Corporate Profile * AXA’s consolidated net earnings before goodwill, excluding non-recurring events.
The AXA Group A Word from the President and the Chairman..................
individuals and businesses alike – the support they need at every critical stage in their lives or development.
To achieve this ambition, AXA has a number of core strengths: n50 million clients worldwide; na captive distribution force comprised of na global brand; and na unique blend of skills in areas as diverse as insurance underwriting, long-term investment, and financial advice.
Our ultimate objective is to operationalize the promise of financial protection and wealth management that is implicit in the AXA brand: n for individuals: offer protection against a broad spectrum of risks and support at critical moments n for businesses: offer the capacity required to deal with business related contingencies.
In a service industry, the value of a business turns on the quality and enthusiasm of its employees and distributors. An organization that operates in the world’s major markets needs a strong corporate culture and a set of core values shared by all. AXA’s core values are: nCourage, in words and actions nLoyalty to all our partners nTeam spirit, which fosters high performance, both individually and collectively nPride in our profession, which enables people to take risks and drives economic growth n the Ambition to be among those who get things done in the general interest n the Imagination to anticipate changes in the world around us n the Pragmatism to grasp situations as they are and react positively and effectively nCommitment to being at the service of our key stakeholders: customers, employees, shareholders.
Wherever we do business, our aim is to be recognized as an outstanding organization to work for, an organization with enthusiastic employees who like what they do, and an organization in which they can take pride.
The process of globalization continues and, with it, a series of mergers and acquisitions that transcend national borders.
To implement its vision, AXA has identified three business strategies: a more focused geographic spread keyed to a “leadership or exit” approach; an opportunistic acquisition policy; and ongoing improvements in operating performance. The latter point, which is critical to AXA’s success in reaching its targets, is detailed in a three-year rolling plan.
Distribution: nTrain and upgrade existing distribution capability while seeking additional third-party distribution channels such as retail banks.
nDefine and implement Group recruitment, evaluation, compensation, promotion and mobility policies to achieve leadership in each local market. AXA’s aim is to be among the most attractive global financial services companies to work for by 2005, in all its local markets.
Services) is charged with developing the concept of service, supporting operations and coordinating lateral projects.
November 1999, AXA Life Japan and Nippon Dantai combine to create AXA Nichidan.
AXA wins the top prize in the corporate Intranet category of the
June 16 and 17, 2000. Measured in terms of the time and effort expended, the two-day AXA 2000 event mobilized the equivalent of 300 employees working full-time for one year.
Provincial Holdings. The issue is the largest capital increase ever effected in the European insurance-banking sector.
Provincial Holdings minority interests, which becomes a wholly owned subsidiary of AXA and is delisted from the London Stock
AXA launches an offer to buy out the outstanding minority interests in 60.3% owned AXA Financial with the aim of strengthening
Group synergies and positioning itself to take advantage of growth opportunities in the US.
AXA and Deutsche Bank sign a letter of intent concerning the sale of Banque Worms to the latter.
This transaction is in line with AXA’s strategy of refocusing on its core business operations. The sale is finalized in February 2001.
$85 billion), an internationally recognized active value equity manager with one of the world’s most renowned sell-side investment research capabilities.
Alliance Capital Management jointly create two companies dedicated to the management of AXA Australia and AXA New
As a result, AXA acquires full ownership of AXA Financial, which is delisted from the NYSE
Index and the Dow Jones Stoxx 50 down 6%, 10% and 4%, respectively, on the year. The
(- 0.5%) from its record level of 5,958 points at year-end 1999. After beginning the year strongly, technology, media and telecommunications stocks were among the biggest losers in 2000, while the traditionally defensive sectors – agribusiness (+ 25%), pharmaceuticals (+ 24%) and insurance
Japanese life insurer Nippon Dantai; the buyout of Sun Life & Provincial Holdings (since renamed AXA UK) minority interests and AXA
Jenrette; and the acquisition of the US-based value asset manager Sanford C. Bernstein.
AXA and its Shareholders By placing their trust in AXA’s ability to compete effectively and achieve steady improvements in operating performance, shareholders take part in AXA’s long-term strategic goals and success.
Dow Jones Global Titan Index, which includes the stocks of the 50 largest US, Japanese and
AXA on a regular basis, nine issued buy recommendations, five issued accumulate recommendations and eight were neutral.
nThe average liquidity of the AXA share in 2000 was extremely high. Over the year, an average of 8.3% of the float was traded in any given month, reflecting a high in May of 13.9%, due to the listing of preferential subscription rights, and a low of 6.6% in July.
The average variance between the buy and sell price, another indicator of liquidity, was also narrow.
Net cash earnings per share was € 6.38, an increase of 16.8% compared with 1999.
nAt their annual meeting on May 9, 2001, shareholders will be asked to approve a dividend payout of € 2.20 in respect of 2000, a 10% increase over the dividend paid in respect of 1999. In the last five years, the dividend paid to shareholders has increased by a compounded average rate of 17.3%.
Meetings with AXA Shareholders n In addition, AXA has set up an Individual
Group executives to discuss AXA’s disclosure and communications policy with respect to individual shareholders.
(ADS), each representing one-half of one ordinary AXA share (the stock split will lead to parity).
AXA Financial employees have purchased more than one million ADS via 401K retirement plans and the employee stock purchase plan.
AXA provides its shareholders with detailed, up-to-date information: n In the business press, by publishing condensed financial statements and synopses of its shareholders’ meetings nVia its Internet site: www.axa.com nVia the Minitel (France): 3616 AXA
CONTRIBUTION TO NET CASH EARNINGS* (GROUP SHARE) BY SEGMENT (in euro millions)
* As of 2000, AXA’s consolidated net earnings are stated as cash earnings, i.e. excluding exceptional operations and before goodwill amortization.
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2000
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of May 18, 2001 was: 1,713,851,912 Ordinary Shares of euro 2.29 nominal value, including 64,465,752 American Depositary Shares
Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 nnnnn Item 18 nnnnnX
Item 1 Identity of Directors, Senior Management and Advisors....................................... 6 Item 2 Offer Statistics and Expected Timetable ............................................................... 6 Item 3 Key Information .................................................................................................. 6 Item 4 Information on the Company ........................................................................... 22 Item 5 Operating and Financial Review and Prospects................................................. 60 Item 6 Directors, Senior Management and Employees ............................................... 138 Item 7 Major Shareholders and Related Party Transactions ......................................... 150 Item 8 Financial Information...................................................................................... 154 Item 9 The Offer and Listing ...................................................................................... 154 Item 10 Additional Information .................................................................................... 158 Item 11 Qualitative and Quantitative Disclosure About Market Risk .............................. 188 Item 12 Description of Securities other than Equity Securities ....................................... 192
United States Securities and Exchange Commission (referred to in this annual report as the “U.S. SEC”).
“ADS” or “ADR” refers to the Company’s American Depositary Shares or Receipts, each of which represents the right to receive one AXA ordinary share, which are listed on the New York Stock Exchange (referred to in this annual report as “NYSE”).
AXA publishes its consolidated financial statements in Euro (“Euro”, “euro” or €). Unless noted otherwise, all amounts in this annual report are expressed in Euro. The currency of the United States will be referred to as
Rate Information”. For a discussion of the impact of foreign currency fluctuations on AXA’s financial condition and results of operations, see “Item 5 - Operating and Financial Review and Prospects - Market Conditions in 2000“.
The following factors could affect the future results of operations of AXA and could cause those results to differ materially from those expressed in the forward-looking statements included in this annual report:
and its subsidiaries operate; • the performance of others on whom AXA relies for distribution, investment management, reinsurance and other services; and
The above factors are in addition to those factors discussed elsewhere in this annual report including matters discussed under “Item 3 - Key Information - Risk Factors”; “Item 4 - Information on the Company”; “Item 5 - Operating and Financial Review and Prospects”; and “Item 11 - Qualitative and Quantitative Disclosure
The historical data set out below is only a summary. You should read it in conjunction with the consolidated financial statements and related notes for the years ended December 31, 2000, 1999 and 1998 and as at December 31, 2000 and 1999 included elsewhere in this annual report.
AXA’s consolidated financial statements for the periods ended prior to January 1, 1999 were prepared in French francs and translated into Euro at the legal conversion rate of € 1.00 = FF6.55957.
AXA’s consolidated financial statements have been prepared in accordance with French GAAP, which are described in notes 1 and 2 to the consolidated financial statements. French GAAP differs in certain material respects from U.S. GAAP. For a description of the material differences between French GAAP and U.S. GAAP relevant to
As a result of the sale of Donaldson, Lufkin & Jenrette (which we refer to in this annual report as “DLJ”)
on November 3, 2000, revenues and net income generated by the Other Financial Services Segment will decrease significantly in future periods. In respect of the U.S. GAAP financial data presented below, the historical income statement data, net income per ordinary share (and per ADS) and balance sheet data presented below have been restated to reflect the accounting treatment of DLJ as a discontinued operation. The restated U.S. GAAP
financial data for the years ended December 31, 2000, 1999 and 1998 and as at December 31, 2000 and 1999 were derived from the audited consolidated financial statements included elsewhere in this annual report.
Please refer to “Item 5–Operating and Financial Review and Prospects”, included elsewhere in this annual report, for information regarding the impact of the sale of DLJ and other significant events affecting the comparability of AXA’s consolidated financial results for the year ended December 31, 2000 with the years ended December
Equity in income (loss) of unconsolidated entities (22) (23) (10) 11 45 (9)
(after tax and minority interest) 2.31 2.46 2.40 1.77 0.45 1.24
(after tax and minority interest) 1.19 1.27 1.24 0.93 0.25 0.65
Diluted – Income from continuing operations (after tax and minority interest) 1.15 1.23 1.20 0.89 0.23 0.62
Shareholders’ equity per ordinary share (b) (n) 54.86 58.43 45.90 38.65 36.19 35.39
(b) All per ordinary share amounts calculated in accordance with French GAAP and U.S. GAAP are based on the weighted average number of ordinary shares outstanding for each period presented. Shareholders’ equity per ordinary share is calculated based on the number of ordinary shares outstanding at each period-end presented. The U.S. GAAP calculations deduct ordinary shares held by AXA and its subsidiaries (that is, treasury shares) in the calculation of weighted average number of ordinary shares outstanding (for net income per ordinary share) and ordinary shares outstanding (for shareholders’ equity per ordinary share). The calculation of basic and diluted net income per ordinary share for each of the three years ended December 31, 2000 is presented in note 16 to the consolidated financial statements.
(d) One AXA ADS is equivalent to one-half of an AXA ordinary share. This is on a pre-stock split and pre-ratio change basis. See footnote (n) below.
(h) Subordinated debt and mandatorily convertible bonds and notes are considered mezzanine capital for French GAAP purposes. (i) The financial data have been translated from Euro to U.S. dollars using the euro/$ rate at December 31, 2000 of € 1.00 = $0.9388.
(excluding the current year net income). (m) Net dividend (excluding tax credit) divided by net income (before exceptional operations and goodwill amortization). (n) At the annual general meeting of shareholders of AXA held on May 9, 2001, AXA’s shareholders approved a 4-for-1 stock split of AXA’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the ADS was changed from one ADS representing one-half of an ordinary share to one ADS representing one ordinary share. The pro-forma impact on net income per ordinary share is presented in note 27 to the consolidated financial statements included elsewhere in this annual report.
(p) 1999 U.S. GAAP Net income per ordinary share (diluted) has been restated due to the accounting treatment for the DLJ discontinued operations and its impact on the calculation of net income per ordinary share on a diluted basis. See note 27 to the consolidated financial statements included elsewhere in this annual report for further information.
(a) On a comparable basis, revenues for the year ended December 31, 2000 were restated using the prevailing foreign currency exchange rates for the corresponding prior year, in this case for the year ended December 31, 1999 (constant exchange rate basis) and eliminated the results of acquisitions, disposals, business transfers (constant structural basis) and changes in accounting principles (constant methodological basis), in one of the two periods being compared.
The information provided in the table above and set out in further detail in notes (a) and (b) below represent non-GAAP measures. It should be noted that “cash earnings” and “net income excluding the impact of exceptional operations” as defined in notes (a) and (b) below may not be comparable with similarly-titled measures reported by other companies as it is not defined under either French GAAP or U.S. GAAP. (a) Cash earnings represents net income before the impact of exceptional operations (see note (b) below) and amortization of goodwill. (b) The exceptional operations include: – In 2000: – the consolidated net realized gain on the sale of DLJ (€ 2,071 million net group share and net of realized and unrealized losses on Credit Suisse
– provision of € 125 million recorded during the period in connection with the sale of Banque Worms, which was agreed in February 2001.
– In 1999: € 156 million (net group share) related to the acquisition of Guardian Royal Exchange (GRE), which was acquired in May 1999.
EXCHANGE RATE INFORMATION The year end and average exchange rates used in the preparation of AXA’s consolidated financial statements, to translate into Euro the results of operations of its principal subsidiaries and affiliates that are not denominated in euro, are set out in the table below. The 1998 year end and average exchange rates were determined using the previously reported French Franc exchanges rates and translated to Euro using the legal rate of conversion at January 1, 1999 of FF 6.55957 = € 1.00 as the Euro did not exist prior to January 1, 1999.
The table below sets forth the high and low Euro Noon Buying Rates for the most recent six months through to April 2001.
DIVIDENDS AXA pays dividends in Euro. Future dividends will depend on AXA’s consolidated operating results, consolidated financial condition and other factors. Proposals for dividend payments are made by the Management
Board, subject to prior approval by the Supervisory Board and final approval by AXA’s shareholders at the annual general meeting of shareholders. Dividends paid to holders of ordinary shares and ADSs will generally be subject to French withholding tax at a rate of 25 % which, subject to certain procedures and exceptions, may be reduced to 15 % for holders who are residents of the United States. Certain holders of ordinary shares and ADSs may be entitled to receive a subsequent payment equal to the French avoir fiscal (or tax credit) in an amount equal to 50 % of any dividends paid by the Company, less applicable French withholding tax. See “Item 10-Additional
Information-Taxation of Dividends Avoir Fiscal” for a summary of certain United States federal and French tax consequence to holders of ordinary shares and ADSs.
(a) Payment equivalent to the French “avoir fiscal” or tax credit, less applicable French withholding tax, will be made only following receipt of a claim for such payment, and, in any event, not until after the close of the calendar year in which the respective dividends are paid. Certain US tax exempt holders of ordinary shares or ADSs will not be entitled to full payments of avoir fiscal. (see “Item 10-Additional Information-Taxation).
(d) At the annual general meeting of shareholders of AXA held on May 9, 2001, the shareholders approved the declaration of a dividend in respect of 2000 of € 2.20 per ordinary share on a pre-stock split basis (equivalent to € 1.10 or $ 0.98 per ADS, using the Euro Noon Buying Rate at April 30, 2001 of € 1.00 = $ 0.8874). In general, dividends per ordinary share are based on the number of ordinary shares outstanding at the end of the year for each year presented. In 2000, dividends per ordinary share will be based on the number of ordinary shares outstanding at December 31, 2000 and will also include also include the 4.9 million of ordinary shares issued to the remaining minority interests in AXA Financial, Inc. following the completion of the merger of AXA Merger Corp. with and into AXA Financial on January 2, 2001.
AXA faces strong and increasing competition in all its business lines. AXA’s competitors include mutual funds companies, asset management firms, commercial banks and other insurance companies, many of which are regulated differently than AXA and offer alternative products or more competitive pricing than AXA does.
The recent consolidation in the global financial services industry has also enhanced the competitive position of some of AXA’s competitors by broadening the range of their products and services, and increasing their distribution channels and their access to capital. In addition, development of alternative distribution channels for certain types of insurance and securities products, including through the internet, may result in increasing competition as well as pressure on margins for certain types of products. These competitive pressures could result in increased pricing pressures on a number of AXA’s products and services, particularly as competitors seek to win market share, and may harm AXA’s ability to maintain or increase AXA’s profitability.
of the AXA trademark which is important to the marketing of AXA’s products and services”. The existence of this right of Finaxa may also deter potential acquirers from making an offer to acquire control of AXA. The
Mutuelles AXA may decide to increase their interest in AXA, or to sell all or a portion of the ordinary shares they own, at some future date.
allocated among them through Groupements d’Intérêt Economique or GIEs. GIEs are partnerships between various companies of the AXA group and the Mutuelles AXA that perform various common services for their members and allocate associated costs and expenses. These costs and expenses currently are allocated on the basis of actual use of the specific service, to the extent practicable. The manner of managing these insurance businesses or allocating these costs and expenses may change in the future in a way that may increase AXA’s operating costs and adversely affect its results of operations.
On November 3, 2000, AXA (the Company), AXA Financial, The Equitable Life Assurance Society of the
United States and AXA Participations Belgium completed the sale of their 71% equity interest in DLJ to the Credit
AXA’s obligations are denominated either in Euro or other currencies, the value of which is subject to exchange rate fluctuations. AXA’s interest obligations on its outstanding debt, however, are generally matched to cash dividends to be received by AXA in the same currencies. Approximately € 350 million of the cash dividends received by AXA in 2000 were paid in currencies other than the Euro. Approximately € 526 million of interest payments were made by AXA in 2000 in currencies other than the Euro.
Fluctuations in the securities markets and other economic factors may adversely affect sales of AXA’s separate account (unit linked) products such as variable life and variable annuity products, participating life insurance and pension products, mutual funds, and asset management services. In particular, a protracted or steep decline in the stock or bond markets would likely reduce the popularity of these products.
Changes in interest rates affect many aspects of AXA’s business and can significantly affect AXA’s profitability.
Conversely, during periods of declining interest rates, life insurance and annuity products may be relatively more attractive to consumers, resulting in increased premium payments on products with flexible premium features, and a higher percentage of insurance policies remaining in force from year to year. During such a period, AXA’s investment earnings may be lower because the interest earnings on the fixed income investments likely will have declined in parallel with market interest rates. In addition, mortgages and bonds in AXA’s investment portfolio will be more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates, and AXA may be required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, during periods of declining interest rates, AXA’s profitability may suffer as the result of a decrease in the spread between interest rates credited to policyholders and returns on AXA’s investment portfolio.
Changes to tax laws may affect the attractiveness of certain of AXA’s products, which currently have favorable tax treatment. For example, an unfavorable change in the tax treatment of life insurance products in France in 1998 had an adverse impact on the market for these products. From time to time, governments in the jurisdictions
In accordance with industry practice and accounting and regulatory requirements, AXA establishes reserves for claims and claims expenses related to its property and casualty, and international insurance businesses. AXA
In addition, certain of AXA’s property and casualty operations are required by local regulations in the countries in which they operate to establish catastrophe and equalization reserves.
AXA continually reviews the adequacy of the established claims reserves, including emerging claims development, and actual claims compared to the original assumptions used to estimate initial gross claims reserves.
Based on current information available, AXA considers that these provisions are sufficient. Insurance claims provisions are subject to audit on an annual basis by AXA’s auditors. However, because the establishment of claims reserves is an inherently uncertain process, AXA cannot assure you that ultimate losses will not materially exceed its claims reserves and have a material adverse effect on its earnings.
