A holder of ordinary shares, including, for purposes of this paragraph, a holder of ADSs, who fails to comply with the disclosure requirements under French company law set forth in the above paragraphs, will not be permitted, in accordance with, and subject to limitations provided under French company law and the deposit agreement, to exercise voting rights with respect to any ordinary shares exceeding the above referenced thresholds to the extent ownership of these ordinary shares was not properly disclosed to AXA, e • Items 8-17 (V5) 1/07/02 11:41 Page 161 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
until the end of a two year period following the date on which the holder complies with these disclosure requirements. In case of violation of the notification requirements provided for under AXA’s statuts, the voting limitations described above will apply if one or more shareholders holding 5% or more of the share capital request their implementation and if their demand is registered in the minutes of the relevant shareholders general meeting. In addition, in both cases, a French court may in specified circumstances, upon the request of AXA’s Management Board, any holder of AXA ordinary shares or the COB, eliminate all or part of the voting rights (and not only with respect to the shares in excess of the relevant threshold) of the relevant holder for a period not to exceed five years. Furthermore, the violation of the notification requirements described above is treated as a criminal offence by French company law and holders of ordinary shares or, whenever these holders are legal entities, their legal representatives who fail to comply therewith are liable to a fine of 18,000 euros.
must immediately notify the CMF and initiate a public tender offer for the balance of AXA’s outstanding share capital. The tender offer must also cover all securities issued by AXA that are convertible into or exchangeable for equity securities.
CONVERTIBLE/EXCHANGEABLE BONDS For information on convertible/exchangeable bonds and notes issued by the Company, see Footnote 14
“Mezzanine Capital” to the consolidated financial statements included in this annual report as Item 18.
April 27, 2001, pursuant to which the AXA ADRs are issued (referred to herein as the “deposit agreement”)
and a summary of certain applicable provisions of French law. The deposit agreement is among AXA, The
Additional copies of the deposit agreement are available for inspection at the Corporate Trust Office of the e • Items 8-17 (V5) 1/07/02 11:41 Page 162 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Item 10 depositary in New York and at the principal Paris office of the custodian, currently BNP-Paribas, or any of their successors.
Capitalized terms used in this summary and not otherwise defined shall have the respective meanings set forth in the deposit agreement.
AMERICAN DEPOSITARY RECEIPTS 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
The depositary will hold all deposited AXA ordinary shares in bearer form unless the holder of an ADR: • certifies that it is a registered holder who is holding its ADR as the beneficial owner and not on behalf of, or for the benefit of, another person (which we refer to in this description as an “Eligible Owner”) and
ordinary shares pursuant to the statuts of AXA or French law, as each may be amended from time to time.
DEPOSIT AND WITHDRAWAL OF AXA ORDINARY SHARES French law provides that ownership of capital shares issued by a French company generally will be evidenced only by a record of ownership maintained by either the issuer or its agent or an accredited financial intermediary, such as a bank. Thus references to deposit, receipt, surrender, withdrawal and delivery of AXA
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 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 currently maintained by BNP-Paribas in the case of AXA ordinary shares in registered form, or
• in an account maintained by an accredited financial intermediary in the case of AXA ordinary shares in bearer form.
Unless requested in writing by AXA to cease doing so and subject to the provisions of the deposit agreement, the depositary may execute and deliver ADRs prior to the receipt of AXA ordinary shares and deliver AXA
The depositary will also set dollar limits with respect to pre-release transactions to be entered into with any particular pre-releasee on a case-by-case basis as the depositary deems appropriate. For purposes of enabling the depositary to fulfill its obligations to holders of ADRs under the deposit agreement, the collateral referred to in the preceding paragraph shall be held by the depositary as security for the performance of the prereleasee ’s obligations to the depositary in connection with a pre-release transaction, including the prereleasee ’s obligation to deliver AXA ordinary shares or ADRs upon termination of a pre-release transaction.
• which would be, to the actual knowledge of the depositary, required to be registered under the United
States Securities Act of 1933 (the “Securities Act”) prior to public sale in the United States, unless a registration statement is in effect relating to these AXA ordinary shares, or
AXA ordinary shares on behalf of an owner of AXA ordinary shares, by taking such action will be deemed to represent and warrant that these AXA ordinary shares are validly issued, fully paid and non-assessable and that the person making the deposit is duly authorized so to do. Every such person, 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 Securities Act. These representations and warranties will survive the deposit of these AXA ordinary shares and issuance of corresponding ADRs.
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” below for further information. It is expected that the depositary will convert Euro (or any other foreign currency) 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.
Whenever the depositary or the custodian receives any distribution, other than cash, AXA ordinary shares or rights, in respect of the Deposited Securities, the depositary will cause the securities or property received by it to be distributed to the holders of ADRs entitled thereto, in proportion to their holdings, in any manner that the depositary may reasonably deem equitable and practicable for accomplishing such distribution; provided, however, that if the depositary determines that distribution cannot be made proportionately among ADR
holders that are entitled to it, or if for any other reason the depositary deems that distribution not to be feasible, the depositary may adopt the method that it deems equitable and practicable for the purpose of effecting that distribution, including, after consultation with AXA, the public or private sale of all or any part of the securities or other property and the distribution to ADR holders that are entitled to that property of the net proceeds of the sale.
of outstanding ADRs, subject to the provisions of the deposit agreement, including the provisions in respect of the withholding of taxes and governmental charges and the payment of fees, additional ADRs for an aggregate number of ADSs representing the number of AXA ordinary shares received as dividend or free distribution. The depositary may withhold any such distribution if it does not receive adequate assurances from AXA that the distribution does not require registration under the Securities Act. Instead of distributing
ADRs for fractional ADSs, the depositary will sell the aggregate of such fractions and distribute the net proceeds as in the case of a distribution received in cash, or take any other action, with the approval of AXA, as may be appropriate. If additional ADRs are not so distributed, each ADS shall also represent the additional
If AXA offers or causes to be offered to the holders of Deposited Securities any rights to subscribe for additional
AXA ordinary shares or any rights of any other nature, the depositary, after consultation with AXA, will determine the procedure to be followed to make these rights available to ADR holders or to dispose of these rights on behalf of ADR holders. If the depositary, by the terms of the rights offering or for any other reason, may not either make these rights available to ADR holders or dispose of these rights and distribute the net proceeds to the holders, then the depositary will allow the rights to lapse. If the depositary determines in its discretion that it is lawful and feasible to make these rights available to certain holders of ADRs but not to others: • the depositary will distribute to every ADR holder with respect to whom it determines the distribution to be lawful and feasible, in proportion to the number of ADSs held by that holder, warrants or other instruments, as set forth in the deposit agreement, and
• in respect of ADR holders, to whom the depositary determines the distribution not to be lawful and feasible, the depositary will use reasonable efforts to sell the rights, warrants or other instruments at public or private sales, at such place or places and upon such terms as the depositary may deem proper, and distribute the proceeds of the sale (net of the fees of the depositary and all taxes and governmental charges) to these
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 e • Items 8-17 (V5) 1/07/02 11:41 Page 166 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Form RF 1A EU no. 5052 or Form RF 1A EU no. 5053, 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.
