
PricewaterhouseCoopers Audit Mazars 63, rue de villiers 61, rue henri Régnault 92208 Neuilly-sur-Seine Cedex 92400 Courbevoie
we have performed our work in accordance with the standards we deemed necessary. These standards require us to examine and verify the content of the Management Board report on the terms of repurchase or reimbursement of the category B preferred shares.
we have no observations to make with respect to the terms of repurchase or reimbursement of the category B preferred shares whose insertion into the bylaws is envisaged.
Complementary report of the Statutory Auditors on the capital increase reserved for employees enrolled in a Company Savings Plan
In our capacity as Statutory Auditors of AXA and pursuant to the provisions of Article R.225-116 of the French Commercial Code, we hereby present a complementary report to our special report of March 25, 2008 on the issue of shares, without preferential subscription rights, reserved to employees or former employees of AXA enrolled in the group Company Savings Plan (P.E.E.G) or the group International Savings Plan (P.I.A.G) as authorized by the Annual general Meeting on April 22, 2008.
This Meeting delegated its authority to the Management Board to set the finals terms of such transactions, over a period of eighteen months, up to a maximum nominal amount of €100 million.
we performed our work in accordance with the standards of our profession applicable in France. Those standards require that we plan and perform procedures to verify: • the fairness of the figures taken from the interim financial statements as of June 30, 2008, prepared under the responsibility of the Management Board in accordance with the same methods and pursuant to the same presentation as the last annual financial statements. we conducted a limited review of those interim financial statements in accordance with the professional standards applicable in France; • the conformity of the terms and conditions of the transaction with regards to the delegation of authority granted by the general Meeting, and the fairness of the information provided in the supplementary report of the Management Board relative to the calculation methods and amounts of the issue price.
we have no matters to report on: • the fairness of the figures resulting from the Company’s financial statements and contained in the complementary report of the Management Board; • the conformity of the terms and conditions of the transaction with regards to the delegation of authority granted by the general
Meeting of April 22, 2008 and with the information provided at that Meeting; • the proposal to waive the shareholders’ preferential subscription rights, which you have already approved, the choice of the calculation methods of the issue price, and its final amount ; • the presentation of the issue impact on the position of owners of equity securities having regard to the shareholders’ equity and the share trade value .