AXA offers products and services in Europe, North and South America, the Asia/Pacific zone, the Middle
AXA holds a non-controlling equity stake, agents and independent contractors. AXA’s international operations expose AXA to different local political, regulatory, business and financial risks and challenges which may affect the demand for its products and services, the value of its investment portfolio, the required levels of its capital
As a global financial services enterprise with a decentralized management structure, AXA relies, to a considerable extent, on the quality of local management in the various countries in which it operates. The success of AXA’s operations is dependent, among other things, on its ability to attract and retain highly qualified professional personnel. Competition for key personnel in most countries in which AXA operates is intense. AXA’s ability to attract and retain key personnel, in particular senior officers, experienced portfolio managers, mutual fund managers and sales executives, is dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent, which, may offer compensation packages that include considerable equity based incentives through stock option or similar programs.
FINAXA MAY TERMINATE THE LICENSING TO AXA OF THE AXA TRADEMARK
WHICH IS IMPORTANT TO THE MARKETING OF AXA’s PRODUCTS AND SERVICES
The name “AXA” and the AXA trademark are owned by Finaxa. On May 21, 1996, AXA and Finaxa entered into a licensing agreement pursuant to which Finaxa has: • granted AXA a non-exclusive license to use the AXA trademark in the jurisdictions in which AXA currently has operations and in any additional jurisdictions in which the AXA trademark is registered, and
• agreed not to grant licenses to use the AXA trademark to any other company or partnership unless (i) that company or partnership holds an ownership interest in Finaxa or (ii) Finaxa and/or AXA hold, directly or indirectly, an interest in that company or partnership.
AXA’s insurance and financial services operations are generally conducted through direct and indirect subsidiaries. As a holding company, AXA’s principal sources of funds are dividends from subsidiaries and funds that may be raised from time to time through the issuance of debt or equity securities or through bank or other borrowings. As of December 31, 2000, AXA (the Company) had short term and long term financing debt outstanding of €5,717 million and subordinated debt and mandatorily convertible notes outstanding of €7,236 million. As of December 31, 2000, AXA had consolidated short term and long term financing and operating debt outstanding of €13,646 million and consolidated subordinated debt and mandatorily convertible notes outstanding of €8,453 million.
(including interest expense), cash on hand from previous securities offerings, proceeds of future offerings of securities, and proceeds from the sale of non-core assets.
Certain of AXA’s significant subsidiaries, including AXA France Assurances, AXA Financial, AXA UK Holdings
(formerly, Sun Life & Provincial Holdings), AXA Asia Pacific Holdings, and AXA Colonia are also holding companies and are dependent on dividends from their own subsidiaries for funds to meet their obligations. In addition, certain of AXA’s principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to AXA and its affiliates. While management does not believe that these restrictions constitute a material limitation on AXA’s ability to meet its obligations or pay dividends on its shares, these restrictions may constitute a material limitation in the future.
THE TRADING PRICE OF AXA ADSs AND DIVIDENDS PAID ON AXA ADSs
RIGHTS DUE TO DELAYS IN NOTIFICATION TO AND BY THE DEPOSITARY
The deposit agreement expressly limits the obligations and liability of AXA and the depositary. Neither
In addition, the depositary and AXA only have the obligation to participate in any action, suit or other proceeding with respect to the AXA ADSs which may involve them in expense or liability only if they are indemnified.
These provisions of the deposit agreement will limit the ability of holders of AXA ADSs to obtain recourse if AXA
or the depositary fail to meet their obligations under the deposit agreement or if they wish to involve AXA or the depositary in a legal proceeding.
is also one of the world’s largest asset managers, with total assets under management as at December 31, 2000 of €892 billion, including assets managed on behalf of third party clients of €472 billion.
Net income from operating segments 2,205 100% 1,905 100% 1,611 100%
(a) Gross premiums for life and savings operations include deposits collected from policyholders for life investment products which under French GAAP are recorded as premium income and under US GAAP are reported as deposits in the balance sheet, with the total premiums reduced to reflect the actual fees charged to policyholders.
Net asset value per ordinary share (in euros) 76.7 61.5 57.5
(a) “Net income before exceptional operations” represents a non-GAAP measure. It should be noted that this financial information may not be comparable with similarly-titled measures reported by other companies as it is not defined under either French GAAP or U.S. GAAP.
(a) Based on estimated fair values at the dates indicated, and excludes cash and equivalents, securities purchased under resale agreements.
For additional information on AXA’s business segments, see “Item 5 – Operating and Financial Review and Prospects – Operating Results by Segment” and note 22 to the consolidated financial statements.
AXA’S STRATEGY AXA aims to be the world leader in financial protection and wealth management.
To achieve its vision, AXA has identified three business strategies: the implementation of aggressive operating priorities; a more focused geographical reach aimed at “leadership or exit,” and opportunistic acquisitions centered on Western Europe, the United States and selected Asian markets. The key acquisitions and mergers completed in 2000 were consistent with this vision: • The acquisition of Nippon Dantai in Japan and its subsequent merger with AXA Life Japan, creating AXA
Capital creates a unique “multi-style” asset management firm serving institutional, corporate, private clients and distributors with equal levels of dedication; • The buyout of minority interests in AXA Financial and Sun Life & Provincial Holdings (subsequently renamed
• The sale of DLJ at an attractive price just before the downturn in the equity markets, allowing AXA to dispose of a non-core business and reduce its earnings volatility.
In 1984, Les Mutuelles Unies began operating under the AXA name and in 1986, took control of Groupe Présence, another French stock insurance company. In 1988, Les Mutuelles Unies transferred its insurance businesses to
AXA is a French société anonyme à directoire et conseil de surveillance (a form of limited liability company)
Matignon 75008 Paris, France and its telephone number is (331) 40.75.57.00. For information on AXA’s principal trading market for its ordinary shares and ADSs, see “Item 9 – The Offer and Listing” included elsewhere in this annual report.
– AXA Reinsurance and Abeille Re 0.9 – – – 0.9
(a) In 2000, AXA acquired the outstanding minority interests in (i) Sun Life & Provincial Holdings, which was subsequently delisted from the London Stock Exchange and renamed AXA UK Holdings, (ii) AXA Financial, which was subsequently delisted from the NYSE, (iii) AXA China Region, through AXA’s subsidiary, AXA Asia Pacific Holdings, which was subsequently delisted from the Hong Kong Stock Exchange and (iv) AXA Aurora.
(b) Donaldson, Lufkin & Jenrette was sold on November 3, 2000, see “ - Significant Divestitures” below. (c) AXA from time to time acquires AXA Colonia shares through open market purchases and, as a result, AXA’s ownership interest in AXA
Colonia has increased from 69% at December 31, 1997 to 91% at December 31, 2000. In addition, in connection with the acquisition of Guardian Royal Exchange in 1999, AXA Colonia acquired an 83.7% interest in Albingia. During 2000, AXA Colonia increased its ownership interest in Albingia to 99%.
(d) Represents investment in property and casualty direct marketing operations (France, Germany, Spain, and Japan) and in life and savings operations in China. The cumulative investment by AXA up to December 31, 2000, including the amount invested in 2000 is provided in “Item 5 – Operating and Financial Review and Prospects - Liquidity and Capital Resources”.
Since 1991, AXA has undertaken a number of significant acquisitions and investments, which are summarized below.
• In 1999, AXA acquired Guardian Royal Exchange (which we refer to in this annual report as “GRE”) through
• In 1998, AXA acquired the minority interests in Royale Belge through a public exchange offer. Royale Belge is now a wholly owned subsidiary of AXA. In addition, Royale Belge acquired ANHYP (a Belgian savings bank)
• In 1995, AXA acquired a controlling equity interest in National Mutual Holdings (subsequently renamed “AXA
Life") in anticipation of Equitable Life’s demutualization. As a result of the demutualization of Equitable Life in 1992, AXA’s investment was converted into a controlling equity interest in The Equitable Companies
AXA has also sold a number of non-strategic assets and operations that are summarized below: • In 2000, AXA (the Company), AXA Financial and certain of their affiliates sold their 71% equity interest in
Donaldson, Lufkin & Jenrette to Credit Suisse Group for $7.3 billion (approximately €8.4 billion1). The consideration included cash in the amount of $2.4 billion and 25.7 million2 of Credit Suisse Group shares.
As at January 31, 2001, AXA no longer held the shares of Credit Suisse Group as the remaining shares were sold.
• AXA has sold certain non-strategic GRE subsidiaries, including Guardian Life in the UK (July 1999), Le Foyer
• In 1997, AXA sold a portion of its interest in Compagnie des Immeubles de la Plaine Monceau (CIPM) to
AXA during 2000, see “Item 5 – Operating and Financial Review and Prospects – Year 2000 Operating Highlights”
and note 6 to the consolidated financial statements included elsewhere in this annual report. For details on acquisition and disposal activity which had occurred subsequent to December 31, 2000, see “Item 5 – Operating and Financial Review and Prospects-Events Subsequent to December 31, 2000” and note 25 to the consolidated financial statements.
(1) U.S. dollar amount has been translated to euro using the Euro Noon Buying Rate on November 3, 2000 of €1.00 = $0.861), being the date the sale was completed.
The percentage on the left represents the economic interest and the percentage on the right represents the percentage of control. (a) Holding company that owns notably The Equitable Life Assurance Society of the United States and Alliance Capital. At December 31, 2000, AXA held a 92.4% interest in AXA Financial, which increased 100% on January 2, 2001 following the merger of AXA Merger Corp. (a wholly owned subsidiary of AXA) with and into AXA Financial. (b) Holding company that owns notably AXA Assurances, AXA Courtage, AXA Conseil and AXA Collectives. (c) Holding company that owns notably National Mutual Life of Association of Australasia, National Mutual Health Insurance and Australian Casualty & Life. (d) New corporate name as of May 17, 2000.
BUSINESS OVERVIEW The table below presents AXA’s consolidated gross premiums and financial services revenues by segment for each of its major geographic markets for the years indicated.
BREAKDOWN OF AXA'S GROSS PREMIUMS AND FINANICAL SERVICES REVENUES Years ended December 31,
Other Financial Services 15% 16% 15% Donaldson, Lufkin & Jenrette (a) 91% 89% 91%
(a) Represents the 71% equity interest held in Donaldson, Lufkin & Jenrette that was sold on November 3, 2000.
AXA (the Company) Short Term Debt (Commercial Paper) Standard & Poor's A-1
The ratings set forth above may be subject to revision or withdrawal at any time by the assigning rating organization. None of these ratings are an indication of the historic or potential performance of AXA’s ordinary shares, ADSs, or debt securities and should not be relied upon with respect to making an investment in any of
AXA’s Life and Savings Segment (formerly the Life Insurance Segment) offers a broad range of life insurance products including retirement products as well as life and health insurance products for both individuals and groups, with an emphasis on savings-related products including separate account (unit linked) products. The
The table below summarizes AXA’s life and savings gross premiums and gross insurance reserves by geographic region for the periods and as at the dates indicated: Gross premiums Insurance Years ended December 31, Reserves at
(in euros millions, except percentages) 2000 1999 1998 December 31, 2000
(a) Source: Swiss Re Sigma report 9/2000 “Worldwide insurance in 1999”. (b) In general, based on 1999 market data for each specific country or an estimate for 2000. (c) Relates to the variable annuity products. (d) AXA acquired a majority holding in Nippon Dantai in March 2000, which was ranked the 13th largest life insurance company and the 2nd largest non-mutual in Japan as the time of the acquisition.
(e) AXA Sun Life’s ranking did not take into account the 2000 merger of Commercial General Union and Norwich Union (which formed
France. After significant growth in gross premiums from 1992 to 1996, life insurance premiums in the
French market declined between 1996 and 1998. This decline was due primarily to changes in tax laws concerning life insurance contracts. The French life insurance market experienced renewed growth of 13% and 20% in 1999 and 2000, respectively, based on gross premiums. Growth was primarily attributable to savings-oriented retirement products and in particular, separate account (unit-linked) contracts and contracts that offer diversified investment strategies (multi-support contracts).
United States. In general, demographic studies suggest that, as the post-World War II “baby boom”
(under which employers make the investment decisions) toward employee-directed, defined contribution retirement and savings plans (which allow employees to choose from a variety of investment options). In 2000, gross variable annuity premium growth was flat due to stock market volatility whereas gross variable life premiums increased by approximately 5%.
United Kingdom. Growth in new annualized business premiums was approximately 15% per year between 1995 and 1999, mainly due to growth in investment-type products (such as single premiums bonds), which grew at approximately twice the overall market rate during this period. Over the same period and in terms of gross new business premiums, the volume of life insurance products sold decreased by 7% and the volume of pension products sold (representing 53% of the market) decreased by 2%. In 2000, the UK government adopted new legislation relating to employee pension schemes. This new legislation, which became effective in April 2001, imposes a 1% limit on annual charges that can be levied by insurance companies for administering the
These factors have affected consumer confidence in financial service products. Since 1997, the market has been undergoing a significant restructuring following the bankruptcy of several mid-sized life insurers and the entry of several foreign life companies. In addition, there have been several mergers among the local
Japanese companies. At March 31, 2000, approximately 60% of gross premiums related to individual life contracts and 25% of gross premiums related to group annuity contracts.
– Hong Kong. Traditional participating individual life insurance products have been the predominant life insurance products offered in Hong Kong. However, there is increasing demand for unit-linked products, which currently represent approximately 9% of annual new business premiums and 75% of single new business premiums. Based on annualized new business premiums, the life insurance market in Hong Kong grew by 31% in 1999. In 1998, legislation was passed in Hong Kong providing for the establishment of mandatory pension funds and requiring all companies to set up pension funds on behalf of their employees by January 29, 2001. At December 31, 2000, 46% of employers had not yet complied with the new legislation.
Germany. After a period of stagnation in recent years, the German life insurance market experienced strong growth of approximately 12% in 1999. This growth was attributable to government proposals concerning the taxation of life insurance products, which would have significantly reduced the tax benefit on such contracts from 2000. These proposals were withdrawn in December 1999. In 2000, gross premiums in the German life insurance market grew by approximately 2%. This increase was attributable to an increased awareness of private pensions associated with uncertainty relating to government proposals to create a new privately funded pension scheme. In the German life insurance market, long-term individual participating endowment contracts have traditionally dominated life insurance sales. However, this trend has changed in recent years as a result of the increased popularity in variable annuity products and variable life products.
Belgium. Overall, individual life insurance has experienced rapid growth in recent years partly as a result of the growth in savings-related products. Based on gross new business premiums, traditional individual life insurance contracts experienced an increase of 8% in 2000 compared to a decrease of 12% in 1999. For the first time in 1999, premiums received on savings-related investment products surpassed premiums received on traditional individual life insurance products due to (i) the decrease in the minimum guaranteed rates on traditional life insurance contracts, (ii) financial market performance, and (iii) increased consumer awareness of investment products. This experience continued in 2000 with 30% growth, primarily in respect of separate account (unitlinked ) products.
The nature and level of competition vary among the countries in which AXA operates. There is strong competition among companies for all the types of life insurance (including savings-oriented products and annuities)
AXA’s life and savings products include a full range of life, health and retirement / savings-related products to both individuals and corporate clients. The life and savings-related products offered include term life, whole life, universal life, mortgage endowment, deferred annuities, immediate annuities, variable life and other investmentbased products. The health products offered include critical illness and permanent health insurance products.
The nature of the products offered by AXA varies from market to market.
(a) Includes revenues from other activities (commissions and related fees associated with the management of AXA’s general account assets and mutual funds sales).
Specific to the United Kingdom, the participating contract, also known as the with-profit contract, is offered by many life insurance companies in the United Kingdom, including AXA Sun Life and AXA Equity & Law (the latter has ceased writing new business). For with-profit contracts, policyholders’ premiums are paid into a life insurance company’s with-profit fund, which is part of a company’s long-term fund. In the with-profit fund, the premiums are invested in a range of assets, including equities, real estate and fixed maturity securities and the with-profit policyholders are entitled to receive a share of the profits arising from these investments. The policyholders’
share of the profits, referred to as bonuses, are paid on or credited to with-profit contracts as recommended by the company's actuary and approved by its board of directors. There are two types of bonuses, regular bonuses and terminal bonuses. Regular bonuses, designed to provide a return to the policyholder through a periodic increase in benefits, are credited to the policyholder at regular intervals and represent a partial return of investment income. Once credited, regular bonuses are guaranteed to be paid at maturity, death or as otherwise specified in the policy. Terminal bonuses, which are not guaranteed in advance of payment, are designed to provide policyholders with their share of total investment performance (including investment income and realized and unrealized investment gains or losses) and other company experience (including expenses, mortality experience and income taxes). Terminal bonuses can represent a significant portion of the total amount paid at maturity
In 2000, AXA announced that it was undertaking a financial reorganization of AXA Equity & Law, one of its life insurance subsidiaries in the United Kingdom, pursuant to which a portion of the assets that have accumulated over the years (which we refer to in this annual report as the “inherited estate”) will be attributed to AXA as the shareholder and a portion will be allocated to the with-profit policyholders in the form of a
reorganization bonus. In addition, policyholders that elected to support the proposal will receive cash payments made by AXA. For further information on the inherited estate, please refer to “Item 5 – Operating and Financial
Review and Prospects – Events Subsequent to December 31, 2000” and note 25 to the consolidated financial statements included elsewhere in this annual report.
Over the past few years, AXA’s life and savings operations have experienced significant growth in savingsoriented products, in particular, variable life and variable annuity products. This growth has been notably in
AXA distributes its life and savings products through a number of channels that vary from country to country. The distribution channels used by AXA’s principal life and savings operations, based on consolidated gross premiums from new business for the year ended December 31, 2000, are presented below.
Based on gross premiums Exclusive agents Intermediaries/ Other networks, including from new business in 2000: and direct salesforce independent advisers/ Direct Marketing/
a) Based on new business written in the six-month post-acquisition period ended September 30, 2000. Approximately, 72% of the products were distributed through affinity groups, which include the Chamber of Commerce and Industry and Corporate direct sales (to individuals).
For most retirement and life products, costs in the first year are higher than costs in subsequent years due to first year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate” plays an important role in profitability.
The ratio of surrenders to average gross insurance reserves are presented below for the periods indicated.
Turkey), Morocco, Canada, Singapore and China. The products offered in these markets are tailored to the specific country market and are offered through various distribution channels, depending on the country, including general agents, salaried sales forces, bank networks and brokers. AXA also has unconsolidated equity interests in companies that sell life insurance products in South America, Africa, the Middle East and Asia Pacific.
(a) Claims ratio: The ratio of incurred claims and claims handling expenses to premiums earned, net of reinsurance ceded. Combined ratio: The sum of the claims ratio and the expense ratio (property and casualty acquisition and administrative expenses to premiums earned), both of which are net of reinsurance ceded.
(b) Claims reserves are before reinsurance ceded and exclude catastrophe equalization reserves.
After several years of intense competition and, consequently, reduced premium rates, principally in the automobile and commercial risk products lines, premium rates in certain European countries increased in 1999 and 2000. This improvement has minimized the unfavorable effects resulting from a general deterioration in claims experience due to a number of natural catastrophes that occurred in 1999 and a general increase in the cost and frequency of claims (specifically relating to automobile claims).
In each of its principal markets, AXA operates through well-established property and casualty insurance companies. AXA’s principal property and casualty insurance subsidiaries operate in France (AXA Assurances, AXA
BASED ON WORLDWIDE GROSS PROPERTY AND CASUALTY PREMIUMS WRITTEN IN 1999 Country Ranking % of gross AXA’s ranking AXA’s ranking
(d) Based on 1999 gross property and casualty premiums written, AXA is ranked as follows: third in liability insurance (9.7% market share), third in homeowners’ insurance (5.4% market share), fourth in automobile insurance (4.2% market share).