• rights are to be issued with respect to the Deposited Securities,
• for any reason there occurs a change in the number of Deposited Securities that are represented by each
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• 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
The depositary: • will not vote, or cause to be voted, or attempt to exercise the right to vote that attaches to, AXA ordinary shares represented by ADSs in respect of which the voting instruction card is improperly completed or in respect of which the voting instructions included in the voting instruction card are illegible or unclear, and
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT The form of the ADRs and the deposit agreement may at any time be amended by agreement between AXA
• a fee for the distribution of securities pursuant to the deposit agreement in an amount equal to the fee for the execution and delivery of ADRs referred to above which would have been charged as a result of the deposit of these securities, but which securities are instead distributed by the depositary to holders of ADRs and the net proceeds distributed.
LIABILITY OF HOLDERS OF ADRS FOR TAXES If any tax or other governmental charge becomes payable by the custodian or the depositary with respect to any ADR or any Deposited Securities represented by the ADSs evidenced by that ADR, such tax or other governmental charge will be payable by the holder of the ADR to the depositary. The depositary may refuse to effect registration of any transfer of that ADR or any withdrawal of Deposited Securities underlying that ADR
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TRANSFER OF AMERICAN DEPOSITARY RECEIPTS The ADRs are transferable on the books of the depositary; provided, however, that the depositary may close the transfer books at any time or from time to time, when transfer agents located in The City of New York generally close their transfer books, and at any other time, following consultation with AXA to the extent practicable, when deemed expedient by the depositary in connection with the performance of its duties or at the request of AXA. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any ADR, the delivery of any relevant distribution or the withdrawal of Deposited
The depository may refuse to deliver ADRs, register the transfer of any ADR or make any distribution of, or related to, AXA ordinary shares until it has received such proof of citizenship, residence, exchange control approval or payment of taxes and other governmental charges, the identity of any person legally or beneficially interested in the ADR and the nature of that person’s interest, or to provide such other information as the depositary may deem necessary or proper or AXA reasonably may require. The delivery, transfer and registration of transfer of ADRs generally may be suspended during any period when the transfer books of the depositary are closed, or if any such action is deemed necessary or advisable by the depositary or AXA at any time or from time to time, subject to the provisions of the deposit agreement. The surrender of outstanding
ADRs and the withdrawal of Deposited Securities may not be suspended, subject only to: • temporary delays caused by closing the transfer books of the depositary for the deposit of AXA ordinary shares in connection with voting at a shareholders’ meeting or the payment of dividends; • the payment of fees, taxes and similar charges; and
GENERAL Neither the depositary nor AXA nor any of their respective directors, employees, agents or affiliates will be liable to any holder of ADRs, if by reason of any provision of any present or future law or regulation of the
United States or any other country, or of any other governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of AXA’s statuts, or by reason of any provision of any securities issued or distributed by AXA, or any offering or distribution thereof, or by reason of any act of God or war or other circumstances beyond its control, the depositary or AXA or any of their respective directors, employees, agents, or affiliates shall be prevented, delayed or forbidden from, or be the subject of any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of the deposit agreement or the Deposited Securities it is provided will be done or performed. In addition, neither 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.
AXA and the depositary assume no obligation nor will they be subject to any liability under the deposit agreement to holders or beneficial owners of ADRs, other than to perform their respective obligations specifically described in the deposit agreement without negligence, willful misconduct or bad faith.
Shareholders also have 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. In the event of any waiver, the relevant issuance of securities must be completed within the period prescribed by law, and the AXA Management Board may offer existing holders of shares a non-transferable priority right to subscribe to the new securities issued during a limited period of time. Preferential subscription rights, if not previously waived, are transferable during the subscription period relating to a particular offering and may be quoted on the Paris Bourse.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS French company law does not allow shareholder action by written consent, in lieu of a shareholder meeting, in the case of AXA. Shareholders may vote at a meeting, however, by means of remote transmission (such as the Internet) and/or videoconference under certain conditions to be provided for by French law and subject to the approval of the Management Board.
AXA’s corporate and consolidated annual accounts, as provided by French law. The Management Board or the Supervisory Board may convene other ordinary general meetings at any time of year. AXA’s statuts further provides that an extraordinary general meeting of shareholders may be convened at any time of year. Generally, under French company law and AXA’s statuts, mergers, increases and decreases in share capital, the creation of new classes of shares, the issuance of investment certificates or notes convertible or e • Items 8-17 (V5) 1/07/02 11:41 Page 172 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
The AXA statuts further provides that the Management Board may waive or reduce this five-day period in the interest of all shareholders.
Generally, only actions set forth in a meeting’s agenda may be taken at a shareholders’ meeting. Shareholders may, however, dismiss directors even if this matter was not included on the agenda. Additional resolutions may be submitted for shareholder approval at a meeting by the Management Board if made within 10 days of the publication of the preliminary notice in the BALO by: • one or several shareholders holding 5% of AXA’s ordinary shares; or
• a duly qualified association of shareholders who have held their shares in registered form for at least two years and who hold shares representing 1% of the outstanding voting power.
French law designates as a quorum the presence in person or by proxy of shareholders having not less than 25% (in the case of an ordinary general meeting) or one third (in the case of an extraordinary general meeting)
AXA ordinary shares must be present (including shares voted by correspondence) for a quorum to exist for an extraordinary shareholders’ meeting.
French company law provides that a simple majority of the votes of the shareholders attending or represented at the meeting is required to pass a resolution at an ordinary general meeting and two-thirds of the votes of e • Items 8-17 (V5) 1/07/02 11:41 Page 173 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
the shareholders attending or represented at the meeting is required to pass a resolution at an extraordinary general meeting.
United States. However, a number of provisions are available under French company law that have certain anti-takeover effects. In the case of AXA, the relevant provisions include, among other things: • a company’s ability to repurchase its own shares; • the existence of shares with double voting rights; and
“Description of Capital Stock of AXA-Form, Holding and Transfer of Securities”.
The vote must be cast at an extraordinary general meeting of shareholders.
Under French company law, the vote of the shareholders of a surviving corporation to a merger at an extraordinary general meeting is also needed (except for a merger of a wholly-owned subsidiary with and into the surviving corporation).
Board and certain of its other books and records during the Company’s usual business hours at its registered office. Only documents relating to the last three fiscal years are required to be made available to shareholders.