Germany. In the German property and casualty insurance market gross premiums written increased at an annual compound rate of over 7% from 1991 to 1995. This growth slowed from 1996 to 1999 and increased by 1% in 2000. This experience was attributable to severe price competition following market deregulation and the limited economic benefits stemming from the German reunification. The slight growth in 2000 was mainly due to automobile insurance, where gross premiums written increased by a rate of 3%. Automobile insurance represented approximately 44% of gross premiums written in the German property and casualty insurance market in 2000.
Consolidation among the largest insurance carriers has helped to increase premium rates generally. The main premium rate increases in 2000 were in the automobile insurance market. Premium rates on homeowners insurance have remained relatively flat. Although the commercial property and liability markets have remained competitive, there are some signs that rate increases are beginning to be accepted. In addition, a number of recent legislative changes in the United Kingdom are expected to have a negative impact on future personal injury claims costs, affecting both the timing of claims payments and the amount paid in settlement.
The increase was due to a slight improvement in premium rates and continued demand for automobile insurance cover, first observed in 1998, as a result of replacement of a large number of vehicles and an increase in consumer confidence in the economy. In the past few years, workers’ compensation insurance premiums have been adversely affected by intense competition and low premium rates, while fire and other property insurance premiums have risen slightly.
PROPERTY AND CASUALTY Gross premiums Insurance Reserves SEGMENT Years ended December 31, at (in euro million, except percentages) 2000 1999 1998 December 31, 2000
In addition to the principal markets discussed above, AXA offers personal and commercial property and casualty insurance products in the following countries: Italy, Spain, Netherlands, Portugal, Luxembourg, Switzerland,
Austria, Hungary, Canada, Morocco, Turkey, Japan, Singapore and Hong Kong. The products offered in these markets are tailored to the specific country market and are offered through various distribution channels, including brokers and direct sales force. AXA also has unconsolidated equity interests in companies that sell property and casualty insurance products in South America, Asia Pacific, the Middle East and Africa.
AXA’s property and casualty insurance operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks. Certain insurance exposures are ceded internally to AXA Cessions, which organizes external reinsurance programs. Total gross premiums ceded by the property and casualty operations to third-party reinsurers for 2000 was €1,146 million (1999: €1,010 million).
The International Insurance Segment consists primarily of AXA’s reinsurance operations (formerly conducted by AXA Reinsurance) and its transnational large-risk property and casualty business (formerly conducted by AXA
(a) Claims reserves are before reinsurance ceded and exclude catastrophe equalization reserves. (b) The total includes other transnational activities not presented separately in the table above.
The global reinsurance marketplace has experienced mergers and consolidations and several companies have exited the market by (i) disposing or transferring their business to other companies or (ii) ceasing to underwrite new reinsurance business. Since the end of 1999 and throughout the year 2000 renewal season, rates have increased significantly, particularly for natural catastrophe business, despite the surplus capacity in the reinsurance market.
The key features of the marketplace in which AXA Corporate Solutions for large risk property and casualty insurance operates can be summarized as follows: (i) increasing demand for risk management and financial analysis, (ii) demand for risk transfer and alternative risk transfer and (iii) global concentration of suppliers
AXA Cessions. AXA’s property and casualty subsidiaries reinsure a large portion of their business internally through AXA Cessions. AXA Cessions coordinates retrocession with external reinsurers to reduce the loss exposures of each subsidiary and of AXA as a whole.
(in euro million, except percentages) 2000 1999 1998 December 31, 2000
AXA’s asset management operations are subject to substantial competition in all aspects of its business due, in part, to the relatively low barriers to entry. The competitive factors include the range of investment products offered, the investment performance of such products and the quality of services provided to clients.
Units do not trade publicly and are subject to significant restrictions on transfer.
On October 2, 2000 Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, Inc.: a U.S.-based asset manager. The purchase price consisted of a cash payment of $1.5 billion and 40.8 million newly issued Alliance Capital Units. AXA Financial purchased approximately 32.6 million newly issued Alliance Capital Units for $1.6 billion on June 20, 2000 to fund the cash portion of the purchase price.
Alliance Capital provides diversified asset management and related services globally to a broad range of clients including: • institutional investors, consisting of corporate and public employee pension funds, endowment funds, domestic and foreign institutions and governments and affiliates such as AXA and its insurance company subsidiaries; • private clients, consisting of high net worth individuals, charitable foundations, trusts and estates; and
• individual investors through mutual funds sponsored by Alliance Capital and affiliated joint venture companies.
AXA IM had €256 billion of assets under management, including €44 billion of assets managed on behalf of third-party clients. Its operations expanded during the year due to (i) the acquisition of Nippon Dantai whose assets are now partially managed by AXA IM, (ii) the integration of AXA Rosenberg, which was acquired in 1999, and (iii) internal restructuring of the management of AXA’s insurance company investments. AXA Rosenberg focuses on quantitative investment products relating to the creation and sale of structured fixed income and equity products.
AXA Banque and AXA Crédit. Based in Paris, AXA Banque delivers banking services dedicated to
INSURANCE-RELATED INVESTED ASSETS The assets supporting AXA’s insurance operations (included within the three segments: the Life and Savings
Segment, the Property and Casualty Segment and the International Insurance Segment) consist of a diversified portfolio of investments. These assets are managed principally by AXA’s Asset Management Segment and consist of general account assets (on which the insurer generally bears the investment risk and reward) and separate account (unit-linked) assets (on which the policyholder generally bears the investment risk and reward). The discussion below concerns the general account investment assets of AXA’s insurance operations, which are referred to in this annual report as “insurance-related invested assets”.
The liabilities of AXA’s life and savings operations can be divided into two primary types, participating and non-participating. For participating products, the investment results of the underlying assets determine, to a large extent, the return to the policyholder, and the insurer’s profits are earned from investment management, mortality and other charges. For non-participating or interest-sensitive products, the insurer’s profits are earned from a positive spread between the investment return and the crediting or reserve interest rate.
Although all the general account assets of each insurer support all of that insurer’s liabilities, the insurers have developed asset/liability management techniques with separate investment objectives for specific classes of product liabilities. As part of this approach, insurers develop investment guidelines for each product line which form the basis for investment strategies to manage such product line’s investment return and liquidity requirements, consistent with management’s overall investment objectives for the insurance related investment assets. Investments frequently meet the investment objectives of more than one class of product liabilities; each such class may be allocated on a pro-rata interest in such investments and the returns therefrom. AXA
routinely monitors and evaluates the status of its investments in light of current and anticipated future economic conditions and trends, and other factors. The strategic allocation of assets is generally determined through asset-liability analyses for both life & savings and property & casualty businesses. The strategy may differ across the geographical territories and the different lines of businesses depending on the existing investment mix, the availability of alternative investment vehicles and the underlying nature and duration of the in-force insurance contracts. Further information on how AXA manages investment risk is provided in “Item 11 – Qualitative and
At December 31, 2000, the insurance-related invested assets supporting the general account life and savings operations (including those specific assets allocated to the UK “with-profit” contracts) primarily consisted of fixed maturity investments (51%) and equity investments (23%) (1999: 55% and 24%, respectively). At such date, the insurance-related invested assets supporting the property and casualty insurance operations primarily consisted of fixed maturity investments (47%) and equity investments (35%) (1999: 48% and 33%, respectively).
– Less: fixed maturities allocated to UK with-profit contracts (c) (3,529) (3,529) – – – – (3,529) (3,529) (1%) (1%)
Mortgage, policy and other loans 25,098 25,169 863 862 53 53 26,014 26,084 10% 9%
New-Zealand, Germany, Belgium and Japan accounted for approximately 90% (1999: 90% excluding Japan)
Assets allocated to UK “with-profit” contracts. These assets are carried at estimated fair value in the consolidated financial statements of AXA due to the nature of the UK with-profit contract (see “- Life and Savings
(also referred to as “loss reserves”) fall into two categories namely: • Reserves for reported claims and claims expenses. These reserves are for outstanding claims which have not yet been settled and are based on undiscounted estimates of the future claim payments that will be made in respect of the reported claims, including the expenses relating to the settlement of such claims; and
The process of estimating the original gross claims reserve is based on information available at the time the reserve was originally established. However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as,
(from the insured party, a third party or a ceding company) and the final settlement (payment) of the claim, primarily attributable to long-tail casualty claims which may take several years to settle due to size and nature of claim, and the occurrence of large natural catastrophes late in the financial year for which limited information may be available at year end; • judicial trends; • regulatory changes, and
As a result, actual losses may deviate from the original gross reserves established. Consequently the reserve may be re-estimated reflecting those changes resulting in loss reserve redundancies (in cases where the original gross claims reserve was overstated) or deficiencies (in cases where the original gross claims reserve was understated).
AXA continually reviews the adequacy of the established claims reserves, including emerging claims development, and actual claims experience compared to the original assumptions used to estimate initial gross claims reserve. Based on current information available, AXA considers that these provisions are sufficient.
The claims reserves are translated into AXA’s reporting currency (Euro) at the year-end closing rates. The effect of foreign exchange on the claims reserves is presented in note 12 to the consolidated financial statements included elsewhere in this annual report.
and (ii) AXA’s reinsurance operations within AXA Corporate Solutions included in the International Insurance Segment.
methodology established by the French government. This reserve is in addition to each single notified claim.
In addition, certain AXA property and casualty operations are required by local regulations, in the countries in which they operate to establish catastrophe and equalization reserves, see “- Additional Factors which may affect AXA’s Business – Regulation” for further details. The catastrophe and equalization reserves were included in the consolidated balance sheet caption “Insurance Claims and Claims Expenses’. However, the catastrophe and equalization reserves were excluded from the Loss Reserve Development Table as these reserves provide no indication as to how claims have been reserved (initially) and the outcome upon settlement of such claims in future periods based on the underwriting and associated reserving methodologies adopted by AXA.
The reserves that were excluded from the Loss Reserve Development Table represented 11.9% of total gross reserves at December 31, 2000 (1999: 11.5%). These reserves were included as “Other Reserves” in the
for each year represents the aggregate amount by which the original gross claims reserve liability as of that year-end has changed in subsequent periods.
GROSS LOSS RESERVE DEVELOPMENT TABLE At December 31, Property and Casualty Segment (b) (in euro millions except percentages) 1990 1991 1992 1993 1994 1995 1996 1997(b) 1998 1999(c) 2000
Gross reserves for unpaid claims and claims expenses developed in 2000 10,349 11,500 12,843 13,941 15,544 15,188 16,466 19,310 20,011 22,619 na
(b) AXA acquired Compagnie UAP (“UAP”) on January 1, 1997. The operations of AXA and UAP were integrated in 1998. At the date of acquisition, UAP had net reserves of €13.7 billion. The outstanding claims reserves and claim expenses of UAP’s property and casualty operations are included in the year end reserves as at December, 31, 1997 and thereafter. Cumulative payments and reserve development for the 1998 year and thereafter include the development of the integrated property and casualty liabilities of AXA, including UAP, as loss development data specific to UAP is not available and there is no reasonable basis of allocating cumulative payments and reserves re-estimated between AXA and UAP post-acquisition.
In 2000, there were no reportable changes in the claims payment patterns. In addition, there have been no significant changes in assumptions during the current year or any material strengthening of existing claims reserves, except for in the United Kingdom, Ireland and Italy. In addition, the unfavorable loss reserve development reported in 2000 (€422 million) also related to the December 1999 storms in Western Europe, mainly in the
French property and casualty operations. See “Item 5 - Operating and Financial Review and Prospects” for further information.
There have been no material reinsurance transactions or any significant changes to existing reinsurance arrangements during the current year.
LOSS RESERVE DEVELOPMENT TABLE At December 31, AXA Reinsurance (in euro millions except percentages) 1990 1991 1992 1993 1994 1995 (d) 1996 1997 1998 1999 2000
Initial gross reserves for claims and claims expenses (b) 721 853 941 1,184 1,496 2,451 2,644 2,880 3,060 3,396 3,455
Re-estimated net claims reserves: 846 998 1,169 1,111 1,315 2,044 2,104 2,297 2,709 2,776
Initial net claims reserves in excess (less than) reestimated net claims reserves: Percent of original net reserve (a) (34.1%) (42.6%) (37.4%) (3.1%) (1.5%) 6.6% 14.1% 11.5% (2.4%) 6.4% na
(c) Represents premium earned subsequent to the accounting year end and premium reinstatements / experience-rated premiums received and accrued from the ceding insurers as assumed losses were incurred.
The following table reconciles the gross insurance claims reserves and claim expenses in the Loss
Development Tables presented above to that presented in the consolidated financial statements, which were prepared in accordance with French GAAP as at the dates indicated.
Reserves for claims and claims expenses net of reinsurance 39,242 37,703
AXA’s principal operations are located in Western Europe, North America and the Asia-Pacific region, and to a lesser extent, in Africa, South America and the Middle East. In these jurisdictions, AXA is generally subject to comprehensive regulation and supervision, particularly with respect to its insurance and investment management operations.
AXA’s insurance subsidiaries operate have laws and regulations governing standards of solvency, levels of reserves, permitted types and concentrations of investments, and business conduct to be maintained by insurance companies as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or filing of rates.
Insurance issued subpoenas to Equitable Life, and in December 1999 the Florida Attorney General issued an additional subpoena to Equitable Life, in each case requesting, among other things, documents relating to various sales practices. Equitable Life has responded to these subpoenas. In addition, a number of states have enacted legislation requiring insurers who sold policies in Europe prior to and during the Second World War to file information concerning those policies with state authorities. Although each of AXA’s U.S. insurance subsidiaries intends to comply with these laws with respect to its own activities, the ability of AXA and its European affiliates to comply may be impacted by various factors including the availability of relevant information after more than 50 years and privacy laws in effect in various European countries, which could result in state regulatory authorities seeking to take enforcement actions against AXA and its U.S. affiliates, including Equitable Life.
Several states in the United States, including New York, regulate transactions between an insurer and its affiliates under insurance holding company acts. These acts contain certain reporting requirements and restrictions on provision of services and on transactions, such as asset transfers, loans and shareholder dividend payments by insurers. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, such regulators determine that the issuing company is not maintaining adequate statutory surplus or capital. In 1998, the National Association of
The other jurisdictions in which AXA operates, including those in the Asia/Pacific zone, generally also have comprehensive regulatory schemes and AXA must satisfy the local regulatory requirements in each of these jurisdictions. In general, insurance licenses issued by local authorities are subject to revocation and/or modification by those authorities. Consequently, AXA’s insurance subsidiaries could be prevented from conducting business in certain of the jurisdictions in which they currently operate should they not meet such local regulatory requirements.
In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser, censures and fines.
Alliance Holding, Alliance Capital and certain of its subsidiaries as well as certain US subsidiaries of AXA
District of Columbia, except for U.S. Funds offered only to residents of a particular state. Certain AXA subsidiaries are also registered with the U.S. SEC as transfer agents and broker-dealers that are subject to minimum net capital requirements. Transactions between Equitable Life and Alliance Capital are subject to applicable provisions of the New York Insurance Law and transactions between AXA Investment Managers and its insurance company clients are subject to various insurance law regulations of the various jurisdictions where these clients are domiciled.
France. The Company also has major operating subsidiaries with headquarters located in other countries including
AXA also holds numerous investment properties in connection with its insurance and financial services operations.
You should read the following discussion together with AXA’s audited consolidated financial statements and the related notes included elsewhere in this annual report. The audited consolidated financial statements have been prepared in accordance with French GAAP, which differ in certain material respects from U.S. GAAP.
Conversely, by March 2000 the investment environment was no longer favorable to equities, while government bonds yields recovered much of the ground lost in 1999. The 10-year U.S. Treasury bond rate decreased from 6.43% at December 31, 1999 to 5.10% at December 31, 2000, making U.S. Treasury bonds one of the bestperforming investments of the year, with a total return of nearly 15%. The European bond markets were also favorably impacted, with the 10-year fixed maturity yield of nearly 10%. As was the case in 1999, the Japanese bond market remained largely uncorrelated to general trends, and its long-term rates ended the year virtually unchanged. In general, government bonds in most markets outperformed all other types of fixed-income securities in 2000. However, the U.S. high-yield bond market was seriously distressed.
S&P 500 index decreased by 10% and the Nasdaq, strongly influenced by high technology investments, plummeted by 35%, the worst performance in its 29-year history. The performance in the UK equities was in line with the global indices, recording a loss of 10%, while equities in the other European markets were relatively resilient, decreasing by around 3% in 2000. Stock price performance varied depending on the industry sector, with technology indices worldwide decreased by 40-60% in 2000, while the traditional industry sectors (tobacco, public utilities, pharmaceuticals and insurance) generally outperformed the global indices.
The Euro, which was already weak in 1999, fell further against the U.S. dollar in 2000, by 8%. The Euro reached a low of €1.00 = U.S.$0.82 on October 26, 2000 before rebounding near the end of the year to €1.00 = U.S.$0.94 on December 29, 2000. The recovery of the Euro can be attributed to slowing economic growth in the United States and estimates that the European economies will prove more resilient to an economic slowdown. The year 2000 began with a growth outlook for the world’s economies and fears that the U.S. economy could overheat and ended with the threat of a worldwide slowdown and fears of a recession in the United
reached a peak with a price of nearly U.S.$35 a barrel (Brent in London) in the summer of 2000, and the pursuit of tighter monetary policy that also began in 1999 (in June 1999 in the United States). The combined effect of these two factors was a slowdown in economic growth and an adverse impact on the world’s financial markets.
France. The life insurance and retirement savings market grew by nearly 20% in 2000 as compared to 15% in 1999. As in 1999, market growth in 2000 is primarily attributable to the success of separate account products in the very favorable investment market that prevailed until September 2000. The stable tax environment for life and savings products that has existed for two years also had a positive impact on sales. In addition, many banks savings plans (“PEP”) matured in 2000 and were reinvested in insurance contracts.
United States. Separate account product sales were adversely impacted by stock market volatility, a trend that was exacerbated when stock prices fell sharply at the end of the year. In 2000, premium growth on variable annuity products was flat (0.7%), while total sales of variable life insurance contracts increased slightly (5.0%)
United Kingdom. In 2000, new business premiums on life and savings products declined by approximately 2% as compared to 1999. 2000 was marked by two phenomena: difficulties encountered by several major players (for example, Equitable Life, a UK life insurance company, ceased to write new business in 2000) and uncertainties related to the new regulations governing Stakeholder Pensions.
Germany. After 1999, a year in which sales in life and savings products were driven by tax reform, growth in 2000 was a modest 2%. The market is also waiting for the government’s position on pension funds, which is expected to be announced in 2002. The trend in favor of regular premium contracts and separate account products continues, with the latter accounting for nearly 20% of all new business.
Belgium/Netherlands. The Belgian market continued to expand significantly (growth of approximately 30% is estimated for 2000). Premiums from the so-called new generation products and in particular, separate account products, increased substantially to the detriment of traditional products. Conversely, sales in The
Southern Europe. The domestic life and savings markets are dominated by bank-insurance and, as is the case elsewhere in Europe, growth in 2000 was driven by separate account product sales. In Spain, market growth was primarily related to the outsourcing of pension fund management by companies. In Italy, recent tax incentive measures are expected to stimulate demand.
between June 1999 and June 2000. The health market was stimulated by government initiatives and, at September 30, 2000, more than 45% of all Australians had contracted private hospital insurance coverage, compared with 30% in 1998. Premiums on personal income protection products increased by 13% while new business increased by 27%.