MODIFICATION OF SHAREHOLDER RIGHTS Under French law, the shareholders generally have the power to amend the statuts. Such an amendment requires the approval of two thirds of the shareholders attending or represented at an extraordinary shareholders’ meeting. Generally, shareholders holding one third of the voting power of AXA’s outstanding ordinary shares would constitute a quorum at an extraordinare shareholders meeting. However, pursuant to
Form F-4 (registration No. 333-50438) filed with the U.S. SEC on November 21, 2000.
Taxation The following generally summarizes the material U.S. Federal income tax and French tax consequences to
U.S. Holders of the ownership and disposal of AXA ordinary shares or ADRs representing ADSs.
For purposes of this discussion “U.S. Holder” is any one of the following: • An individual who is a citizen or resident of the United States,
• A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the
• An estate the income of which is subject to U.S. Federal income taxation regardless of its source,
• A trust if a court within the United States is able to exercise primary supervision over the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or
If a partnership holds AXA ordinary shares or ADRs representing ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. Partners of partnerships holding these Shares or AXA ADRs should consult their tax advisors as to the tax consequences of owning or disposing of AXA ordinary shares or ADRs representing ADSs, as applicable.
This summary is not a complete description of all of the tax consequences of the ownership or disposition of
AXA ordinary shares or ADRs representing ADSs. It is based on the current tax laws of France and the United
States, including the United States Internal Revenue Code of 1986, as amended (which we refer to in this annual report as the “Code”), its legislative history, temporary, existing and proposed Treasury Regulations,
Item 10 fiscal and the précompte see “French Taxation-Taxation of Dividends-”Avoir Fiscal”. No further details on these changes are available as of the date of this annual report. Your individual circumstances may affect the tax consequences of the ownership or disposition of AXA ordinary shares or ADRs representing ADSs, and your particular facts or circumstances are not considered in the discussion below.
The summary is not intended to apply to holders of AXA ordinary shares or ADRs in particular circumstances, such as: • Dealers in securities,
• Traders in securities who elect to apply a mark-to-market method of accounting,
• U.S. Holders who hold AXA ordinary shares or ADRs representing ADSs other than as capital assets,
• Holders of AXA ordinary shares or ADRs representing ADSs that own directly or indirectly or are deemed to own, five percent or more of either the total voting power or the total value of the AXA Shares or that carry on a trade or business in France through a permanent establishment or fixed base for the purpose of which
Furthermore, although this summary generally applies to relevant holders whether or not they are employees of AXA or its affiliates, this summary does not describe all the tax considerations relevant to persons who acquired shares of AXA ordinary shares or ADRs representing ADSs pursuant to the exercise of an incentive stock option.
TAXATION OF DIVIDENDS-WITHHOLDING TAX France generally imposes a 25% withholding tax on dividends distributed in cash or in the form of ordinary shares by a French corporation (such as AXA) to shareholders who are not residents of France for French tax purposes. However, the Treaty generally reduces the withholding tax rate to 15% on dividends paid in cash or in the form of shares to an “Eligible U.S. Holder”.
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“Instruction”), dividends paid in cash or in the form of AXA ordinary shares to an Eligible U.S. Holder who is entitled to the avoir fiscal (as discussed below) will no longer be subject to the French withholding tax of 25%
Under French law, shareholders who are not resident in France are not eligible for the avoir fiscal. Under the Treaty, however, an Eligible U.S. Holder is generally entitled to a payment from the French Treasury that is the equivalent of the avoir fiscal. That payment is made by the French Treasury not earlier than the
or more of the capital of AXA. This rule only applies if less than 20% of the shares of the regulated investment company should be beneficially owned by persons who are neither citizens nor residents of the
Thus, for example, if a dividend of 100 were payable by AXA to: • an Eligible U.S. Individual Holder and the requirements are satisfied, that holder would initially receive 85
(the 100 dividend less a 15 withholding tax). That holder would also receive an additional payment from the
French Treasury of 42.5, consisting of the avoir fiscal of 50, less the withholding tax on that amount. Thus, the total net payment to the Eligible U.S. Individual Holder would be 127.5, although, as discussed below, that holder would recognize 150 of income for U.S. Federal income tax purposes,
A U.S. Holder entitled to the refund of the précompte must apply for the refund by filing a French Treasury form RF 1 B EU-NO. 5053 before the end of the calendar year following the year in which the dividend is paid. The form and its instructions are available from the United States Internal Revenue Service or at the
An Eligible U.S. Holder entitled to the avoir fiscal who wishes to obtain a reduced withholding rate at source must: • complete,
ADRs), a French form RF1 A EU n° 5052, entitled “Application for Refund”, before the date of payment of the relevant dividend. An Eligible U.S. Holder that is a regulated investment company must also be identified as such on a list provided annually by the U.S. Internal Revenue Service to the French tax administration.
ordinary shares or ADRs before the date of payment of the relevant dividend. Whichever procedure is followed, the avoir fiscal is not paid by the French Treasury earlier than January 15th following the close of the calendar year in which the relevant dividend is paid.
If either of the procedures described above has not been followed before a dividend payment date or is not available to an Eligible U.S. Holder, AXA or the French paying agent will withhold tax from the dividend at the normal French rate of 25%, and the Eligible U.S. Holder will be entitled to claim a refund of the excess withholding tax and the payment of the related avoir fiscal by filing the Application for Refund with the depositary or the French paying agent early enough to enable them to forward that application to the French tax administration before December 31st of the year following the calendar year in which the related dividend was paid.
States and which does not own, directly or indirectly, 10% or more of the capital of AXA, and
Provided they are entitled to Treaty benefits under the limitation on benefits provisions in Article 30 of the
Treaty, Eligible Tax-Exempt Individual Holders are entitled to receive from the French Treasury a payment equal to 30/85ths of the gross avoir fiscal (the “partial avoir fiscal”), less a 15% dividend withholding tax on that amount, notwithstanding the general requirement described above that the individual holder be subject to
U.S. tax on both the dividend and the avoir fiscal. Thus, for example, if a dividend of 100 were payable by
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Profit Organizations”), Eligible Tax-Exempt Holders are entitled to receive from the French Treasury a payment equal to 30/85ths of the avoir fiscal, less a 15% withholding tax on that amount. Thus, the total net payment to the Eligible Tax-Exempt Individual Holder would be 100. The Eligible Tax-Exempt Individual Holder, where required by the French tax administration, must show that it is the beneficial owner of the AXA ordinary shares or ADRs and that the holding of those AXA ordinary shares or ADRs does not have as one of its principal purposes the purpose of allowing another person to take advantage of the grant of the partial avoir fiscal under the Treaty.