France. For the first time since 1996, the property and casualty market began to recover in 2000, as economic growth stimulated demand for commercial insurance coverage. This demand-driven growth, coupled with premium rate increases enacted after the storms in December 1999 (moderate for personal lines and more substantial for commercial lines), resulted in annual growth estimated at 4%.
Southern Europe. These markets reported significant growth in 2000. Spain and Portugal were affected by efforts to improve claims ratios. Further premium rate increases are expected to occur in these markets in 2001. Conversely, the government-imposed freeze on automobile premium rates in Italy, enacted in April 2000, had an adverse impact on activity in 2000. A number of property and casualty insurers have requested the freeze to be lifted in 2001.
The Asset Management Segment includes management of third-party assets as well as the management of assets on behalf of AXA’s insurance subsidiaries.
Japan. On March 7, 2000, AXA and the shareholders of Nippon Dantai contributed their Japanese life insurance operations to a new holding company called AXA Nichidan Holding (AXA Nichidan). This transaction valued Nippon Dantai at ¥10.5 billion yen (€107 million1). In addition, AXA contributed cash of approximately
¥207 billion (€2 billion) to AXA Nichidan to provide the necessary capital to finance the company’s planned business development. AXA’s ownership interest in AXA Nichidan was 96.4% at September 30, 2000, being AXA
Life & Provincial Holdings (SLPH). Following the acquisition , SLPH was delisted from the London Stock Exchange.
United States. Three major transactions were completed in 2000: • On October 2, 2000, Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, an U.S.-based asset management company. As a result of this transaction, AXA total assets under management increased to more than €890 billion at the date of acquisition.
The aggregate consideration for the transaction was $3.5 billion (€4.0 billion), and consisted of cash ($1.5 billion) and 40.8 million of newly issued units of limited partnership interest of Alliance Capital Management
In addition, AXA Financial has agreed to provide liquidity to the former shareholders of Sanford C. Bernstein after a two-year lockout period to allow the 40.8 million private units of limited partnership interest to be sold to AXA Financial over the subsequent eight years (not more than 20% of such units may be sold to
(1) All amounts relative to transaction costs and resulting goodwill for the period have been translated on the basis of exchange rates as at the date of the relevant transaction.
exchanging outstanding employee stock options in AXA Financial) was $10.5 billion (€11.3 billion). Total goodwill was €7.3 billion. The increase in shareholders’resulting from AXA’s issuance of 25.8 million ordinary shares in the form of AXA ADSs to the minority interests in December 2000 and January 2001 was €3.9 billion. At December 31, 2000 AXA had issued 20.9 million ordinary shares in connection with the exchange offer. The remaining 4.9 million ordinary shares were issued in January 2001 at the time of the merger of
Spain. On December 28, 2000, AXA acquired the 30% interest in AXA Aurora held by Banco Bilbao
Vizcaya Argentaria SA (BBVA) for €205 million. Subsequent to this transaction, AXA Aurora became a wholly owned subsidiary of AXA. Goodwill recorded in respect of this acquisition was €104 million and is being to be amortized over 30 years. Concomitantly, AXA Aurora sold its 21.4% ownership interest in Hilo Direct Seguros, a direct selling automobile insurance unit, to BBVA for €8.9 million. Upon completion of the second transaction,
January 2000. The 6.0% mandatorily convertible notes issued by AXA on January 22, 1997 matured and were converted into 4.1 million ordinary shares of AXA. As a result, AXA’s consolidated debt decreased and shareholders’ equity increased by €282 million.
May 2000. The merger between AXA and AXA Participations (an existing wholly owned subsidiary of
December 2000. In connection with the buyout of minority interests in AXA Financial and the completion of the exchange offer in December 2000, AXA issued 20.9 million ordinary shares at a unit price of €149.9. As a result, shareholders’ equity increased by € 3.1 billion in December 2000. See “ì- Events Subsequent to December 2000” for information on ordinary shares issued by AXA at the time the merger was completed.
issued €500 million in undated subordinated notes. The proceeds were used to finance the acquisition of Nippon
December 2000. AXA filed with the U.S. Securities and Exchange Commission a debt “shelf” registration for $5.0 billion, from which on December 15, 2000 AXA issued $1.9 billion (approximately € 2.1 billion) in subordinated notes denominated in Euro, US dollars and British pounds. In addition, AXA arranged a syndicated credit facility of $5.0 billion, of which $2.75 billion (approximately €3.0 billion) was drawn under a three-year term loan, which is denominated in US dollars and Swiss francs. Both of these financing arrangements were used to partly finance the buyout of minority interests in AXA Financial.
Worms to Deutsche Bank. Under the terms of the agreement, AXA will retain some of Banque Worms’ business assets, including those related to discontinued businesses, as well as the majority of its investment securities. In addition, AXA will provide a guaranty to Deutsche Bank covering certain losses, which may be incurred by Banque
Worms as a result of possible payment defaults on loans transferred with Banque Worms in the transaction. AXA’s consolidated financial statements for 2000 include a non-recurring charge of €125 million in respect of a reserve established to cover net current or future losses relative to this transaction. The sale was completed in April 2001.
& Law that had accumulated over the years (referred to in this annual report as the “Inherited Estate”) would be attributed to AXA as the shareholder, and the remainder would be attributed to policyholders in the form of a
reorganization bonus. In addition, policyholders who elected to support the proposal will receive cash payments made by AXA. In the absence of appeal, the High Court approval became irrevocable in January 2001.
(i) AXA Merger Corp. was merged with and into AXA Financial, (ii) the remaining shares of AXA Financial common stock outstanding were converted into the right to receive $35.75 in cash (without interest) and 0.295 of an
in respect of this transaction was 25.8 million, which increased AXA’s shareholders equity by €3.9 billion.
The proceeds were used to pay down a portion of the $2.75 billion three-year term loan (borrowed in December 2000 to partly fund the buyout of minority interests in AXA Financial) denominated in Swiss francs. At the end of February 2001, the outstanding balance on the three-year term loan totaled $1,810 million and denominated in U.S. dollars.
• AXA’s shareholders declared a dividend in respect of the 2000 financial year of €2.20 per ordinary share on a pre-stock split basis and did not reflect the corresponding change in the ratio between the AXA ADS
The principal changes in presentation for the year ended December 31, 2000 include the following and, unless otherwise stated below, the prior year financial information has been restated accordingly for comparative purposes: • In order to improve profitability measurements of the operating units, general expenses that were allocated previously to intermediate holding companies were reallocated to the relevant operating subsidiaries.
As a result of the sale of DLJ, only nine months of DLJ operating results were included in AXA’s consolidated operating results for the year ended December 31, 2000. As a result of the sale, management expects that the revenue contribution from the Other Financial Services Segment will decrease significantly in future periods.
Gross revenues comprise gross insurance premiums, revenues arising from asset management fees earned and other financial service operations (including investment banking) revenues.
Gross revenues for the year ended December 31, 2000 increased by 20.2% compared with the year ended December 31, 1999. On a comparable basis, the increase was 10.8%. Excluding DLJ, consolidated gross revenues totaled €69.3 billion in 2000.
(22.6%) and Belgium (20.6%). Sales performance was boosted by the success of separate account (unit-linked)
(1.5%). Due to intense price competition, gross premium volume remained stable in France and increased by 0.3% in Germany.
Growth in consolidated financial services revenues (31.1% on a comparable basis, that is, 1999 restated to reflect nine months of DLJ operating results) was primarily due to growth in asset management revenues of 21.3% (19.7% for Alliance Capital and 34.2% for AXA Investment Managers), which increased in line with growth in assets under management and efforts to shift to higher yielding investments such as equities.
Compared with the nine-month period ended September 30, 1999, DLJ’s revenues increased by 39.3%.
AXA’s consolidated net income totaled €3,904 million in 2000, up 93.2% as compared to 1999, and included €1,643 million in connection with the following exceptional operations in 2000: – the consolidated net realized gain on the sale of DLJ, which totaled €2,004 million net group share (€2,071 million net group share and net of realized and unrealized losses on Credit Suisse Group shares received in respect of that transaction of €67 million); – realized losses and valuation allowances of €236 million (net group share) relating primarily to the Equitable
Life high yield bond portfolio as a result of broad weaknesses in credit markets from a slowing economy during the third and fourth quarter of 2000, coupled with a review of investment strategy following AXA’s acquisition of the minority interests in AXA Financial and
Gross revenues for 1999 totaled €66,528 million, or an increase of 17.3 % compared to 1998, or 10.4 %
Revenue growth in the International Insurance Segment was 2.7%. The increase in gross premiums earned by the Large Risks operations (9.5%) was partially offset by the 13.7% decrease in gross premiums earned by the reinsurance operations.
On a comparable basis, revenue growth in the financial services operations was 23.5% in 1999 as compared to 1998. The growth was primarily due to strong growth in the financial markets in 1999. The bulk of this
business was conducted by the subsidiaries of AXA Financial (Alliance Capital and DLJ), which accounted for nearly 90% of these revenues.
Excluding the impact of this net non-recurring gain in connection with GRE, consolidated net income would have been €1,865 million.
– Bond conversion (1995-1999, 4.5%) and exercise of stock options (a) 175 5
– Issuance of ordinary shares for AXA Financial, Inc. transaction (a) 3,131 21
– Other bond conversion and exercise of stock options 35 1
• Based on net income excluding the impact of exception operations of €1,643 million in 2000, basic earnings per share excluding the impact of exceptional operations was €5.95 in 2000, an increase of 12.7% as compared to 1999 (1999: €5.28, an increase of 16.8% from €4.52 in 1998).
• Diluted EPS before exceptional operations has grown by 19.2% on an annualized basis since 1995 (€2.32)1.
The return on equity2 was 12.2% in 2000 as compared to 13.4% in 1999. Return on equity before goodwill amortization expense3 was 13.7% in 2000, or a 90 basis point decrease as compared to 14.7% in 1999.
but was 4.6% under the Dow Jones Stoxx Insurance index. The AXA share price at December 31, 2000 was €154. In the last five years, the AXA share price has increased by 320%. In the same period, the CAC 40 index grew by 317%, the Dow Jones Stoxx 50 index grew by 296%, and the Dow Jones Stoxx Insurance index grew by 306%.
(2) Based on consolidated net income (before impact of exceptional operations) divided by the weighted average consolidated shareholders’ equity, excluding the current year net income.
(3) The ratio of consolidated net income, before impact of exceptional operations and goodwill amortization expense, to average consolidated shareholders’ equity for the period, before the respective year’s net income.
Excluding exceptional operations, the contribution by the Life and Savings Segment to AXA’s consolidated net income increased by €264 million, or 24.3%, and accounted for 60% of AXA’s consolidated net income.
This contribution was primarily attributable to the life and savings operations in Spain, Italy and the Netherlands, where gross premiums increased significantly due to the success of separate account (unit linked) products. In addition, (i) Germany had a favorable contribution due to a tax reform, (ii) the operating results included six months of post-acquisition operating results of AXA Nichidan, and (iii) contribution from AXA China Region increased as a result of the buyout of minority interests in November 1999. Despite significant gross premium growth, the contribution of the life and savings operations in France to AXA’s consolidated net income increased by only €54 million due to an increase in income tax expense (1999 benefited from a lower average tax rate, due to a significant level of realized capital gains taxable at a lower rate).
The following footnotes apply to all tables that present the operating results of operations within the Life and Savings Segment sub-section. (a) Includes investment income, net of investment expenses and interest expense on short-term and long-term debt, and net realized investment gains or losses.
Gross premiums in 2000 increased by 18.7% as compared to 1999. Growth in individual retirement savingstype products was 21.3%, slightly higher than growth estimates for the market as a whole (20%). Due to favorable investment market conditions in the first half of the year, individual savings-related retirement products increased by 30.6% in 2000, and the increase was attributable to significant sales growth in separate account products.
In 2000, the individual savings-related retirement products accounted for 66% of gross premiums, of which 62% was derived from separate account products. Group health and retirement products, accounted for 21%
The net investment result decreased by €77 million, mainly due to a €243 million reduction in net realized gains. In 1999, a net gain of €413 million (€137 million after tax and interest credited to policyholders) was realized in connection with the tendering of Elf and Paribas equity securities. The €166 million increase in interest income was attributable to an increase in dividends received from equity investments because of the reallocation of investments from real estate to equity securities, as well as an increase in income earned on separate account assets due to growth in separate account business.
Insurance benefits and claims, which include costs relating to claims handling and policyholder participation in profits, increased by €1,851 million in 2000. Excluding the impact of reserve strengthening in 1999, insurance benefits and claims increased by 22.7% in 2000 as compared to 1999. The increase was attributable to a higher claims ratio in individual life insurance and to an increase in the proportion of retirement-savings contracts within the overall product mix (and within this business line a shift to contracts with lower fees). This increase was partially offset by a €126 million decrease in interest credited to policyholders due to the decline in the net investment result. Insurance reserves totaled €71,664, or an increase of 7%, primarily due to a 30% increase in separate account liabilities.
(1) General expenses include acquisition costs (before capitalization of deferred acquisition costs and excluding DAC amortization expense in respect of prior periods and VBI amortization expense), administrative expenses and claims handling expenses.
Year Ended December 31, 1999 compared to Year Ended December 31, 1998.
Gross premiums increased 10.6% from 1998 (9.1% on a comparable basis). This net growth was attributable to 14.3% growth in retirement savings-type products, which accounted for 69% of total business activity. AXA
Insurance benefits and claims increased by €740 million (6.3%) in line with gross premiums. The increase in 1999 was partly due to (i) a strengthening of disability insurance reserves of €66 million, (ii) a strengthening of the reserves for future risks on former UAP life contracts of €75 million, and (iii) a reserve strengthening on former UAP disability contracts of €76 million. This reserve strengthening was attributable to unfavorable trends in underwriting results from these contracts.
Investments in companies accounted for under the equity method – – –
(a) Yields are calculated on the basis of the average beginning and end of period asset carrying value for each asset category. (b) Including net investment results for invested assets not detailed in the table above.
(a) Income earned by AXA Client Solutions on the sale of investment products (mutual funds) and on asset management for third parties (other activities) is now included under gross revenues and is no longer deducted from administrative expenses.
on a comparable basis. The increase was due to growth in new business on certain product lines with higher acquisition costs. Acquisition costs (after the change in DAC) totaled €483 million in 2000 as compared to €669 million in 1999, or a decrease of 27.8% on a comparable basis. Excluding the exceptional writedown of DAC
Administrative expenses increased by €127 million, or 21.9% on a comparable basis, primarily due to costs relating to the reorganization of distribution channels and growth in the other activities. The ratio of general expenses to gross premiums increased by 190 basis points, from 12.8% in 1999 to 14.7% in 2000. The ratio of general expenses to insurance reserves was 1.89% in 2000 as compared to 1.62% in 1999.
The contribution from the US life and savings operations to AXA’s consolidated net income increased by €832 million in 2000. Excluding non-recurring events2 and the impact of foreign currency fluctuations of €52 million, the increase in the contribution to AXA’s consolidated net income was €85 million. This increase was primarily due to a significant increase in separate account fees, investment income and operating margins from other activities relating to AXA Client Solutions.
(1) Amount is after taking account of the impact of DAC amortization. (2) In 2000: realized gain on the sale of DLJ (€936 million), realized losses and valuation allowances relating to high-yield bonds in the second half 2000 (€236 million). In 1999: gain on the DLJdirect IPO (€52 million), and non-recurring amortization of deferred acquisition costs (€47 million).
Gross premiums increased by 12.3% in 1999 as compared to 1998, primarily due to higher sales of annuities sold by both the retail and wholesale distribution channels. These products accounted for approximately 66.1%
of gross premiums in 1999 as compared to 63% in 1998. New business volume increased due to continuous expansion and penetration of the wholesale distribution network, increased productivity from the retail channel and the availability in 1999 of a complete line of annuities with more competitive product features and options.
The sale of life insurance products increased by 1.3% due to the introduction of a new series of variable life insurance products beginning in the middle of 1999.
Income before income taxes and goodwill amortization of €668 million increased €11 million as compared to 1998 reflecting the factors discussed above.
Income taxes decreased by €17 million in 1999, or 11.0%, reflecting the non-taxable nature of the €90 million realized gain related to the sale of approximately 18% interest in DLJdirect.
The following table summarizes the net investment results of the US life and savings operations for the principal categories of general account assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
Fixed maturity investments: Related assets at year end 22,494 23,638 19,530
(a) Yields are calculated on a comparable basis using the average of beginning and end of period asset carrying values for each asset category (b) Includes net investment results for invested assets not detailed in the table above. (c) The yield and amount for 2000 excluded the impact of exceptional operations.
Since May 1999, AXA Sun Life’s gross premiums include PPP Lifetimecare, a former subsidiary of GRE that sells long-term care products. PPP Lifetimecare contributed only 2% to AXA Sun Life’s total gross premiums in 2000. The life insurance operations accounted for 48% of gross premiums in 2000. Gross premiums from the life insurance operations decreased by 18% in 2000 as compared to 1999, primarily due to a high level of new business written in the first half of 1999, as a result of promotional campaigns during that period that were not renewed in 2000. In addition, growing competition among intermediaries, leading to lower fees and policyholder sales charges, adversely affected sales in 2000. Retirement products accounted for 50% of total gross premiums.
Despite uncertainties related to the implementation of Stakeholder Pension regulations in 2001, which will reduce allowable sales charges on retirement savings-type products, gross premiums on these products increased by 14% in 2000 as compared to 1999. The increase was due to the reduction in policyholder charges and the issuance of a large insurance contract in the last quarter of 2000.
This increase was partially offset by a lower level of realized gains as in 1999 the bond portfolio was restructured and generated realized gains.
Income tax expense decreased by 11%, primarily due to changes in tax regulations. These changes had a positive impact in 1999 (when the rate at which life insurance companies were taxed was reduced) and a negative impact in 2000 (due to a change in the tax treatment of savings-type products, resulting in a higher tax expense for the shareholder).
The €16 million increase in goodwill amortization was due to the buyout of the 43.8% minority interests in SLPH in July 2000. As a result of the transaction the contribution to AXA’s consolidated net income increased by €29 million as the contribution included six-months of post-acquisition operating results on a 100% basis.
On the basis of 56% equity ownership and on a constant exchange rate basis, the contribution of the UK life and savings operations in 2000 would have decreased by €43 million, primarily due to a low level of new business and changes in the tax regulations.
On a comparable basis, gross health insurance premiums grew by 5.1%. Gross group health insurance premiums accounted for 52% of total earned premiums and increased by 7.4% in 2000 as compared to 1999.
The net investment result decreased by €9 million on a comparable basis due to the lower level of realized gains in 2000.
The ratio of general expenses to earned premiums was 18.0% in 2000 as compared to 18.9% in 1999.