Tax-exempt holders generally must follow the procedures set forth above under “Taxation of Dividends
TAX ON SALE OR REDEMPTION OF AXA ORDINARY SHARES OR ADRS Under the Treaty, no French tax is levied on any capital gain derived from the sale of AXA ordinary shares or
Any such redemption generally would entitle the shareholders to the avoir fiscal and may trigger the précompte, provided it is pro rata among all the shareholders of AXA. An Eligible U.S. Holder generally would be entitled to Treaty benefits with respect to the avoir fiscal and the précompte related to his or her gain on a redemption of AXA ordinary shares that is treated as a dividend for French tax purposes.
that would be subject to French gift or inheritance tax under French domestic tax law will not be subject to such French tax by reason of the Convention between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Estates,
• the AXA ordinary shares or ADRs were used in, or held for use in, the conduct of business through a permanent establishment or a fixed base in France.
Holder exceeds the U.S. Holder’s allocable share of AXA’s current and accumulated earnings and profits, the excess will be applied first to reduce the Holder’s basis in his or her AXA ordinary shares or ADRs, and then, any remaining excess would constitute gain from the deemed sale or exchange of his or her AXA ordinary shares or ADRs. See “Tax on Sale or Exchange of AXA Ordinary Shares or ADRs” below.
For U.S. Federal income tax purposes, dividends will be taxable to the U.S. Holder of AXA ordinary shares or
As discussed above, payments of dividends, the avoir fiscal, the partial avoir fiscal and the refund of the précompte to a U.S. Holder will be subject to French withholding tax. For U.S. Federal income tax purposes, a U.S. Holder may generally elect to treat these French withholding taxes as either a deduction from gross income or a credit against the U.S. Federal income tax liability of that U.S. Holder. The maximum foreign tax credit allowable generally is equal to the U.S. Holder’s U.S. Federal income tax liability for the taxable year multiplied by a fraction, the numerator of which is the U.S. Holder’s taxable income from sources without the United States and the denominator of which is the U.S. Holder’s taxable income from all sources for the taxable year. That foreign tax e • Items 8-17 (V5) 1/07/02 11:41 Page 182 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Item 10 credit limitation is applied separately to different “baskets” of income. For purposes of applying the foreign tax credit limitation, dividends are generally included in the “passive income” basket or, if received by certain holders and certain other conditions are met, the “financial services income” basket.
In the case of an Eligible U.S. Holder, if the full withholding tax rate of 25% is applied because, for instance, the procedures described under “French Taxation - Taxation of Dividends - Procedures to Obtain Treaty
Benefits” are not complied with by the dividend payment date, the refundable portion of the tax withheld by
TAX ON SALE OR EXCHANGE OF AXA ORDINARY SHARES OR ADRS For U.S. Federal income tax purposes, a U.S. Holder generally will recognize gain or loss on any sale, exchange or other disposition of AXA ordinary shares or ADRs representing ADSs, unless a specific non recognition provision applies. That gain or loss will be measured by the difference between the U.S. dollar value of the amount of cash, and the fair market value of any other property, received and the U.S. Holder’s tax basis in the AXA ordinary shares or the ADRs, determined in U.S. dollars. A U.S. Holder’s tax basis in the
U.S. Holder for these AXA ordinary shares or ADRs exceeds one year. In general, gain from a sale or exchange of AXA ordinary shares or ADRs by a U.S. Holder will be treated as United States source income for foreign tax credit limitation purposes.
U.S. Holders should consult their own tax advisor as to the application of the U.S. Federal information reporting and backup withholding requirements to them and their qualification, if any, for an exemption under these rules as well as the particular tax consequences to them of owning and disposing of AXA
UNITED STATES STATE AND LOCAL TAXES In addition to U.S. Federal income taxes, U.S. Holders may be subject to United States state and local taxes with respect to their AXA ordinary shares or ADRs representing ADSs. U.S. Holders should consult their own tax advisors regarding such matters.
The following information should be read in conjunction with (i) “Item 5 – Operating and Financial Review and
Prospects”, (ii) AXA’s consolidated financial statements and the notes to the consolidated financial statements included under Item 18 of this annual report, and (iii) information under the heading ‘Cautionary Statements on Forward Looking Statements’ at the beginning of this annual report.
Risk management In an effort to protect and enhance shareholder value, AXA actively manages its exposures to market risks.
through the distribution of policyholder dividends. Therefore, AXA’s exposure to market risk is reduced as generally 85% or more of the earnings are attributed to the policyholders in respect of participating insurance contracts.
As a result of the diversity of insurance products and the regulatory environments in which AXA operates, different methods of asset-liability management are utilized by different subsidiaries. Most of these methods fall into two major categories as set out below: • Duration analysis is primarily used for interest sensitive products and policies with long-term fixed payout patterns. AXA uses duration analysis to create a portfolio of predominately fixed maturity securities that minimizes the risk of changes in interest rates to AXA.
Consequently, there is greater flexibility in investment strategies while managing investments to ensure sufficient liquidity to meet the claims as they become due based on actuarial assessments.
Sensitivity analyses AXA performs sensitivity analyses to quantify the exposure of certain financial instruments to interest rate risk, equity price risk and foreign currency exchange risk. Such sensitivity analyses quantify the potential loss in terms of estimated fair value or future earnings under certain scenarios of reasonably possible adverse changes in financial markets. The sensitivity analyses estimate risk exposure and, therefore, potential net gains are ignored. Financial instruments within the scope of the analyses include fixed maturity and equity securities, mortgage loans, policy and other loans, debt and other borrowings, derivative instruments, and insurance contracts (life & savings, property & casualty, and international insurance). In accordance with the regulations of the U.S. SEC, real estate was not included within the scope of the analyses.
States, the United Kingdom, Belgium, Germany, Australia and Japan. Such subsidiaries account for over 90%
For purposes of the sensitivity analyses, fair values were estimated in accordance with the valuation methods described in notes 2, 6 and 25 to the consolidated financial statements. However, the financial statement disclosures provided in note 25 for fair values on financial instruments included only insurance contracts defined as “investment” contracts written by AXA’s Life & Savings operations that have no or insignificant mortality and morbidity risk, whereas this sensitivity analyses included all insurance contracts.
December 31, 2000 given that the overall fixed maturity to equity security investment mix across AXA’s principal insurance operations did not change significantly in 2001.
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U.S. life & savings operations’ high-yield bond investment products (net impact of €1.8 billion). In addition, if the cost relating to the U.S. terrorist attacks on September 11, 2001 of €561 million, which was denominated primarily in U.S. dollars, was not included in the 2001 French GAAP earnings, AXA’s exposure to changes in foreign currency exchange rates would be nearly €70 million, comparable to 2000, if the 2000 U.S. dollarbased exceptional operations (discussed above) were also excluded.
Item 12: Description of Securities other than Equity Securities Not applicable
Item 18: Financial Statements The consolidated financial statements appear on pages F-1 to F-115 and include: page
Consolidated Financial Statements: Consolidated Balance Sheets as at December 31, 2001, 2000 and 1999 F-2
Consolidated Statements of Income for the years ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-6
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Euro. In addition, we have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
As discussed in note 2 to the consolidated financial statements, the Company changed its method of accounting for and presenting certain items, as discussed therein.
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At December 31, (in euro millions) 2001 20001 19991 5 Value of purchased life business inforce 3,739 3,724 2,438
Mortgage, policy and other loans 22,907 26,316 17,457 6 Total investments from insurance activities 248,208 243,241 211,763 7 Separate account (unit-linked) assets 115,723 117,261 109,647 6 Total investments from non-insurance activities 10,355 10,773 47,553 8 Investment in affiliated companies (equity method) 1,570 1,217 1,408
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Minority interests’ share in retained earnings brought forward 3,024 1,578 6,595
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Years ended December 31, (in euro millions, except per ordinary share amounts) 2001 20001 19991
Goodwill amortization (group share) 681 279 180 24 Adjusted Earnings Per Ordinary Share:2,4
– provision of euro 125 million recorded during the period in connection with the sale of Banque Worms, which was completed in April 2001. In 1999: – euro 156 million (net group share) related to the acquisition of Guardian Royal Exchange (GRE).
Notes f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-4 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
For further information on the movements in shareholders’ equity see note 12.
Ordinary Shares Capital Retained Net income in excess earnings for the
Adjustment on opening balance – – – (16) – (16) Issuance of ordinary shares 4.8 11 102 – – 113 Cash dividend – – – (582) – (582) Exercise of stock options 13.2 30 82 – – 112
Conversion of 6.0% mandatorily convertible bonds at maturity 16.4 38 245 – – 282 Issuance of ordinary shares
– Merger of AXA Participations 8.0 19 197 – – 216
– Squeeze out merger in the buyout of minority interests in AXA Financial, Inc. 19.7 45 692 – – 737
– Employee stock purchase program (July and December 2001) 18.3 42 279 – – 321
Impact of change in methodology (AXA Equity & Law Inherited Estate) – – – (79) – (79) Exercise of share options 2.6 9 22 – – 31 Cash dividend4 (1,053) – (1,053) Impact of foreign currency fluctuations – – – 300 – 300
(a former UAP operation) as SLPH issued ordinary shares in connection with the acquisition of Guardian Royal Exchange (“GRE”) in May 1999. (3) The impact of the adoption of new French Regulations on January 1, 2001 is discussed in note 2 with unaudited Pro forma financial information provided in note 32. (4) Includes the cash dividend paid of euro 927 million and supplemental tax charge arising from such distribution of euro 126 million. (5) Includes a euro 869 million capitalization reserve.
Adjustments to reconcile net income to net cash provided by operating activities: Net investment (gains)/losses2 1,811 (10,256) (3,669)
Net cash (used in) provided by financing activities (1,625) 11,710 2,192 Net impact of foreign exchange fluctuations (514) 915 837 Change in cash due to change in scope of consolidation 91 452 3,606 Net (decrease) increase in cash and cash equivalents (10,047) 11,935 3,709 Cash and cash equivalents beginning of year (net) 26,065 14,130 10,421 Cash and cash equivalents end of year (net)5,6,7 16,018 26,065 14,130 Supplemental cash flow information: continuing and discountinued operations
(7) Represents cash and cash equivalents net of bank overdrafts. Cash and cash equivalents are presented in the balance sheet gross of bank overdrafts, which are presented separately in liabilities under the balance sheet caption “Amounts owed to credit institutions”. Gross cash and cash equivalents at December 31, 2001, 2000 and 1999 totaled euro 17,646 million, euro 28,728 million and euro 16,509 million, respectively.
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The consolidated financial statements of AXA have been translated into English from those published in French and include additional disclosures required by the U.S. Securities and Exchange Commission (“SEC”) primarily included in notes 6, 17, 27-31, 33 and 34 to the consolidated financial statements.
AXA’s consolidated financial statements are prepared as at December 31. Certain entities within AXA have a reporting year-end that does not coincide with December 31, in particular AXA Life Japan and its insurance subsidiaries, which have a September 30 financial year-end. In prior years, AXA Asia Pacific Holdings and its subsidiaries also had a financial year ending September 30; however, the financial year-end was changed to December 31 in 2001. Therefore, AXA’s 2001 consolidated financial statements included 15 months of operating results beginning October 1, 2000 for this group of companies.
Foreign Exchange Translation For the years ended December 31, 2001 and 2000 and as at December 31, 2001 and 2000,
– revenues and expenses transacted in foreign currencies have been translated into Euro using the average exchange rate for the accounting period.
The consolidated financial statements for the year ended December 31, 1999 were prepared and reported in French Francs and were subsequently converted and reported in Euro using the legal conversion rate of
Changes in Presentation As a result of new French Regulations adopted in 2001 (discussed in note 2 below), certain reclassifications have been made to AXA’s consolidated balance sheet and statement of income as set out below.
• The insurance liabilities are reported gross of reinsurance ceded, with the reinsurers’ share of insurance liabilities recognized as an asset.
• In respect of the statement of income detailed by segment, presented in note 31 “Segment Information”, the elimination of all inter-segment intra-group operating transactions are now presented in a single column, which permits the reconciliation of the contributions by segment to that reported in AXA’s consolidated statement of income. In prior periods, the elimination of such activities was reported within each segment individually rather than in the aggregate across all of AXA’s segments.
The financial information provided for the years ended December 31, 2000 and 1999 have been reclassified accordingly for comparative purposes.
– Regulations issued by the French Accounting Regulations Committee (the Comité de la Réglementation
In certain material respects, French GAAP differs from generally accepted accounting principles in the United
States of America (“U.S. GAAP”). A description of the significant differences between French GAAP and U.S.
GAAP, a reconciliation of AXA’s consolidated net income and shareholders’ equity to U.S. GAAP and condensed consolidated statements of income and balance sheets for each of the three years ended December 31, 2001 and at December 31, 2001 and 2000 are included in notes 33 and 34.
CHANGES IN ACCOUNTING PRINCIPLES IN 2000 AND 1999 There were no changes in accounting principles adopted in 2000 and in 1999.
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– Newly consolidated entities and acquisitions of additional equity investments in consolidated subsidiaries: In general, for acquisitions completed after January 1, 2001, it is no longer possible to charge goodwill to shareholders’ equity in an amount equal to the portion of the acquisition financed through the issuance of new shares. In addition, certain transactions can be accounted for as a merger under Article 215 if certain requirements are met. Acquisitions prior to January 1, 2001 are not effected by this change as the change in accounting principle has been adopted prospectively.