GRE companies of €53 million. On a comparable basis, the net investment result increased by €268 million, or 11%, in 1999 as compared to 1998. The increase in net investment income was mainly from the equity portfolio (up 14%), and partially offset by the decline in income earned on real estate (down 29 %) due to divestments. Net realized gains of €1,003 million in 1999, or an increase of €144 million as compared to 1998 was principally due to realized gains on fixed maturity securities (up 116 % and totaled €529 million in 1999).
increased by 11.5 % in 1999, primarily due to an exceptional amortization effected in 1998. This 1998 charge recorded followed a review of the development of future profits on certain products. Administrative expenses of €343 million included €68 million relating to the GRE subsidiaries.
The ratio of general expenses to gross premiums was 13.3% in 1999 as compared to 13.6% in 1998.
Fixed maturity investments: Related assets at year end 12,088 11,241 9,622
Assets allocated to UK with-profit contracts and Separate Account assets 34,612 33,872 23,882 Investments in companies accounted for under the equity method – 116 – TOTAL INVESTED ASSETS AT YEAR END 71,053 69,662 51,754
(b) Includes net investment results for invested assets not detailed in the table above. (c) Relates to unrealized investment gains and losses on assets allocated to UK with-profit contracts.
Japan) and Nippon Dantai have been subsequently integrated within AXA Nichidan.
As a result of the acquisition, it is expected that in 2001 the Asia Pacific region will account for approximately 12% of AXA’s consolidated total revenues, with Japan accounting for 8%.
The following tables present information regarding the life and savings operations in the Asia/Pacific region for the years indicated.
The net investment result was €331 million, primarily earned on fixed maturity investments. In 2000,
AXA Japan undertook a vast restructuring of its portfolio of invested assets (which total €34 billion) with the aim of reducing foreign currency exposures and improving the overall quality of its invested assets.
September 2000, it received an A+ rating from Standard & Poor’s.
On a comparable basis and excluding policy terminations renewals, gross premiums increased by 25.6%
On a comparable basis, the contribution to AXA’s consolidated net income decreased by €15 million.
On a comparable basis, gross premiums written by AXA China Region decreased by 0.4% in 2000 as compared to 1999. Group retirement products, which accounted for 18% of gross premiums in 2000, had a decrease in gross premiums of 12% as the market has been waiting for the mandatory pension funds to be launched: related premiums relating to such funds will not be recorded until the first quarter of 2001. In respect of individual retirement and health products, gross premiums increased by 3%, (79% of gross premiums), despite a reduction in the number of agents in 2000. This increase was primarily due to portfolio growth related to new business written in 1999.
General expenses increased by €4 million due to the implementation of mandatory pension products.
Due to increases in interest rates, AXA China Region revised certain assumptions used to estimate the emergence of future profits on the value of purchased business in-force. The change in assumptions increased its contribution to net income (group share) by €7 million.
The contribution to AXA’s consolidated net income in 2000 increased by €11 million due primarily to the buyout of the minority interests in AXA China Region (November 1999) by AXA Asia Pacific Holdings (in which AXA has a 51% ownership interest).
In November 2000, AXA sold its 50% equity interest in the South Korean life insurer Dongbu AXA Life to its partner, the Dongbu group. For the first nine months of 2000, Dongbu AXA Life contributed € 5 million to
AXA Minmetals, a joint venture of AXA (51%) and its Chinese partner Minmetals (49%), began operations in June 1999. In 2000, AXA Minmetals wrote 17,400 new contracts as compared to 4,000 in 1999. AXA’s share of AXA Minmetals’ net loss was comparable to that in 1999, primarily due to the high level of general expenses that are characteristic of a developing business.
Gross premiums increased by 65.9% principally due to regular premium paying policies. These policies represented 90% of the total business. In particular, the level of new business was 43% higher in 1999 as compared to 1998 and related primarily to life insurance products. On a constant exchange rate basis, net income increased by €6 million due to favorable underwriting results.
Net investment results increased by € 246 million in 1999 as compared to 1998. The increase was attributable to the favorable results arising from the financial markets in 1999 as compared to 1998: 1998 was affected adversely by the Asian financial market crisis. However, this improvement was partially offset by deterioration in claims on earlier periods relating to disability products.
The ratio of general expenses to gross premiums was 16.4% in 1999 as compared to 18.5 % in 1998.
The contribution to AXA’s consolidated net income increased by €58 million in 1999 as compared to 1998. The increase was principally due to net investment result in 1999 of €64 million (group share). In 1998, taking into consideration the collapse of the financial markets, AXA China Region had proceeded to restructure its Asian real estate portfolio, which had significant losses of €162 million, or €54 million (group share). In addition, in 1999 operating results included an increase in amortization of value of purchased business in-force of €23 million due principally to the increase in net investment results in 1999.
The operating results of Dongbu AXA Life are consolidated on a proportional basis as AXA had a 50%
Following the sale in 1999 of AXA Life Singapore to AXA Australia, the close of the 1999 financial period was pushed back to September 30, 1999. Therefore, only nine months of activity was included in the AXA
The following table presents the operating results for the life and savings operations in Germany for the years indicated.
The increase in the net investment result was due to dividend income received in respect of “special funds”
Insurance benefits and claims increased by 8.1% in 2000 as compared to 1999. The mortality and morbidity experience decreased slightly (from 62.5% to 61.5%), and the interest and crediting rate on participating insurance policies decreased to 93.5% in 2000 as compared to 95.6% in 1999, mainly due to improved underwriting and investment margins.
The contribution to AXA’s consolidated net income was €23 million, as compared to €3 million in 1999.
The health insurance contribution to AXA’s consolidated net income was €16 million in 2000 as compared to €7 million in 1999. Excluding the positive impact of the tax reform (€6 million, group share), this increase was due to a €5 million improvement in the net investment result from dividend income and to slight favorable loss development, which was partially offset by an increase in information technology expenditures. Despite these additional costs, the ratio of general expenses to gross premiums was stable at 11.6% between 1999 and 2000 due to an increase in gross premiums.
The net investment result increased by €20 million, primarily due to the restructuring of “special funds”, which generated significant interest income. This increase was partially offset by low interest rates in 1999.
On a comparable basis, insurance benefits and claims increased by 6.6% in 1999 as compared to 1998.
This increase related to the interest and bonus-crediting rate on participating insurance policies that increased to 95.6% in 1999 as compared to 95.2% in 1998.
The 1999 income tax expense decreased by €18 million as compared to 1998. This decrease was primarily due to (i) the decrease in the tax rate applied to deferred taxes, (ii) the realized gains on the sale of PanEuroLife
AXA’s share of AXA Colonia’s net income was €13 million (€6 million from the life operations and €7 million from the health insurance operations) and Albingia broke even, with no contribution to net income.
The following table summarizes the net investment results of the life and savings operations in Germany for the principal categories of general account assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
Fixed maturity investments: Related assets at year end 10,814 10,493 8,665
Real estate: Net realized gains (losses) 0.4% 4 0.4% 4 – –
Loans: Net realized gains (losses) – – – – – –
Gross premiums increased by 20.6% in 2000 as compared to 1999, due to 25.6% growth in individual life premiums, which accounted for 73% of gross premiums. Gross premiums on savings-related products including separate account products increased by 93.6% in 2000 as compared to 1999, and represented 31% of all individual life insurance premiums written as compared to 20% in 1999. Products with guaranteed interest rates increased by 50.2%, primarily due to broader distribution through the banking network and brokers, and the introduction of insurance certificates sold by the Belgian postal service (La Poste). Gross group life insurance premiums increased by 8.7% and accounted for 27% of gross premiums. The increase was mainly due to higher sales of segregated fund products.
The level of realized gains decreased by €15 million in 2000 as the level of realized gains on equity investments was exceptionally high in 1999 (€207 million versus €106 million in 2000). 2000 was favorably impacted by realized gains on the sale of real estate of €50 million and by realized gains on fixed maturities, which increased by €21 million as compared to 1999, which had exceptionally high realized gains following the reallocation of the portfolio aimed at improving asset liability matching.
The underwriting margin (net of reinsurance) decreased by €20 million to €130 million in 2000 as compared to 1999. The decrease was due to a change in the product mix toward separate account products. At the same time, the contribution of traditional contracts remained high.
General expenses remained stable in 2000. The ratio of general expenses to insurance reserves was 1.92%
Income tax expense increased by €17 million in 2000 due to realized gains on fixed maturity securities
AXA Royale Belge reduced slightly the interest and bonus crediting rate on participating policies from an overall decline in interest rates.
General expenses decreased by €56 million in 1999 as compared to 1998. After eliminating the reorganization provision of €47 million that was established in 1998, the ratio of general expenses to gross premiums was 17.7% in 1999 as compared to 18.5% in 1998. The ratio of general expenses to insurance reserves was 1.96% in 1999 as compared to 2.2% in 1998.
Fixed maturity investments: Related assets at year end 5,423 4,690 4,728
(a) Yields are calculated on the basis of average beginning and end of period asset carrying value for each asset category. All amounts are converted into French francs from local currency at year-end exchange rates.
(b) Includes net investment results for invested assets not detailed in the table above.
(decrease of €3 million). General expenses rose by €11 million due to higher costs related to early retirement, offset by the €23 million improvement in the net investment result attributable to realized gains (€10 million)
products, which represented 41% of gross premiums in 1999 as compared to 19% in 1998. The contribution to AXA’s consolidated net income 1999 was €28 million higher as compared to 1998. This increase was primarily due to a partial recovery of €7 million impairment provision established in 1998 on South American government bonds
TOTAL before impact of exceptional operations 234 636 558 306 566 379
and accounted for 32% of gross premiums. Premium rate increases were gradually implemented in 2000 and should lead to an increase in commercial property gross premiums in 2001. The aforementioned decreases in gross premiums were offset by growth in gross premiums written on construction risk of 7.7%, which accounted for 5% of total premiums, and by the 300 basis point increase in natural catastrophe insurance premium rates.
Insurance claims (gross of reinsurance) decreased by €186 million in 2000. In 1999, insurance claims were adversely impacted by the cost of the December 1999 storms in France (€591 million after the release of catastrophe equalization reserves), but benefited from the reduction of future claims handling costs. In 2000, an additional charge of €295 million was recorded in respect of the December 1999 storms, after €27 million of the equalization reserve was used to cover such costs. To cover future risks of this type, the catastrophe equalization reserve was increased by €48 million in 2000, bringing the total reserve to €112 million at December 31, 2000.
Acquisition expenses were stable. Excluding the €199 million provision relative to the strategic change program in 1999 (€124 million after tax), administrative expenses decreased by only €4 million. The expense ratio2 was unchanged at 26.5% in 2000 as compared to 1999. The combined ratio3 was 108.1% in 2000 as compared to 106.0% in 1999, after excluding the impact of the provision for the strategic change program.
Income tax expense reflected the unfavorable impact of the 2001 French Finance Act on the taxation of dividends received in respect of investments in participating interests (€14 million).
The contribution to AXA’s consolidated net income was €274 million in 2000 as compared to €244 million in 1999. This increase reflected ongoing improvement in the claims ratio and profitability in a highly competitive market.
On a comparable basis, gross premiums written decreased by 1.1% in 1999 as compared to 1998. Gross premiums written on automobile insurance decreased by 1.7% and accounted for 45% of gross property and casualty premiums. The decrease was due to intense premium rate competition affecting both new business and renewal business. Gross premiums written by Direct Assurance in 1999 totaled €109 million, or an increase of 18.2% on a comparable basis, in 1999 as compared to 1998. Gross premiums written on property insurance decrease by 3.1% and accounted for 32% of gross property and casualty premiums. This decrease was due to more stringent underwriting standards adopted in 1998 with the objective of increasing profitability rather than business volume.
The net investment result increased by € 296 million, largely due to the € 279 million increase in realized gains in 1999, including gains totaling €386 million on Paribas and Elf securities tendered in connection with public offers of exchange. The increase in realized gains was partly offset by realized losses of €12 million on the sale of fixed maturity securities in 1999 as compared to realized gains of €43 million in 1998.
With regard to insurance claims, the claims ratio was 79.5% in 1999, or a 210 basis point deterioration as compared to 1998, mainly due to the December 1999 storms in France. The cost of these storms totaled €591 million (net of reinsurance) after the utilization of €87 million from the equalization reserve in 1999. At
In 1999, the net reinsurance ceded result improved by €443 million due primarily to the recoveries related to natural catastrophes at year-end 1999.
Excluding the aforementioned provision for change program costs, the combined ratio would have been 106.0%, primarily due to the December 1999 storms.
Income tax expense decreased by €15 million as a result of the decrease in the effective tax rate and a higher level of realized gains, which were subject to a lower rate.
The following table summarizes the net investment results of the French property and casualty operations for the principal categories of invested assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
(a) Yields are calculated on the basis of the average beginning and end of period asset carrying value for each asset category. (b) Including net investment results from other invested assets not detailed in table above.
The following table presents the operating results for the property and casualty operations in Germany for the years indicated.
On a comparable basis1 gross premiums written decreased by 0.3% in 2000 as compared to 1999 due to intense premium rate competition in the German market and the restructuring of the Albingia portfolio.
The expense ratio decreased to 31.8% in 2000 from 33.3% in 1999, reflecting staff reductions in the operations following the integration of Albingia.
As a result of these events, the combined ratio was 109.1% in 2000 as compared to 111.5% in 1999.
The contribution to AXA’s consolidated net income was €135 million in 2000, or an increase of €99 million as compared to 1999. The increase was primarily due to the impact of tax reform (€85 million, group share and on a constant structural basis) and the increase in AXA’s ownership in AXA Colonia in 2000 to 91%
Excluding Albingia, net investment results increased by €57 million to €419 million in 1999 as compared to 1998. This increase was attributable to investment income related to the restructuring of AXA Colonia’s special funds.
Insurance claims, which totaled €1,971 million, were affected adversely by large claims in commercial risk insurance and by the increase in claims frequency in automobile insurance in 2000. On a comparable basis, the claims ratio for all accident years was 79.6%, or a deterioration of 240 basis points as compared to 1998.
Excluding Albingia, acquisition expenses and administrative expenses increased by €9 million. The expense ratio increased to 32.9% in 1999 from 30.1% in 1998, due primarily to the decline in average premiums. The combined ratio was 112.5% in 1999 as compared to 107.4% in 1998.
Fixed maturity investments: Net realized gains (losses) – – (0.1%) (3) 0.4% 10
Net income excluding impact of exceptional operations (b) (162) (2) 8 19
(a) Established on the basis of 12 months of operation for former GRE subsidiaries, which were acquired in May 1999. (b) The exceptional operations related to the acquisition of GRE, acquired in May 1999.
Year Ended December 31, 2000 compared to Year Ended December 31, 1999
On a comparable basis, gross premiums increased by 1.6%, or by 3.3% after taking account of the decision to cease writing certain types of business primarily relating to certain London Market business that was not transferred to AXA Corporate Solutions (International Insurance Segment). Gross premiums written on automobile insurance increased by 8.7% and accounted for 46% of gross property and casualty premiums. The increase reflected the increase in premium rates that took effect in the beginning of 2000 and growth in the insurance portfolio attributable to business with affinity groups.
On a comparable basis, the net investment result increased by 35% in 2000 as compared to 1999, mainly due to an increase in net realized gains of €97 in 2000 as compared to 1999. AXA Insurance took advantage of the favorable market conditions prevailing in 2000 to realize a portion of its unrealized gains in its equity investments. Investment income rose by 4% in 2000 as compared to 1999.
The expense ratio increased by 190 basis points to 37.4% in 2000 as compared to 1999, primarily due to an increase in commission rates and expenses relating to the implementation of AXA Shared Services Limited
The increase in goodwill amortization was due to the buyout of minority interests in Sun Life & Provincial
Holdings in July 2000. On a constant exchange rate and structural basis (and based on ownership of 56%), the contribution to AXA’s consolidated net income decreased by €103 million, primarily due to the strengthening of insurance reserves.
The gross premiums written in 1999 included €874 million from the former GRE subsidiaries for the eightmonth post-acquisition period, as GRE was acquired in May 1999. There was an 18% decrease in gross premiums written over a twelve month period due to the adoption of a more stringent risk underwriting policy in automobile insurance and the decision to cease underwriting unprofitable business from GRE (particularly the marine portfolio).
Net investment results included a €45 million contribution from GRE subsidiaries realized in the eightmonth post-acquisition period. The amount contributed by GRE was affected by the increase in interest rates in 1999. Excluding the impact of GRE, AXA Insurance reported a strong increase in net investment results of €53 million. This included an increase in realized gains of €67 million, primarily due to the sale of equity securities under favorable market conditions, and a slight decline in investment income (down 5%, principally on fixed maturity securities). Net investment results for the prior year were adversely affected by the Asian financial market crisis (negative impact of €27 million).
Net loss totaled €5 million, with AXA Insurance contributing net income of €26 million and the GRE
The following table summarizes the net investment results of the property and casualty operations in the
United Kingdom for the principal categories of invested assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
(b) Including net investment results from other invested assets not detailed in table above.
The 2000 claims ratio for all accident years was virtually unchanged as compared to 1999 at 83.4%.
Excluding the favorable impact of the decision to cease writing new business on the reinsurance portfolio, the claims ratio for the current accident year deteriorated by 210 basis points due to large industrial fire claims and higher claims experience in workers’ compensation and automobile insurance lines. There was favorable loss reserve development of €29 million, primarily in the automobile insurance portfolio.
Administrative and acquisition costs decreased by €6 million, while the expense ratio improved from 31.6%
in 1999 to 31.4% in 2000. The combined ratio was stable at 114.8% in 2000 as compared to 1999.
Income tax expense increased by €18 million due to the high level of realized gains on equity investments recorded in 1999 that were not subject to tax.
Gross premiums written on automobile insurance increased by 1.2% and accounted for 43% of gross property and casualty premiums, due to higher premium rates. Gross premiums written on workers’ compensation insurance increased slightly by 0.5% and accounted for 19% of gross property and casualty premiums. The decrease in premiums was primarily attributable to commercial fire insurance and the loss of several large contracts in a highly competitive market.
The increase in net income was attributable to the increase in AXA’s ownership of AXA Royale Belge (99.8%
Belgium for the principal categories of invested assets for the periods indicated. Certain invested assets and associated net investment results are not included, and net investment income is not reduced for investment expenses or interest expense on short-term and long-term debt. Accordingly, the net investment results summarized in the following table are not directly comparable to the net investment results discussed above.
Fixed maturity investments: Related assets at year end 3,000 3,134 3,122
The other property and casualty operations include principally AXA’s property and casualty operations in
The following tables present the operating results for the other property and casualty operations for the years indicated.
NET INCOME Years ended December 31, Including Minority Interests Group Share pro forma (a) pro forma (a)
Italy. Gross premiums written increased from €903 million in 1999 to €1,038 million in 2000, primarily due to business growth and an increase in the average premium in respect of automobile insurance. The premium rates increases were implemented before the Italian government enacted a premium rate freeze in April 2000.
The Italian property and casualty operations had a net loss of €67 million in 2000. The net loss was mainly due to an increase in the claims reserve for business written in prior years of €47 million (net group share) to cover the adverse deviation in the cost of claims related in particular to impending legislation concerning bodily injury claims and a provision established to cover possible fines for violations of anti-trust regulations (reducing net income by €17 million), partly offset by a deferred tax benefit recorded in reduction to provisions for premium cancellations that became deductible over seven years (increasing net income by €25 million). In 1999, the contribution to AXA’s consolidated net income included a non-recurring release of €10 million provision relating to unexpired risks.
Spain. Gross premiums written increased from €729 million in 1999 to €897 million in 2000 due to growth in the automobile insurance portfolio, which was positively impacted by growth in the average premium and the growing motor fleet business.