– Equalization reserves: Equalization reserves that do not cover catastrophic risks, which are characterized by high costs and low occurrence, can no longer be recognized as liabilities.
Unless otherwise indicated above, the cumulative effect of changes in accounting principles under French
CHANGES IN ACCOUNTING PRINCIPLE SPECIFIC TO THE UK “WITH-PROFITS” CONTRACTS In the context of AXA Equity & Law’s Plan of Financial Reorganization completed in 2001, as it related to its UK
Up until December 31, 2000, the portion of the FFA attributable to terminal bonuses was included in the UK
Basis of Consolidation Companies in which AXA exercises controlling influence are fully consolidated. Controlling influence is presumed when AXA directly or indirectly holds at least 40% of the voting rights and no other shareholder directly or indirectly holds a percentage interest greater than that held by AXA.
Investments in mutual funds and investment and real estate companies by AXA’s life insurance subsidiaries are not consolidated but accounted for at cost, if the exclusion from consolidation does not materially misstate
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The equity holdings of entities that are not consolidated, which are used to support separate account (unitlinked ) contracts, are included in the calculation of AXA’s controlling interest but are excluded from the calculation of the percentage of ownership interest.
Certain business combinations can be accounted for as a merger under Article 215 of the new French regulations, so long as specific criteria are met.
VALUATION OF ASSETS ACQUIRED AND LIABILITIES ASSUMED The identifiable assets and liabilities of the acquired company are recorded at their estimated fair value.
– acquisition is an increase in an ownership interest of an existing consolidated company: the net book value of the assets are reviewed and decreased in value where appropriate, with the remaining negative goodwill offset against any pre-existing goodwill asset arising from previous partial acquisitions of the relevant company.
For acquisitions undertaken prior to January 1, 2001, when new shares were issued by the Company to partly finance an acquisition, a portion or all of the goodwill could be charged directly to retained earnings and reserves (in proportion to the value of shares issued by AXA to total purchase price). The value recorded
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Intercompany Transactions From January 1, 2001 and in preparing the consolidated financial statements, the entire effect of intercompany transactions is eliminated upon consolidation unless there are other-than-temporary losses, which are recorded immediately.
In addition, the total or partial transfer of securities between two consolidated subsidiaries (for which AXA has a level of interest less than 100% in either entity) will not effect the consolidated operating results with the exception of the recognition of any related deferred tax and allocation to participating policyholders, as it is reported as a change within shareholders’ equity (and presented separately in the Statement of Shareholders’
GOODWILL The goodwill amortization period is dependent on the type of business activity acquired, the market and future profitability. The amortization period generally does not exceed 30 years for insurance operations, including banks and asset management companies whose principal activity is the management of assets on behalf of insurance companies of AXA. For asset management operations that manage assets on behalf of third parties, the goodwill amortization period does not exceed 20 years, or five years for brokerage operations. If the goodwill is less than €10 million (€1.5 million for brokerage operations), then the goodwill asset is fully amortized as a charge against earnings in the year of acquisition.
Goodwill will be evaluated based on circumstances and events that may arise and indicate the carrying value is no longer recoverable resulting in a change in estimated useful life or a writedown of the carrying amount based on the future operating cash flows and profits. The operating cash flows used in this assessment are those of the entity acquired, if separately identifiable, or the business segment that acquired the entity, or at the level of AXA group as a whole in the event that such an acquired company has activities that fall in more than one business segment of AXA.
Real estate investments are stated at historical cost less accumulated depreciation and any valuation allowances. Valuation allowances are recorded for a decline in the value of a property that is deemed to be other-than-temporary. Real estate acquired in satisfaction of debt is valued at estimated fair value at the date of foreclosure.
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Fixed maturity securities are stated at amortized cost less valuation allowances. Generally, valuation allowances are recorded for declines in the value of a specific fixed maturity security that are deemed to be other-thantemporary whereby the amount may not be fully recoverable.
Investments in real estate companies and mutual funds are accounted for as real estate investments or as equity securities, respectively.
DETERMINING FAIR VALUE OF INVESTMENTS The basis for determining the fair value of investments is as follows: (i) listed equity and fixed maturity securities are based on the quoted market price at date of valuation and unlisted securities are valued based on quoted market prices of comparable securities, pricing models or other similar valuation techniques, (ii) the fair value of real estate held for investment purposes is determined by qualified appraisers and is reviewed with reference to current market conditions, and (iii) the fair value of loans is based on estimated future cash flows utilizing interest rates that reflect current market conditions, and non-performing loans are valued based on the lower of the guaranteed value or future cash flows.
The method of determining fair value may not correspond to the actual price realized when the investment is sold either in a block (with other similar investments rather than individually) or due to the actual tax impact on the realization of unrealized gains and losses when the investment is sold.
Income taxes AXA’s French insurance subsidiaries, AXA Financial and, where permitted, other subsidiaries file individually consolidated income tax returns; other companies file separate income tax returns. Current income tax expense (benefit) is recorded in earnings based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income tax assets and liabilities are recorded based on the differences between financial statement carrying amounts and income tax bases of assets and liabilities and for net operating loss carryforwards, if any, using the tax regulations in force in the relevant local tax jurisdictions. Valuation allowances are recorded for deferred tax assets that are not expected to be recovered.
LIABILITY FOR INSURANCE BENEFITS AND CLAIMS Unearned premium reserves An unearned premium reserve is established and represents the portion of gross premium written which has not yet been earned in the period. A portion is included in income over the periods benefited, as the portion of the unearned premium reserve earned in the period is calculated on a pro rata basis in proportion to the insurance still in force at period-end. The deferred acquisition costs related to such contracts are included as an asset under the heading “Prepayments and accrued income” using the same basis.
Insurance liabilities For traditional life insurance contracts (that is, those contracts with significant mortality risk), the liability for future policy benefits is calculated in accordance with the applicable regulatory principles of each country on the basis of actuarial assumptions as to investment yields, mortality, morbidity and expenses, using a prospective approach. An additional provision is recorded in the event of an adverse impact on the benefits due to a change in mortality tables. If the contracts include a minimum guaranteed rate of return, the insurance liability will also include a provision necessary to cover the guarantee in the event that the actual rate of return is insufficient.
Under this method, the liability represents an account balance based on the premiums received to date plus any interest or bonus credited to the policyholders less policy charges, such as, for insurance administration and surrenders.
In respect of participating life insurance contracts, whereby the policyholder has the right to participate / share in the investment returns / profits earned by the insurance company, the future policy benefit liability includes a value attributable to anticipated participation rights arising from the operating results or net investment return for the period.