The contribution to AXA’s consolidated net income was €5 million in 2000, a €8 million improvement as compared to 1999. Excluding Direct Seguros, net income was €9 million, or a €5 million increase as compared to 1999. The underwriting margin improved by €21 million (group share) due to a 410 basis point decrease in the claims ratio to 82.4%, principally related to an increase in the average automobile insurance premium.
Direct Seguros provided a net loss of €4 million in 2000, or an improvement of €3 million as compared to 1999, primarily due to lower marketing expenses in 2000 as compared to prior years.
Ireland. 1999 financial data for AXA Ireland was prepared on a pro forma basis to reflect 12 months of operations (the company was acquired on May 7, 1999).
The net investment result increased by €10 million due to a €3 million increase in interest income on bond investments and a €6 million increase in realized gains on equity investments.
May 1999. The €50 million was charged against shareholders’ equity as a purchase accounting adjustment.
The remaining increase in the insurance reserves primarily related to the automobile insurance portfolio, due to the increase in the average cost of bodily injury claims in Ireland and, as a result, reduced net income by €30 million (group share). In addition, the current claims ratio deteriorated by 80 basis points in 2000 mainly due to a €2 million provision recorded (after tax) due to the storms that occurred in the fourth quarter of 2000.
Morocco. The €49 million decrease in 2000 was primarily attributable to realized gains of €27 million in connection with the acquisition of the Compagnie Africaine d’Assurance (“CAA”) in 1999, and to a €31 million valuation allowance on non-consolidated equity investments in 2000.
Portugal. The €17 million contribution to AXA’s consolidated net income included 12 months of operation of the former GRE branch office, as opposed to eight months of post-acquisition results in 1999. The €9 million increase in 2000 as compared to 1999 reflected a €16 million increase (group share) in the underwriting result, partly due to the release of a provision for unexpired risks. General expenses increased by € 8 million, principally due to a non-recurring campaign to promote the AXA trademark. The expense ratio improved by 50 basis points to 31.3%, attributable to significant gross premium growth.
Italy. Gross premiums written increased by 2.5% in 1999 as compared to 1998, mainly due to a 4.9%
Net income was break-even in 1999, principally due to an improvement in net investment results, including several significant realized gains (€19 million net group share), and in the combined ratio, which deteriorated by 740 basis points to 108.2% in 1999 as a result of (i) a selective underwriting policy implemented in 1997,
Ireland. Gross premiums totaled €257 million in respect of the eight-month period following the GRE
acquisition in May 1999. For the entire year, gross premiums increased by 10%, principally in the automobile insurance product line, which accounted for 81% of gross property and casualty premiums. Net income totaled €3 million and included realized losses of €6 million on disposals and goodwill amortization of €2 million. The combined ratio was 104.4%.
National Insurers’ Federation. This decision led some brokers to transfer their business portfolios to other companies
Realized gains totaled €108 million in 2000 as compared to €133 million in 1999. Despite the decline in realized gains, the net investment result increased by €10 million in 2000 as compared to 1999, primarily due to realized foreign exchange gains of €5 million as a result of the strength of the U.S. dollar in 2000 and higher yields on fixed maturity investments.
The 200 basis point decrease in the retention rate and the ceding of reinsurance resulted in a €389 million decrease in the net reinsurance ceded. Ceded premiums totaled €462 million in 2000 as compared to € 252 million in 1999. In addition, a profit-sharing clause generated €116 million in 1999.
The €25 million increase in the contribution to AXA’s consolidated net income was primarily due to the market recovery in natural catastrophe retrocessions in the 2000 renewal season.
The €36 million increase in the change in unearned premium reserve was primarily due to the growth in proportional treaty business.
As in 1998, AXA Corporate Solutions Reinsurance took advantage of favorable conditions to set up excess of loss cover at attractive rates and also benefited from a profit-sharing clause that generated €116 million on this cover (compared with €99 million in 1998). Excluding the effect of exchange rates, particularly against the U.S.
The 13% decline in acquisition expenses was due to the decrease in the change in unearned commissions related to the growth in proportional treaties during 1999 and lower commissions paid as a consequence of deteriorating underwriting results. General administrative expenses remained stable in 1999 as compared to
Net income declined by €31 million in 1999 as compared to 1998, primarily due to low reinsurance premium rates worldwide.
In the United Kingdom (10% of total premiums for AXA Corporate Solutions Insurance), AXA Corporate
Solutions Insurance ceased all business activities in the London Market and limited its underwriting to domestic risks. On a comparable basis, gross premiums written decreased by €130 million, or 52% in 2000 as compared to 1999.
(gross of reinsurance) in 2000. In addition, there was unfavorable loss reserve development of €49 million due to the December 1999 storms in Western Europe, which was fully reinsured and thus had no impact on net income in 2000.
The contribution to AXA’s consolidated net income in 2000 was a net loss of €17 million, as compared to a net loss of €151 million in 1999, in line with the stringent underwriting policy adopted. The improvement also reflected the beginning of a recovery in the corporate risks market.
Against the backdrop of strong financial markets, net investment results increased by €90 million to €210 million in 1999 as compared to 1998. This increase was due to €116 million in realized gains on the sale of equity securities, compared to €39 million of realized gains in 1998.
AXA Corporate Solutions Insurance (formerly AXA Global Risks) with AXA Corporate Solutions Reinsurance (formerly
The net loss of €151 million in 1999, as compared to a net loss of €86 million in 1998, was primarily attributable to the sharp deterioration in the claims ratio for the current accident year due in particular to the occurrence of several natural catastrophes.
Conversely, AXA Cessions was covered by a group protection treaty that resulted in an after-tax profit of €17 million in connection with the year-end storms in 1999.
2000 compared to 1999. Gross premiums written increased by 12% primarily due to growth in foreign subsidiaries, which accounted for more than two-thirds of gross premiums (particularly in the United Kingdom and Latin America). The contribution to AXA’s consolidated net income in 2000 was relatively stable due to ongoing efforts to improve the claims ratio.
1999 compared to 1998. Gross premiums written increased by 1.2% to €281 million in 1999 as compared to €278 million in 1998. The growth in international business was offset by a decrease in gross premiums earned in France due to the cancellation of significant, but unprofitable, contracts. Net income totaled €11 million, or an increase of €1 million in 1999 as compared in 1998.
2000 compared to 1999. Net income from the other International Insurance companies increased by €9 million, primarily as a result of a €40 million increase in net income contributed by Créalux as compared to 1999. This increase was due to the release of equalization reserve surpluses, which was partially offset by losses attributable to Saint Georges Re (€33 million, or a deterioration of €34 million as compared to 1999)
related to the acceptance of a treaty covering the non-consolidated GRE businesses in run-off.
FINANCIAL SERVICES REVENUES Years ended December 31, (in euro millions) 2000 1999 1998
ASSET MANAGEMENT SEGMENT In 2000, the Asset Management Segment accounted for 4% of AXA’s gross premiums and financial services revenues as compared to 2.9 % in 1999. The net income from the Asset Management Segment represented 8% of AXA’s consolidated net income as compared to 4.5% in 1999, of which 77% was contributed by Alliance
The asset management segment includes third-party asset management and asset management on behalf of AXA insurance companies. The tables below present the revenues and net income for the Asset Management
On a constant exchange rate basis, Alliance Capital’s asset management revenues increased by 33.4%
in 2000 to €2,577 million. In October 2000, Alliance Capital acquired substantially all of the assets and assumed substantially all of the liabilities of Sanford C. Bernstein, Inc., a U.S.-based asset management company. Sanford
C. Bernstein), revenues increased by 19.7% in 2000 as compared to 1999, due to 21% growth in average assets under management coupled with a more profitable product mix that was partially offset by a decrease in fund performance-related fees. At December 31, 2000, assets under management totaled €483 billion, or an increase of €91 billion as compared to 1999. This increase was attributable to the acquisition of Sanford C. Bernstein.
This increase was primarily due to 28.5% growth in assets under management as compared to 1998 and a change in asset mix, which impacted the fees earned. Mutual fund assets under management relating to individual investors increased by 43% as compared to 18% growth in institutional accounts. In addition, the percentage of products invested in equities, on which asset management fees are higher, continued to grow. The growth in assets under management of 35.9% to €80 billion at December 31, 1999 resulted from the addition of new accounts, while 64.1% was due to financial market appreciation.
(a) Before intercompany eliminations. (b) After intercompany eliminations; total of these operations represents an item of the net investment results.
Before the elimination of intercompany transactions, revenues earned in 2000 totaled €557 million, or a 37.8% increase as compared to 1999 on a comparable basis. In 2000, 16 new operating units were consolidated for the first time, contributing €70 million to revenues (and €2 million to AXA’s consolidated net income).
Revenues and income growth was attributable to (i) a 7.4% increase in assets under management to €18 billion at December 31, 2000, or a 17% increase in average assets under management in 2000, and (ii)
• the increase in the Group’s ownership in AXA Investment Managers UK following the buyout of its minority interests (€7 million).
Other financial and real estate companies 60 2 42 55 (5) 29
TOTAL excluding impact of exceptional operations 521 539 352 246 219 156
AXA Client Solutions, AXA Financial and, to a lesser extent, AXA and one of the Belgian holdings recorded a significant realized gain on the sale of DLJ to Credit Suisse Group.
The contribution to AXA’s consolidated net income in 1999 increased by €98 million (or €87 million at constant exchange rates). This increase was attributable to the strong operating performances by each operational area within DLJ while managing general operating expense levels. This compared to 1998, which was affected by the crisis in the emerging financial markets.
The decline in net income from the French financial companies of €72 million, resulted in a net loss of €122 million. This loss included a net loss of €60 million attributable to Banque Worms as compared to a net loss of €80 million in 1999, and a net loss of €62 million for the other subsidiaries of the Compagnie Financière de Paris (“CFP”) as compared to net income of €30 million in 1999.
The results included AXA Bank Belgium of €33 million and the losses from Banque Worms of €80 million. A
change in accounting treatment for Banque Worms was made in 1999 and its results have been included in operating results given that this operation has not yet been sold following its acquisition via the UAP transaction
On a constant structural basis, the Belgian banks reported net income, similar to that reported in 1998.
HOLDING COMPANY ACTIVITIES The Holding Company activities consist of AXA’s non-operating companies, including mainly AXA (the
Impact of exceptional operations (a) 1,740 (30) – 1,068 169 –
Net income presented in the table above excludes the impact of exceptional operations in the years ended
• In 2000: As a result of the realized capital gains on the sale of DLJ, net of realized and unrealized losses on shares of Credit Suisse Group received in connection with the transaction, AXA (the Company) recorded a net gain of €68 million (excluded from (a) in the table above), AXA Financial recorded a net gain of €1,010 million
in May 1999 (excluded from (d) in the table above). In addition and as a result of the GRE acquisition, AXA
As a result of aforementioned items, the contribution of the holding companies to AXA’s consolidated net income group share can be analysed as set out below.
AXA (the Company). The increase in the Company’s net income was due to the following items in 2000: • the release of a €81 million real estate impairment provision that was deemed no longer necessary in light of prevailing market trends.
• a dividend of €97 million received in respect of a non-consolidated equity investment (former GRE subsidiary in Guernsey).
• a dilution gain of €41 million related to the exercise of stock options in AXA Financial by its employees before the closing of the exchange offer relating to the buyout of minority interests.
• several realized gains of €38 million were recorded in 2000 on the sale of BNP equity securities and contingency value rights (compared with €37 million in 1999).
AXA France Assurance. The decrease of €76 million in net income was primarily attributable to the non-recurring gain of €101 million realized in 1999 on the sale of BNP equity securities that was partially offset by a €19 million (after tax) for the writedown of shares in the property and casualty subsidiary in Australia (which was not consolidated).
Other French holdings. The significant increase in net income from the other French holding companies in 2000 was primarily due to realized gains of €117 million after tax on the sale of BNP equity securities.
AXA (the Company). Excluding the impact of exceptional operations, losses recorded by the Company decreased by €49 million. The results in 1999 were favorably impacted by the significant net realized gains on the sale of equity securities of €37 million after tax. The results in 2000 include higher general expenses linked to the significant advertising campaign of the AXA trademark of €11 million after tax.
AXA continues to pursue a dialogue with U.S. Jewish organizations, American regulatory authorities and the State of Israel in the context of the International Commission on Holocaust Era Insurance Claims (“ICHEIC”)
January 1, 2001 reveal that subsidiary preparations are on target with respect to the euro changeover timetable.
LIQUIDITY AND CAPITAL RESOURCES AXA has expanded its insurance and asset management operations through a combination of acquisitions, joint ventures, direct investments and internal growth. This expansion has been funded primarily through a combination of (i) proceeds from the sale of non-core businesses and assets, (ii) dividends received from operating subsidiaries, (iii) proceeds from the issuance of convertible debt securities and other debt securities, as well as borrowings (including from affiliates), and (iv) the issuance of ordinary shares.
AXA’s insurance operations. The principal sources of funds for AXA’s insurance operations are premiums, investment income and proceeds from sales of invested assets. The major uses of these funds are to pay policyholder benefits, claims and claims expenses, policy surrenders and other operating expenses and to purchase investments.
The liquidity of insurance operations is affected by, among other things, the overall quality of AXA’s investments and the ability of AXA to realize the carrying value of its investments to meet policyholder benefits and insurance claims as they come due. For an analysis of AXA’s insurance-related invested assets (excluding separate account assets), see “Item 4 – Information on the Company -Insurance-related invested assets”.
Segment-Surrenders and Withdrawals”). AXA’s investment strategy is designed to match the net investment results (the investment yield) and the estimated duration of its investments with expected payments on the insurance contracts. AXA regularly monitors the valuation and duration of its assets, market conditions that might affect the level of surrenders and withdrawals on its life insurance policies, and changes in projected immediate and long-term cash needs. AXA adjusts its investment portfolios to reflect such considerations.
See “ Item 4 – Information on the Company - Property and Casualty Reserves”. The majority of AXA’s property and casualty insurance and international insurance operations generated positive cash flows from operating activities in each of the past five years. These positive cash flows, along with that portion of the investment portfolio that is held in cash and highly liquid securities, have historically been sufficient to meet the liquidity requirements of AXA’s property and casualty insurance and international insurance operations. In the event of large catastrophic or other losses, AXA property and casualty operations would be able to liquidate their investment portfolio, a large portion of which is invested in listed securities, if necessary to pay claims.
During 2000, AXA completed several significant transactions which required obtaining debt and equity capital to finance the transactions. These transactions are summarized under “Uses of Funds” below and should be read in conjunction with the following information.
At December 31, 2000 AXA, the holding company, had outstanding subordinated debt and mandatorily convertible bonds and notes of €7,236 million, or an increase of €3,636 million from €3,600 million at December 31, 1999. On a consolidated basis at December 31, 2000, AXA’s total outstanding subordinated debt and mandatorily convertible bonds and notes totaled €8,453 million, or an increase of €3,147 million from €5,306 million at December 31, 1999.
The increase in 2000 was mainly due to the activities set out below.
• On November 3, 2000, the 71% equity interest in Donaldson, Lufkin & Jenrette held by AXA and its affiliates was sold, and, therefore, AXA’s consolidated total outstanding subordinated debt decreased by €773 million.
subordinated convertible notes due January 1, 2017 in February 2000, and (ii) €500 million of 7.25%
• On January 1, 2000, the outstanding 6.0% mandatory convertible notes, issued in connection with the acquisition of Compagnie UAP in 1997, matured and were converted into 4.1 million ordinary shares of
For further information see note 10 to the consolidated financial statements.
At December 31, 2000 AXA, the holding company, had outstanding short term and long term financing debt of €5,717 million, or an increase of €3,444 million from €2,273 million at December 31, 1999. On a consolidated basis as at December 31, 2000, AXA’s total outstanding financing debt was €9,201 million, or an increase of €3,782 million from €5,419 million at December 31, 1999.
The increase in 2000 was primarily due to the activities set out below.
• To partly finance the acquisition of the outstanding minority interests in AXA Financial, in December 2000
AXA signed a $5.0 billion multi-currency dual tranche credit facility comprising a $2.75 billion three year term loan facility and a $2.25 billion 364-day revolving facility. Under the term facility AXA borrowed an aggregate of $2.75 billion (€3.0 billion using year-end exchange rates) and denominated in two currencies: U.S. dollar and Swiss franc. No borrowings were made under the revolving facility, which AXA voluntarily cancelled before December 31, 2000.
• AXA, the holding company maintains standby committed credit facilities in aggregate amount of €4.6 billion, of which €188 million was drawn as at December 31, 2000 (1999: €2.3 billion, of which €758 million was drawn). At December 31, 2000, such credit facilities had an average remaining expiration period of approximately 3.7 years.
For further information see note 7 to the consolidated financial statements.
• In June 2000, AXA raised net cash proceeds of €3.7 billion through the issuance of 30.2 million ordinary shares. The net cash proceeds were used to finance the acquisition of the remaining minority interest in
Until 1998, AXA’s insurance operations in the United States under Equitable Life Assurance Company Limited were subject to restrictions on dividends that were set by the New York Superintendent of Insurance. In 2000,
Equitable Life Assurance Company Limited was permitted to pay a dividend to AXA Financial, Inc. of $ 252 million, or €273 million (1999: $150 million, or €140 million).
AXA anticipates that cash dividends received from operating subsidiaries will continue to cover its operating expenses including planned capital investment in existing operations, interest payments on its outstanding debt and mezzanine capital, and dividend payments during each of the next three years. AXA expects that anticipated investment in subsidiaries and existing operations, future acquisitions and strategic investments will be funded from available cash flow remaining after payments of dividends, debt service and operating expenses, proceeds from the sale of non-strategic assets and businesses and future issues of debt and equity securities.
AXA’s debt and equity financing activities in 2000 were primarily used in respect of the following acquisitions: • Acquisition of the minority interests: – in AXA China Region, owned by AXA Asia Pacific Holdings for HK $4.1 billion (approximately €519 million), funded primarily through subordinated debt securities; – in Sun Life & Provincial Holdings (United Kingdom) for £2.3 billion (approximately €3.7 billion), funded primarily through newly issued ordinary shares of AXA; and
– in AXA Financial (United States) for $10.5 billion (€11.3 billion), which included acquisition costs and costs to settle outstanding employee stock options of AXA Financial, funded partly through subordinated debt, financing debt and newly issued ordinary shares of AXA.
– Sanford C. Bernstein, Inc., by Alliance Capital (United States) whereby $1.5 billion (€1.7 billion) was paid in cash.
At December 31, 2000 the cumulative investment made by the AXA in the direct insurance operations in France, Germany, Spain, Japan and China since their creation totaled €461 million (1999: €393 million).
EU regulations, French law and the laws in other European countries, in which the Company’s principal
For information on regulatory requirements see “Item 4 – Information on the Company – Additional Factors which may affect AXA – Regulation”. For information on AXA’s risk management in connection with market risk, see “Item 11 – Qualitative and Quantitative Disclosure About Market Risk”.
The proceeds were used to pay down a portion of the $2.75 billion three-year term loan (see “Sources of Liquidity
In connection with the financial reorganization of AXA Equity & Law (United Kingdom) relating to the
AXA’s annual general meeting of shareholders was held on May 9, 2001. The shareholders declared a cash dividend of approximately €926 million (€2.20 per ordinary share1) in respect of the 2000 financial year.