The method in determining the insurance benefits is in line with the preferred method set out in the new
French Regulations effective from January 1, 2001, in particular, the discount rates used by the group are, in effect, lower than the expected future investment yield recommended in the Regulations.
Insurance claims and claims expenses The claims reserves are determined on a basis to cover the total cost of settling an insurance claim. With the exception of disability annuities, annuities for which the payments are fixed and determinable, the claims reserves are not discounted. The claims reserves include the claims incurred and reported in the accounting period, claims incurred but not reported (“IBNR”) in the accounting period and costs associated with the claims settlement management. The claims reserve is based upon estimates of the expected losses and unexpired risks for all lines of business taking into consideration management’s judgement on the anticipated level of inflation, regulatory risks and the trends in cost and frequency of claims, actual against estimated claims experience, other known trends and development, and local regulatory requirements.
• Unexpired risk provisions are established for contracts for which the premiums are expected to be insufficient to cover expected future claims and claims expenses. The calculation of the provision includes estimated future losses, administration expenses and investment income.
• Equalization provisions are determined based on local regulation in certain of the countries in which AXA
operates and, principally, relate to catastrophe risks, such as hail, storms, floods, nuclear accidents, pollution liability and terrorist attacks. As described under “ Changes in accounting principles under French GAAP”, according to the new French Regulations, equalization reserves that do not cover catastrophic risks, which are characterized by high costs and low occurrence, are no longer recognized as liabilities.
• Provisions for future negative margins can be recorded by each insurance company based on local regulatory requirements. This provision must be necessary from an economic point of view. In the case of life insurance companies, this provision must consider the insurer’s recoverability of VBI and DAC.
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PROVISION FOR LIQUIDITY RISK A provision for liquidity risk must be recorded as a liability by an insurance company if there is a risk of liquidity, principally in the case of a large contract surrender, and if the total net book value of investments (excluding fixed maturity investments) of such company is greater than its total market value.
However, realized and unrealized gains and losses on derivative instruments that are used to hedge the foreign currency risk of net investments in certain foreign subsidiaries are recorded in shareholders’ equity, along with the related foreign currency translation adjustments.
Other derivative instruments that are not effective or not designated in a hedge relationship are stated at estimated fair value with the changes in fair value recorded in the net investment results. The estimated fair value of derivative instruments is determined based on quoted market prices, dealer quotes, pricing models or others methods determined by management based on amounts estimated to be realized on settlement, assuming current market conditions and an orderly and reasonable disposition.
Revenue Recognition GROSS PREMIUMS AND FINANCIAL SERVICES REVENUES Gross premiums from all types of life insurance are recognized as revenue when due except for short duration contracts. The revenues also include the premiums received on separate account contracts and contracts with insignificant or no mortality or morbidity risk, which are accounted for as deposits under U.S. GAAP, whereby only policy charges related to acquisition, administration, investment management and mortality charges are included as revenue.
Gross revenues in respect of banking and other activities are determined principally as follows: • commissions received upon the sale of financial products, including those revenues received by the insurance companies on such activities; • commissions received and fees for services rendered in respect of asset management activities; and
• rental income received by real estate management companies and sales proceeds received on buildings constructed or renovated and subsequently sold by real estate businesses.
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In respect of banking activities, interest income and financial charges, including interest expenses are included in bank operating income and bank operating expenses, respectively.
From time to time subsidiaries that are not wholly owned by AXA may issue additional capital. As a result, AXA’s ownership interest in that subsidiary decreases and a dilution gain or loss arises. This gain or loss is recorded in the net investment results.
Company to the employee, in principle, an expense is not recorded. For share option plans issued by AXA
is determined at measurement date, being the vesting or exercise date. Accordingly, an estimate of the compensation charge is determined at the end of each interim reporting period dependent on the market value of the underlying shares at such interim date.
In respect of acquisitions of minority interests, the cost of settling or exchanging outstanding employee share options of the target company is included in the purchase price, as the buyout includes the cost of acquiring the minority shareholders interests plus the potential shares to be issued by the target company in respect of the share options granted to its employees.
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OPTIONS TO PURCHASE SHARES (WHICH ARE PURCHASED WITHIN THE MARKET) When employee share options to purchase shares are issued by AXA, a provision is recorded (corresponding to the difference between the market value of the shares to be acquired in the market and the exercise price)
When a share option plan to purchase shares includes a guarantee of liquidity, the sale of ordinary shares to employees is considered temporary and, therefore, not considered a sale that results in a decrease in ownership interest in the company.
United Kingdom. The buyout of minority interests in SLPH (subsequently renamed AXA UK Holdings)
– In November 2000, Donaldson, Lukfin & Jenrette (“DLJ”) was sold to Credit Suisse Group. As a result, only nine months of DLJ’s operating results were included in AXA’s consolidated statement of income.
– In December 2000, AXA proceeded to buyout the minority interests in AXA Financial based on a Merger
Japan. In March 2000, AXA acquired Nippon Dantaï and integrated its existing Japanese life insurance operations along with Nippon Dantaï’s operations into a new company called AXA Nichidan Life, and also created a new holding company, AXA Nichidan Insurance Holding. AXA held a 96.4% ownership interest in
Spain. In December 2000, AXA acquired the 30% interest in AXA Aurora held by Banco Bilbao Vizcaya
Hong Kong. In November 1999, AXA Australia (a subsidiary of AXA Asia Pacific Holdings, in which AXA has a 51% ownership interest) acquired the 26% minority interest in AXA China Region. As a result, AXA’s ownership interest in AXA China Region, through AXA Asia Pacific Holdings, increased from 34.7% to 51.0%.
The following tables list the companies consolidated (fully or proportionally) or accounted for under the equity method, as well as the Company’s share of the subsidiary’s voting rights and direct and indirect ownership interest, at December 31, 2001 and 2000.
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AXA Technology Services Created 100.00 99.81 – – AXA Direct Intragroup Merger – – 100.00 100.00 Financière 45 Intragroup Merger – – 100.00 100.00 Lor Finance Intragroup Merger – – 100.00 100.00
AXA Participations Belgium Intragroup Merger – – 100.00 99.74 Finaxa Belgium Intragroup Merger – – 99.99 99.99
Parent and Holding Companies f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-20 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
United Kingdom AXA Equity & Law Life Assurance Soc. 100.00 99.99 100.00 99.99
AXA Non Life Insurance Co Ltd 100.00 100.00 100.00 100.00 AXA General Insurance Hong Kong 100.00 100.00 100.00 100.00 AXA Australia New Zealand (sub-group) 100.00 51.00 100.00 51.00 AXA Minmetals Assurance Co Ltd 51.00 38.75 51.00 38.75
Life & Savings and Property & Casualty f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-21 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Switzerland AXA Compagnie d’Assurances sur la Vie 99.99 99.98 99.99 99.98
AXA Corporate Solutions (sub-group) 100.00 99.99 99.74 99.70 AXA Assistance (sub-group) 100.00 100.00 100.00 100.00
AXA Investment Managers (sub-group) 96.00 94.06 97.49 94.90 Of which AXA Rosenberg 50.00 47.03 50.00 47.39
National Mutual Home Loans Origination Fund No. 1 100.00 51.00 100.00 51.00
4-Business Combinations Goodwill An analysis of goodwill by principal acquisition and by segment is presented in the table below.