Net cash used in investing activities was €15.2 billion for the year ended December 31, 2000 (1999: net cash used of €36.7 billion) and related mainly to the following items: • new cash from an increase in new business relating to separate account (unit linked) contracts used to acquire underlying investments to support such contracts of €4.0 billion; • cash paid in connection with the buyout of minority interests in AXA China Region (€0.5 billion), SLPH
(1999: net cash provided of €2.2 billion) and was mainly attributable to the following items: • net cash proceeds of €3.7 billion in connection with the issuance of AXA ordinary shares in June 2000 to fund the buyout of the minority interests in SLPH ; and
The operating, investing and financing activities described above, as well as the impact of foreign exchange and change in scope of consolidation (primarily the sale of DLJ and the acquisition of Nippon Dantai), resulted in an increase in cash and equivalents of €11.9 billion in 2000 (1999: increase of €3.7 billion).
Total consolidated cash and equivalents amounted to €26 billion at December 31, 2000 (1999: €14 billion).
The net impact of foreign exchange was a €837 million increase in net cash in 1999 (1998: decrease of €150 million). The net addition to cash due to changes in the scope of consolidation increased to €3,548 million in 1999 arising from the GRE acquisition.
(1) The dividend per ordinary share is before taking account of the 4-for-1 stock split and the corresponding change in the ratio between the AXA ADS and the ordinary share that was approved at the annual general meeting of shareholders held on May 9, 2001.
RECONCILIATION OF FRENCH GAAP TO U.S. GAAP There are differences between generally accepted accounting principles in France (French GAAP) and in the United States (U.S. GAAP). For a discussion of the differences between French GAAP and U.S. GAAP, which materially affect the determination of AXA’s consolidated net income and shareholders’ equity, see notes 26 and 27 to the consolidated financial statements included elsewhere in this annual report.
Consolidated net income in accordance with French GAAP 3,904 2,021 1,531
Under French GAAP, in accounting for UK with-profit contracts, revenue and expense are matched in net income by including both changes in the estimated fair values of assets allocated to UK with-profit contracts and corresponding increases or reductions in the liability for UK with-profit policyholder benefits. US GAAP, which was developed in an environment that differs from the one in which the UK with-profit contract was developed, requires the change in unrealized investment gains on assets allocated to UK with-profit contracts be excluded from net income, while requiring recognition of the corresponding change in the liability for with-profit policyholder benefits in net income. Accordingly, AXA believes this exclusion results in amounts that do not fully reflect the economic effect of the UK with-profit contracts. A rise in the fair value of these assets results in an increase in the liability for policyholder benefits and a reduction in AXA's consolidated US GAAP net income. The adjustment below eliminates the change in unrealized investment gains and losses on assets allocated to UK with-profit contracts, which are included in net income in accordance with US GAAP, except for such adjustment. AXA
believes that the information provided above, for which net income includes the change in unrealized investment gains and losses on assets allocated to UK with-profit contracts, provides a presentation AXA believes is more meaningful under the circumstances.
Elimination of unrealized investment gains and losses on assets allocated to UK with-profit contracts, net of deferred tax 477 (1,030) (709)
Net income per ordinary share: Amounts in accordance with French GAAP
The French GAAP to U.S. GAAP adjustments to AXA’s consolidated net income for the years ended December 31, 2000, 1999 and 1998 were primarily attributable to the following items : • Accounting treatment of unrealized investment gains and losses on assets allocated to UK withprofit contracts. Unrealized investment gains and losses are included in net income under French GAAP
and included in “Other comprehensive income” a separate component of shareholders’ equity under U.S.
GAAP. As a consequence, the adjustment to U.S. GAAP net income in 2000 was an increase of €477 million net of tax and related to AXA’s Life and Savings Segment only (1999: decrease of €1,030 million and 1998: decrease of €709 million).
• Differences in goodwill and purchase accounting. The significant differences between French GAAP
In the event that there is a specific plan by the parent company to repurchase such shares, the realized gain or loss (net of tax) will be recorded in shareholders’ equity under U.S. GAAP. As a consequence, U.S.
GAAP net income decreased by €104 million in 1999 as the amount calculated under French GAAP was greater than the corresponding amount under U.S. GAAP, which related to the issuance of shares by SLPH
NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED For information on new accounting pronouncements not yet adopted under French GAAP and US GAAP, see note 2 and 27 to the consolidated financial statements.
MANAGEMENT BOARD The Company's business is managed by a Management Board (Directoire) currently consisting of five members. Under French law, the Management Board has management responsibility for the Company and broad powers to act in the name of the Company within the scope of the Company's purpose, and subject to the authority expressly reserved by French company law to shareholders and the Supervisory Board. The Chairman of the Management Board or any of its members who has been granted the same authority may represent the
The Management Board reports to the Supervisory Board either orally or in writing summarizing the major developments in the management of the Company. Within three months following the end of the year, the
Management Board prepares the final accounts and the consolidated financial statements of AXA and submits them to the Supervisory Board for review and control. The Management Board also submits a proposal to the
Supervisory Board with respect to the allocation of the earnings for the fiscal year.
The table below sets forth the names of the members of the Management Board as of the date of this annual report and their current principal occupation or employment and principal outside directorships.
Name and Age Principal Occupation or Employment and Principal Outside Directorships
Françoise Colloc’h (58) Group Executive Vice President, Human Resources, Communication and Synergies
Gérard de La Martinière (57) Group Executive Vice President, Finance, Control, and Strategy; Director, Crédit Lyonnais and Schneider Electric
Edward Miller (60) Vice-Chairman of the Management Board; President and Chief Executive Officer of AXA Financial, Inc.; Director, Keyspan Energy Corporation
The Supervisory Board must appoint one of the members of the Management Board as Chairman.
On May 16, 2001, the Company announced that Christopher M. Condron will succeed Edward Miller as President and Chief Executive Officer of AXA Financial, Inc. and will become a member of the Company’s
SUPERVISORY BOARD The Supervisory Board reviews the management of the Company's business and affairs by the Management
Board. This supervision may not give rise to direct or indirect management of the Company by the Supervisory
In addition, according to the Company's statuts certain decisions of the Management Board, including decisions on the establishment of share repurchase programs, mergers and acquisitions, strategic partnership agreements or the distribution of dividends are subject to the prior authorization of the Supervisory Board.
As of the date of this annual report, the Supervisory Board consists of the following 14 members:
Chairman of the Supervisory Board of the Company; Director of AXA Financial, Inc., Schneider Electric and BNP Paribas.
Vice-Chairman of the Supervisory Board of the Company; Vice-Chairman of the Management Board of Aventis; Director of Schneider Electric; Pernod-Ricard, La Poste, EADS and AXA Financial, Inc.
Chairman of the Supervisory Board of Bazar de l’Hotel de Ville (BHV); Vice Chairman of the Supervisory Board of Galeries Lafayette; Director or Supervisory Board Member of Société Générale and Groupe André.
Chairman of the Management Board of Suez Lyonnaise des Eaux; Chairman of the Supervisory Board of Tractebel; Director or Supervisory Board Member of Saint Gobain, Sagem, Crédit Agricole Indosuez and Casino.
Chairman of the Supervisory Board of SAL Oppenheim Jr & Cie and Chairman of Bank SAL Oppenheim Jr & Cie (Suisse).
Member of the Management Board Group Executive Vice President, Human Resources, Communication and Synergies
Each committee issues recommendations, proposals and opinions on matters falling within its mandate, and each is empowered to undertake such reviews as it deems necessary to shed light on Supervisory Board proceedings. Outside participants may be invited to meetings at the discretion of the members of these Committees.
The role of the Audit Committee is to examine the Company’s interim and annual financial statements before they are presented to the Supervisory Board, as well as other financial documents of the Company in connection with the accounts for each reporting period. The Committee is also consulted on the selection of the Company’s Independent Auditors and reviews the independent auditors’ audit plan, the results of their audits, their recommendations and planned follow-up steps. Events that may expose AXA to material risks are referred to the Audit Committee by the Management Board or the independent auditors. The Audit Committee is also informed of accounting practices in force at AXA, and it reviews projected changes in accounting policy or method.
The Audit Committee also reviews the program and aims of the AXA’s Central Audit Department and reports produced by this department or by consultants engaged by it from time to time. It may, at its discretion, request that internal and external audits be carried out.
The Finance Committee is composed of the following seven members: Claude Bébéar (Chairman),
that are proposed by the Management Board, as well as the broad outlines governing AXA’s asset management policy and, more generally, all issues that pertain to AXA’s investment management policy.
The Compensation Committee is composed of the following four members: Henri Hottinguer (Chairman),
The Compensation Committee recommends compensation levels for the Chairman of the Supervisory
Board and the members of the Management Board, the amount of fees for Supervisory Board members to be submitted to the approval of the annual general meeting of the Company’s shareholders, as well as stock subscription and purchase options for AXA ordinary shares granted to members of the Management Board.
The Compensation Committee reviews all Management Board recommendations pertaining to the principles and procedures governing the compensation of AXA executives and to all stock subscription and purchase options for AXA ordinary shares granted to AXA employees.
DIRECTORS SERVICE CONTRACTS In connection with AXA’s acquisition of the minority interest in AXA Financial, AXA Financial entered into continuity agreements with certain executives of AXA Financial, including Edward Miller, Chief Executive Officer of AXA Financial and Vice Chairman of AXA’s Management Board. The continuity agreements were approved by a special committee of AXA Financial’s Board of Directors, formed in connection with that transaction, in order to promote the stability of AXA Financial's management and its focus on the ongoing business of AXA Financial.
(December, 2000), by providing his employer with prior written notice regarding his decision to terminate during the ninth (9th) month following the month in which the offer was consummated. No diminution or assignment, as described above, will be deemed to exist so long as Mr. Miller retains his title with AXA Financial and has duties customarily performed by an executive with the same title in a privately held, wholly owned subsidiary of a public company. In the event of such termination of employment, Mr. Miller would be entitled to a severance amount equal to three (3) times the sum of (i) his annual rate of base salary, plus (ii) the highest annual bonus paid or payable in, or in respect of, the three full fiscal years preceding the year in which such termination occurred. Mr.
EMPLOYEES At December 31, 1999 At January 1, 2000 At December 31, 2000 (a)
(b) A portion of the personnel of AXA’s French affiliates are included in GIEs. In addition, the personnel included in insurance and financial services activities in France include personnel involved in management of the portfolio of the four Mutuelles AXA, which are not included in AXA’s consolidated financial statements.
(c) The personnel at December 31, 1999 mistakenly included 346 persons already included in the central functions of AXA.
COMPENSATION The aggregate compensation paid or accrued in 2000 by the Company or its subsidiaries to executive officers of the Company including the members of the Management Board (20 persons in total) who served during 2000 was €36,042,237.
fees paid or accrued in 2000 by the Company (20 persons in total) was €1,668,173.
Type of Salary Directors fees1 Total compensation (in euros) (in euros) (salaries and fees)
(3) Paid in 2000 for services rendered in 1999. (4) Claude Bébéar was Chairman of AXA’s Management Board until May 3, 2000. His compensation includes amounts received in his capacity as Chairman of the Management Board as well as amounts received in connection with various mandates within the AXA group since his nomination as Chairman of AXA’s Supervisory Board on May 3, 2000.
(5) The compensation of L. Owen includes the portion of his bonus invested in the Executive Deferred Incentive Plan of Sun Life. (6) S. Tulin became a member of the Executive Committee in December 2000. (7) The compensation of M. Wood includes €206,058 following the cancellation of his options on shares of AXA Equity & Law Plc. Following
Because of the different tax systems according to the countries where the Company’s executive officers are located, the comparison of the compensations is difficult. For example, the marginal tax rate for the following countries are: Germany: 51.2% (excluding Church tax); Australia: 48.50%; Belgium: 60%; United States: 46.45%; France: 53.25% plus 10% (social tax); United Kingdom: 40%.
SHARE OWNERSHIP INFORMATION No member of the Company’s Supervisory Board or Management Board and no executive officer of the
AXA SHARES OWNED BY SUPERVISORY BOARD MEMBERS AT DECEMBER 31, 20001
(an affiliate of the Company the assets of which consist principally of shares in AXA Asia Pacific Holdings, Ltd.)
were outstanding. At December 31, 2000, these options on Company ordinary shares and MOFIPAR shares were held by 1,710 persons.
At December 31, 2000, the Company’s executive officers including members of the Management Board
390,000 Mofipar shares. In addition, outstanding options to purchase 40,000 ordinary shares of the Company were held at such date by the members of the Company’s Supervisory Board (18 persons).
For additional information on share options, please see note 20 to the consolidated financial statements included else where in this annual report.
(3) Since May 3, 2000, C. Bébéar is Chairman of the Supervisory Board. (4) Also holds options on ordinary shares of AXA Investment Managers, a non-quoted subsidiary of AXA. (5) Also holds options on shares of Lor Finance, a non-quoted subsidiary of AXA, the assets of which were principally common shares of AXA
Financial, Inc. (6) Also holds options on shares of AXA Corporate Solutions, a non-quoted subsidiary of AXA. (7) 6216 options on AXA ordinary shares held by L. Owen were obtained through conversion of options on SLPH shares previously held by
Mr. Wood as part of AXA’s acquisition of the minority interest in SLPH in July 2000. M. Wood left the AXA group in February 2001. (10) R. Gogel left the AXA group in May, 2000.
MAJOR SHAREHOLDERS The table below sets forth at March 15, 2001 all persons known by AXA to own, directly or indirectly, more than 5% of the issued ordinary shares.
Identity of person or Group Shares Percent Percent of Class of Voting Power
Mutuelles AXA as a Group (directly and indirectly through Finaxa) 89,741,903 21.0% 33.6%
Over the same period, the direct and indirect percentage of AXA’s total outstanding ordinary shares held by
Finaxa has decreased from 20.8% at December 31, 1998 to 18.4% at December 31, 2000. The following table shows the repartition of AXA’s ordinary share capital over the past three years: At December 31,
The AXA ordinary shares held by the Mutuelles AXA and Finaxa are entitled to double voting rights under the statuts of AXA because those shares have been held in registered form for the requisite period. For more information on double voting rights, see “Item 10 – Additional Information – Certain Rights of AXA Shareholders
As of March 15, 2001, to the best of AXA’s knowledge based on the information available to it, AXA had approximately: • 410,169 holders of record of its ordinary shares ; and
• 36,348,902 ADSs outstanding, representing approximately 4.2% of AXA’s total outstanding ordinary shares, held by 22,571 holders of record.
RELATIONSHIP WITH THE MUTUELLES AXA The Mutuelles AXA are four mutual insurance companies engaged in the life and savings insurance business and property and casualty insurance business in France: AXA Assurances IARD Mutuelle, AXA Assurances Vie
The Mutuelles AXA are parties to agreements pursuant to which they have stated their intention to collectively exercise majority control over Finaxa. These agreements affirm the intention of the Mutuelles AXA to utilize the synergies between the Mutuelles AXA and AXA’s insurance subsidiaries so as to enhance their competitiveness while maintaining their separate identities. As part of these agreements, the Mutuelles AXA have also established a strategy committee (comité de coordination stratégique) composed of nine members appointed by the Boards of Directors of the Mutuelles AXA. The strategy committee elects a Chairman from among its members who, at
The Mutuelles AXA are engaged directly in the life and savings business and the property and casualty businesses in France. These insurance businesses, which are the Mutuelles AXA’s only significant operating business activities, generated gross premiums of €1,386 million in 2000.
The insurance businesses of the Mutuelles AXA and the insurance businesses of AXA’s French insurance subsidiaries use similar distribution channels and are managed as single businesses subject to legal and management arrangements established to maintain the legal distinctions between their respective businesses. While the Company and each of the Mutuelles AXA has its own board of directors (or similar corporate governance structure), they have in common certain members of management, and certain members of the Company’s Management and/or Supervisory Boards also hold directorships and/or management positions with the Mutuelles AXA. The Mutuelles AXA, which have no employees, also use employees of AXA’s French insurance subsidiaries pursuant to management agreements between the Mutuelles and those subsidiaries.
There are no agreements between the Mutuelles AXA and AXA’s insurance subsidiaries that restrict in any way their ability to compete with one another.
Economique or GIEs. GIEs are partnerships between various companies of the AXA group and the Mutuelles
AXA that perform various common services for their members and allocate associated costs and expenses.
AXA Courtage IARD, a property and casualty insurance subsidiary of AXA, and AXA Courtage Assurance
RELATED PARTY TRANSACTIONS From time to time AXA enters into agreements and transactions with its subsidiaries and affiliates for various business purposes including the furnishing of services and/or financing of operating activities. These agreements and transactions are generally negotiated on an arms-length basis and reflect prevailing market terms and conditions for similar transactions at the time they are implemented.
May 21, 1996, AXA and Finaxa entered into a licensing agreement pursuant to which Finaxa granted AXA a non-exclusive license to use the AXA trademark in the jurisdictions in which AXA currently has operations and in any additional jurisdictions in which the AXA trademark is registered, and agreed not to grant licenses to use the AXA trademark to any other company or partnership unless (i) that company or partnership holds an ownership interest in Finaxa or (ii) Finaxa and/or AXA hold, directly or indirectly, an interest in that company or partnership.
AXA’s largest shareholder. Upon termination, AXA and the companies to which it has granted sublicenses are required to cease utilization of the AXA trademark and any sublicenses will immediately terminate.
Acquisition of the Minority Interest in AXA Financial. AXA’s acquisition of the minority interests in
AXA Financial was partially financed through an arrangement between AXA, AXA Financial and AXA Merger
All these transactions were on arms length terms. Also in connection with this transaction, AXA Financial entered into continuity agreements with 43 executives of AXA Financial. These agreements were approved by the special committee of independent AXA Financial Board members created to review the terms and conditions of the tender offer in order to promote the stability of AXA Financial’s management and its focus on the ongoing business of AXA Financial. Among the executives who entered into these continuity agreements were Edward
D. Miller, Chief Executive Officer of AXA Financial and Vice Chairman of AXA’s Management Board; Michael Hegarty,
Vice Chairman and Chief Operating Officer of AXA Financial and an Executive Officer of AXA; and Stanley Tulin,
AXA Nichidan. On March 7, 2000, AXA acquired Nippon Dantai Life Insurance Company through the creation of a new Japanese holding company, AXA Nichidan. Following that acquisition, AXA contributed cash of approximately Yen 207 billion (€2 billion) to increase AXA Nichidan’s capital. The purchase price paid by AXA
The principal trading market for the AXA ordinary shares is the premier marché of the ParisBourse. The
ParisBourse was created as a result of the the merger of the Paris, Brussels and Amsterdam Stock Exchanges on
The table below sets forth, for the periods indicated, the reported high and low closing prices in Euro for the AXA ordinary shares on the ParisBourse: Price per AXA Ordinary Share Calendar Period High (€) Low (€)
In accordance with French securities regulation, any sale of securities executed with a deferred settlement instruction during the month of, and prior to, a dividend payment date is deemed to occur after payment of the dividend, and the purchaser’s account will be credited with an amount equal to the dividend paid to the seller and the seller’s account will be debited in the same amount.
• acquire, manage and/or dispose of equity interests in French or foreign companies or businesses, and, in particular, equity interests in companies engaged in the insurance business,
• to perform any and all industrial, commercial; financial, real or personal property transactions directly or indirectly related to any of the foregoing.
Under French law, agreements between the Company and a member of the Management or Supervisory
Board are subject to the approval of the Supervisory Board unless the agreement is entered into on an arm’s length basis and in the ordinary course of business as defined by French company law. The same applies to agreements in which a member of the Management or Supervisory Board has an indirect personal interest.
Board for approval and is proven to be detrimental to the Company. Additionally, the Company’s statutory auditors must be made aware of any such agreement within one month of its execution and must submit a report to shareholders, who then must approve the agreement at their next meeting. If the agreement is not approved by the shareholders, it will remain enforceable by third parties against the Company, but the Company may hold the interested member of the Management or Supervisory Board liable for any damages it suffers as a result of such as agreement.
Euros per transaction). Authorizations thus granted to the Management Board must be reexamined each year when the annual financial statements of the Company are reviewed. In addition the Management Board must also obtain the authorization of the Supervisory Board prior to engaging in certain types of transactions including
Management Board reaches that age, the Supervisory Board may choose to extend his term one or more times.
Supervisory Board who have exceeded the age limit can only be appointed by shareholders for one term for a maximum two-year period.
Board must each own at least one hundred AXA ordinary shares during the whole term of their office.
As of May 18, 2001, there were 1,713,815,912 ordinary shares outstanding, each with nominal value of Euro 2.29. All these ordinary shares were fully paid and non assessable.
The increase in share capital effected by capitalization of reserves, profits or share premium, requires a simple majority of the votes cast at an extraordinary meeting of shareholders. In the case of an increase in share capital in connection with the issuance of shares instead of a cash dividend the voting and quorum procedures of an ordinary meeting of shareholders will apply.
general meeting. The share capital may be reduced by reducing the number of outstanding ordinary shares.
The conditions under which the capital may be decreased will vary depending upon whether or not the reduction is attributable to losses incurred by AXA. Under French law, all holders of ordinary shares must be treated equally.
Under French law, AXA may not issue shares to itself. However, it may, either directly or through a financial intermediary acting on its behalf, purchase its ordinary shares for one of three purposes: (1) to reduce its share capital by canceling the ordinary shares it purchases upon proposal of the Management
Board and after prior authorization of the Supervisory Board, with its shareholders’ approval at an extraordinary general meeting,
(2) to provide shares to its employees under a profit-sharing plan, or stock option plan; and
(3) to acquire up to 10% of its share capital, provided its shares are listed on a regulated market (e.g., the premier marché). To acquire its shares for this purpose, AXA must first file a note d’information that has received the visa of the COB (the French stock exchange authority) and obtain its shareholders’ approval at an ordinary general meeting. That approval remains valid for a period of no more than 18 months from the date of the general shareholders’ meeting granting the approval.
AXA must hold any shares it repurchases in registered form. These shares must also be fully paid. Ordinary shares repurchased and held by AXA are deemed outstanding under French law but are not entitled to dividends, voting rights or preferential subscription rights.
After making a purchase of its own shares, AXA must file monthly reports with the COB and the Conseil des Marchés Financiers that contain specified information about subsequent transactions. The CMF makes this information publicly available.
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. These distributions are also subject to the requirements of French company law and the statuts of AXA.
Upon proposal by AXA’s Management Board and subject to prior approval by the Supervisory Board, the shareholders of AXA may decide to allocate all or part of distributable profits to special or general reserves, to carry them forward to the next fiscal year as retained earnings, or to allocate them to the shareholders as dividends.
AXA must distribute dividends to its shareholders pro rata according to their share holdings. Dividends are payable to holders of shares outstanding on the date of the shareholders’ meeting approving the distribution of dividends, or, in the case of interim dividends, on the date the Management Board meets and approves the distribution of interim dividends. The actual dividend payment date is decided by shareholders at an ordinary general meeting or by the Management Board subject to prior approval by the Supervisory Board, if no decision is taken by the shareholders. AXA must pay any dividends or interim dividends within nine months of the end of its fiscal year. Dividends not claimed within five years of the date of payment become property of the
Under AXA’s statuts, at an ordinary annual general meeting, the shareholders may authorize the Management
Board to grant an option to each shareholder to receive dividends in either cash or additional shares.
In the case of ordinary shares in bearer form, the ordinary shares will be held on their holder’s behalf by the accredited financial intermediary and will be recorded in an account maintained by the accredited financial
French company 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%, 20%, 33 1/3%, 50% or 66 2/3% of the outstanding share capital or voting rights of AXA (including through ADSs), or whose holding falls below any of these levels, must notify AXA within fifteen calendar days and the Conseil des Marchés Financiers within five trading days of exceeding or falling below the relevant level. This notification has to be made by written notice of the shareholder that states the number of ordinary shares and voting rights held by it.
In order to facilitate compliance with the notification requirements, a holder of ADSs may deliver any such notification to the depositary with respect to ordinary shares represented by ADSs and the depositary will, as soon as practicable, forward the notification to AXA and the Conseil des Marchés Financiers.
If AXA is liquidated, the assets remaining after it pays its debts, liquidation expenses and all of its remaining obligations will first be used to repay its shares up to the amount of its stated capital. After these payments have been made, the shareholders of AXA will receive any surplus in proportion of their shareholdings.
On February 17, 2000, AXA issued 6,646,524 subordinated convertible notes, each of an issue price of 165.50, for an aggregate principle amount of €1,099,999,722. The interest rate is 3.75% per year payable annually on January 1 of each year and the gross yield to maturity is 6.00% per year assuming no conversion, redemption or suspension of interest payments takes place prior to maturity. The notes have a maturity date of
AXA has the option to redeem the notes at any time after January 1, 2007 at a price offering a gross yield to redemption of 6.00% per note if the average price of an AXA ordinary share over a period of 10 consecutive trading days exceeds 125% of the early redemption price. AXA also has the option to redeem the notes prior to maturity at a price of € 269.16 per note, together with accrued interest, if less than 10% of the notes issued are outstanding. There is no guarantee or other security of AXA’s obligations under the notes. In 2000, € 1 million of the total debt was converted into ordinary shares of AXA.
The notes have a redemption price on maturity of € 230.38 per note. AXA has the option to redeem the notes at any time after January 1, 2005 at a price offering a gross yield to redemption of 4.45% per note, if the average price of the AXA ordinary share over a period of 10 consecutive trading days exceeds 125% of the early redemption price. AXA also has the option to redeem the notes prior to maturity of a price of € 230.38 per note, together with accrued interest, if less than 10% of the notes issued are outstanding. There is no guarantee or other security of AXA’s obligations under the notes. In 2000, € 6 million of these notes had been converted into AXA ordinary shares.
DESCRIPTION OF AXA’S AMERICAN DEPOSITARY SHARES The following is a summary of certain provisions of an amended and restated deposit agreement, dated
New York, as depositary, and the holders from time to time of ADRs. This summary describes the material terms and conditions of the deposit agreement but does not purport to be complete and is qualified in its entirety by reference to the deposit agreement, which has been filed as an exhibit to the Company’s registration statement on Form F-6 filed with the SEC on April 18, 2001 (registration number 333-13376). Additional copies of the deposit agreement are available for inspection at the Corporate Trust Office of the Depositary in New York, which
Terms used in this summary and not otherwise defined shall have the respective meanings set forth in the deposit agreement.
AXA ADRs evidencing ADSs are issuable by the depositary pursuant to the deposit agreement. At the annual general meeting of AXA’s shareholders held on May 9, 2001, AXA’s shareholders approved a 4-for-1 split of AXA’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the ADS was changed from one ADS representing onehalf of an ordinary share to one ADS representing one ordinary share. In this description, we refer to the deposited
Upon the request of any such holder, the depositary, as promptly as practicable, will cause the number of deposited AXA ordinary shares represented by that holder’s ADSs to be held in registered form.
ordinary shares pursuant to the statuts of AXA or French law, as each may be amended from time to time. Failure to comply with these disclosure requirements may affect the holder’s or beneficial owner’s ability to give voting instructions in respect of the AXA ordinary shares represented by its ADSs. See “Description of Capital Stock of
AXA-Form, Holding and Transfer of Securities” for a description of the disclosure requirements applicable to AXA
Office to, or upon the order of, the depositor or the persons named in the custodian’s notice, an ADR or ADRs registered in the name or names requested by such person or persons for the number of ADSs issuable in respect
of that deposit, but only upon payment to the depositary of its fee for execution and delivery of ADRs and taxes and governmental charges.
Securities represented by that ADR, and upon payment of the fees and charges provided in the deposit agreement and subject to the other provisions of the deposit agreement, the Deposited Securities and the statuts of AXA, the holder of the ADR is entitled to the delivery to it, or upon its order, of the Deposited Securities at such time represented by the ADSs evidenced by such ADR. For certain limitations on the withdrawal of AXA ordinary shares, see “Transfer of American Depositary Receipts” below. Such delivery will, as regards AXA ordinary shares, be made to an account designated by that holder: • in AXA’s share register maintained by BNP-Paribas for and on behalf of AXA in the case of AXA ordinary shares in registered form or
At the request, risk and expense of any holder so surrendering an ADR, and for the account of that holder, the depositary will direct the custodian to forward proper documents of title, if available, for any of the Deposited
Securities to the depositary for delivery at the Corporate Trust Office of the Depositary.
– at the time of the relevant transaction, owns the AXA ordinary shares or ADRs to be remitted, as the case may be,
– will not take any action with respect to these AXA ordinary shares or ADRs, as the case may be, that is inconsistent with the transfer of their beneficial ownership, including, without the consent of the depositary, disposing of these AXA ordinary shares or ADRs, as the case may be, other than in satisfaction of the pre-release; • at all times fully collateralized with cash, U.S. government securities or other collateral of comparable safety and liquidity; • terminable by the depositary on not more than five business days notice; and
• subject to such further indemnities and credit regulations as the depositary deems appropriate.
Every person depositing AXA ordinary shares under the deposit agreement, including every person depositing
AXA ordinary shares on behalf of an owner of AXA ordinary shares, will also be deemed to represent that the relevant AXA ordinary shares are not restricted securities under the United States Securities Act of 1933 (the “Securities
Act”). These representations and warranties will survive the deposit of these AXA ordinary shares and issuance of corresponding ADRs.
Subject to any restrictions imposed by applicable law, regulations or permits, the depositary is required to convert or cause to be converted all cash dividends and other cash distributions received by it on the Deposited
Securities into U.S. dollars, to the extent that in the depositary’s reasonable judgment these cash dividends or cash distributions can be converted on a reasonable basis into U.S. dollars and transferred to the United States, and to distribute as promptly as practicable in the amount received, less any reasonable and customary expenses incurred by the depositary in connection with conversion, to the ADR holders entitled to the relevant amounts in proportion to the number of ADSs held by them. The amount distributed will be reduced by any amounts required to be withheld by AXA or the depositary on account of taxes or other governmental charges. See “Taxation”
into U.S. dollars by selling Euro (or such other foreign currency) and purchasing U.S. dollars on the spot currency market. If the depositary determines, following consultation with AXA, that any foreign currency received by it cannot be converted on a reasonable basis into U.S. dollars and transferred to the United States, the depositary may distribute the foreign currency received by it to, or in its discretion hold the foreign currency, uninvested and without liability for interest, for the respective accounts of, the ADR holders entitled to receive the same.
If a distribution by AXA consists of a dividend in, or other distribution without payment of any subscription price of, AXA ordinary shares, including pursuant to any program under which holders of Deposited Securities may elect to receive cash or AXA ordinary shares, the depositary may distribute pro rata to each holder of outstanding
ADR holders upon an averaged or other fair and practicable basis without regard to any distinctions among these ADR holders because of exchange restrictions, the date of delivery of any ADR or otherwise.
In circumstances in which rights would not otherwise be distributed, if a holder of an ADR requests the distribution of warrants or other instruments in order to exercise the rights allocable in respect of the ADSs evidenced by that ADR, the depositary will make these rights available to that holder upon written notice from AXA to the depositary that: • AXA has elected in its sole discretion to permit these rights to be exercised and
AXA and the depositary providing for the issuance of depositary receipts subject to appropriate restrictions or deposit and withdrawal of AXA ordinary shares and transfers of such depositary shares as required under the Securities Act.
Except as otherwise provided in the preceding paragraph, AXA and the depositary will not make available to ADR holders any right to subscribe for, to receive dividends in the form of, or to purchase any securities unless a registration statement under the Securities Act is in effect or unless the offering and sale of such securities to
The depositary will use reasonable efforts to follow the procedures established by the French tax authorities to enable eligible U.S. holders and beneficial owners of ADRs to quality for a reduced withholding tax rate of 15% if available at the time dividends are paid, to recover any excess French withholding taxes withheld or deducted with respect to dividends and other distributions of AXA to these holders and beneficial owners of
EU no. 5052 or Form RF 1A EU no. 50 53, as applicable, or such other form as may be promulgated from time to time by the French tax authorities for that purpose, together with instructions to these holders and beneficial owners. The depositary shall promptly arrange for the filing with the French tax authorities of all the forms completed by U.S. beneficial owners of ADRs and returned in sufficient time so that these forms may be filed by December 31 of the year following the calendar year in which the related dividend is paid. For more information, please see “Taxation-Ownership of AXA Ordinary Shares and ADRs-French Taxation” for further information.
• any cash dividend or other cash distribution becomes payable, or any distribution other than cash is to be made,
• for any reason there occurs a change in the number of Deposited Securities that are represented by each ADS,
• whenever AXA or the depositary finds it necessary or convenient in respect of any matter, the depository will fix a record date, for the determination of holders of ADRs entitled to receive the relevant dividend, distribution or rights, or the net proceeds of their disposition, or to give or receive instructions for the exercise of voting rights at any such meeting or in respect of any such solicitation or to receive information as to any such meeting or solicitation, or for fixing the date on or after which each ADS will represent the changed number of Deposited Securities.
The procedures described in this summary must be followed in order for ADR holders to give voting instructions in respect of the underlying AXA ordinary shares.
Securities represented by the ADSs evidenced by these holders, ADRs. The record date fixed by the depositary will normally be approximately five days before the shareholders’ meeting.
Voting instructions may be given only in respect of a number of ADSs representing an integral number of AXA ordinary shares.
• the relevant holders have certified to the depositary, as of the date the voting instruction card is executed, that they are, and at all times since the beginning of the second full calendar year preceding the date of the shareholder meeting in question have been, eligible owners.
• forward these instructions to the custodian and the custodian will use its reasonable efforts, insofar as practical and permitted under any applicable provisions of French law, statuts of AXA and the Deposited Securities, to vote or cause to be voted the AXA ordinary shares represented by the ADSs in respect of which a voting instruction card has been received.
• will, in the case where the voting instruction card is properly completed except for voting instructions relating to any resolutions to be submitted to the shareholders’ meeting that have been left blank, (a) vote in favor of these resolutions if they are recommended or submitted by the Company, or (b) vote against these resolutions if they are not recommended or submitted by the Company.
procedures from time to time as they determine may be necessary or appropriate to comply with French or
AXA is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements.
The form of the ADRs and the deposit agreement may at any time be amended by agreement between
AXA and the depositary and such amendment requires no consent from ADR holders. Any amendment which imposes or increases any fees or charges, other than taxes and governmental charges, cable, telex or facsimile transmission costs, delivery costs or other such costs, or which otherwise prejudices any substantial existing right of ADR holders, will, however, not take effect as to outstanding ADRs until the expiration of 90 days after written notice of the relevant amendment shall have been mailed to holders of outstanding ADRs. Every holder of an
days shall have expired after the depositary shall have delivered AXA a written notice of its election to resign, and a successor depositary shall not have been appointed and accepted its appointment as provided in the deposit agreement. If any ADRs remain outstanding after the date of termination, the depositary thereafter will discontinue the registration of transfers of ADRs, will suspend the distribution of dividends to the holders of these ADRs and will not give any further notices or perform any further acts under the deposit agreement, except that the depositary will continue the collection of dividends and other distributions pertaining to the Deposited
At any time after the expiration of one year from the date of termination, the depositary may sell the
Deposited Securities and hold the net proceeds of the sale together with any cash then held, without liability for interest, for the pro rata benefit of the holders of ADRs which have not been surrendered.
To the extent permitted by applicable law or the rules of any securities exchange upon which ADSs are listed or traded, the depositary will charge any party depositing or withdrawing AXA ordinary shares or any party surrendering ADRs or to whom ADRs are issued, including, without limitation, issuance pursuant to a stock dividend or stock split declared by AXA or an exchange of stock regarding the ADRs or Deposited Securities or a distribution of ADRs pursuant to the deposit agreement, where applicable: • taxes and other governmental charges; • any registration fees that may from time to time be in effect for the registration of transfers of AXA ordinary shares generally by the appointed agent of AXA for transfer or exchange of AXA ordinary shares and applicable to transfers of AXA ordinary shares to or from the name of the depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals; • the air courier, cable, telex and facsimile transmission expenses that are expressly provided in the deposit agreement to be at the expense of persons depositing AXA ordinary shares or holders of ADRs; • reasonable expenses incurred by the depositary in the conversion of foreign currency pursuant to the deposit agreement; • a fee of $5.00 or less per 100 ADSs (or portion thereof) for the execution and delivery of ADRs and the surrender of ADRs for the purpose of withdrawal of Deposited Securities; • a fee of $.02 or less per ADS (a portion thereof) for any cash distribution made pursuant to the deposit agreement, except in the case of a cash dividend or other cash distribution received from AXA on any
The depositary, subject to compliance with all applicable laws, rules and regulations and subject to the deposit agreement, may own and deal in any class of securities of AXA and its affiliates and in ADRs.
until payment is made, and may withhold any dividends or other distributions, or, after reasonably attempting to notify the relevant holder, may sell for the account of that holder, any part or all of the Deposited Securities underlying that ADR and may apply any dividends, distributions or the proceeds of any sale to pay any tax or other governmental charge. In this case, the relevant ADR holder will remain liable for any deficiency.
• compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of the Deposited Securities.
Securities it is provided will be done or performed. In addition, neither will the depositary nor AXA nor any of their respective directors, employees, agents or affiliates will incur any liability to any holder of any ADR by reason of any nonperformance or delay, caused by the reasons described in the previous sentence, in the performance of any act or thing provided for by the terms of the deposit agreement, or by reason of any exercise of, or failure to exercise, any discretion provided for under the deposit agreement.
CERTAIN RIGHTS OF AXA SHAREHOLDERS AXA is organized under the laws of The Republic of France and the rights of its shareholders are governed by French law and AXA’s statuts, which is the equivalent of a certificate of incorporation and by-laws in the
French company law does not provide an appraisal procedure allowing dissenting shareholders to have their shares appraised in the context of a merger or consolidation. However, French law provides that, in certain circumstances, including mergers, spin-offs, asset contributions or squeeze-outs, an independent expert must pass upon the fairness of the consideration being offered.
Under French company law, shareholders have preferential rights to subscribe for additional shares to be issued on a pro rata basis. Additional shares may be subscribed for with cash or by set-off of cash debts.
Shareholders have also preferential rights to subscribe for any other securities issued which may either directly result in, or carry rights to subscribe for, additional ordinary shares. Shareholders may waive their preferential subscription rights in respect of any particular offering, either individually or collectively at an extraordinary meeting.
French company law does not allow shareholder action by written consent, in lieu of a shareholder meeting, in the case of AXA.