At Dec. 31 Year ended December 31, 2000 At Dec. 31 Year ended December 31, 2001 At Dec. 31 1999 2000 2001
Guardian Royal Exchange (without Albingia) 317 – (1) (13) 123 426 – 8 (23) – 411 28
Royale Belge (acquisition of minority interests) 638 – – (22) – 616 – – (22) – 593 27
Total by Segment: (1) The portion of goodwill attributed to the Asset Management activities is to be amortized over 20 years.
AXA Equity & Law (United Kingdom) In July 2000, AXA Equity & Law proposed a plan for its financial reorganization (“the Plan”) to its eligible participating (with-profit) policyholders. The Plan addressed principally the attribution of the “Inherited Estate”
Kingdom and it became irrevocable in January 2001. The Plan took effect on April 1, 2001, at which date the
This Inherited Estate has been attributed as follows: (i) £777 million (€1,235 million) to AXA and (ii) £181 million
(€288 million) remaining in the UK “with-profit” fund. According to the terms and conditions of the Plan, the portion of the Inherited Estate attributed to AXA, along with the non-participating insurance business, was transferred out of the “with-profit” fund into separate legal non-participating funds in which 100% of the operating results will accrue to AXA in future periods.
Financial became a wholly owned subsidiary of AXA and, consequently, 19.7 million ordinary shares (4.9 million on a pre 4-for-1 stock split basis) were issued in connection with the merger thereby increasing shareholders’ equity by €737 million. Further details on the total purchase price and determination of goodwill are set out below under “Principal acquisitions in 2000”.
PRINCIPAL ACQUISITIONS IN 2000 The following acquisitions in 2000 were all accounted for under the purchase method of accounting.
AXA Financial – buyout of minority interests (40%) The aggregate purchase consideration was €11,213 million and included the following items: F-26 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-26 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
– €3,868 million, representing the value of the 25.8 million ordinary shares issued by AXA at a price of €149.90 per share at December 22, 2000, being the closing date of the initial offer period, and
– €7,316 million in cash including €539 million relating to the cost of settling or exchanging outstanding employee share options of AXA Financial and €89 million of direct transaction costs.
In December 2000, AXA proceeded to buyout the minority interests in AXA Financial based on a Merger
Depositary Share (ADS). The tender offer became irrevocable on December 26, 2000 and was completed on
December 31, 2000 increased by €3.1 billion following the completion of the tender offer, or a total increase of €3.9 billion after the completion of the merger in January 2001, as previously discussed above.
– €2,518 million of the excess purchase price was charged directly to retained earnings and reserves in proportion to the value of ordinary shares issued by AXA to total purchase price in accordance with the application of Article D248-3 decree dated January 17, 1986 and the recommendation of the Commission des Opérations de Bourse (the “COB”, being the French Regulator) published in the Bulletin N° 210 in
Had no goodwill been charged directly to retained earnings and reserves, additional goodwill amortization of €92 million would have been recorded against income in future periods. The charge for goodwill amortization in 2001 was €191 million, an increase of €16 million in connection with the completion of the ‘squeeze out’
U.S.$ 3.5 billion (€4.0 billion) and consisted of cash in the amount of U.S.$ 1.5 billion and 40.8 million newly
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Following AXA Financial’s investment in Alliance Capital and the acquisition of Sanford C. Bernstein, Inc. by
Alliance Capital, goodwill in the aggregate totaled approximately €4,272 million and is being amortized over 20 years. The goodwill amortization in 2001 was €220 million, or €118 million net group share. Three months of post-acquisition operating results of Sanford C. Bernstein, Inc. were included in AXA’s consolidated net income in 2000.
AXA Nichidan (subsequently known as AXA Life Japan) On March 7, 2000, AXA and the shareholders of Nippon Dantaï contributed their Japanese life insurance operations to a new holding company, AXA Nichidan Holding. This transaction valued Nippon Dantaï at
to increase AXA Nichidan’s capital. The purchase price and additional cash injections were funded primarily by subordinated debt issued by AXA in February and March 2000. The goodwill in respect of this acquisition was €1,856 million, to be amortized over 30 years. Following the revaluation of an intangible asset that effected the opening balance sheet by €130 million, goodwill was subsequently modified. The goodwill amortization charge in 2001 was €65 million.
The year-end reporting date for AXA Life Japan (formerly AXA Nichidan) is September 30 and, therefore, AXA’s consolidated financial statements for the year ended December 31, 2000 included only six months of postacquisition operating results (April 1-September 30), including goodwill amortization expense of €31 million
As a result of the transaction, AXA’s consolidated net income in 2000 included the post-acquisition operating results of AXA China Region on a 51% basis.
Royale Belge (1998) At December 31, 1999, gross goodwill from this transaction was €1,007 million of which €337 million was paid in cash from the issuance of treasury shares and charged directly to retained earnings and reserves. The remaining balance at December 31, 2000, represented a goodwill asset of €670 million, with accumulated amortization totaled €54 million (of which €22 million represented an amortization charge in 2000) with a net carrying value of €616 million. In 2001, the goodwill charge was €22 million. Had no goodwill been charged directly to retained earnings and reserves, additional goodwill amortization of €11 million would have been recorded against income.
At December 31, 2001, the gross goodwill asset was €289 million, accumulated amortization was €54 million
An analysis of goodwill amortization (positive and negative) is presented below: Item 1
(1) The change in goodwill arising from the UAP acquisition in 1999 was attributable to AXA’s decrease in ownership interest in SLPH (a former UAP operation), as SLPH issued ordinary shares in connection with the acquisition of GRE in May 1999.
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Banque Worms was acquired in the 1997 acquisition of UAP. Prior to 1999 it was included in AXA’s consolidated financial statements at original cost (fair value at date of acquisition) less estimated disposal costs, as it was AXA’s intention to sell these operations subsequent to the UAP acquisition. The goodwill relating to
At December 31, 2001, accumulated amortization on goodwill totaled €2,394 million (2000: €1,552 million).
From January 1, 2001, goodwill can no longer be charged directly against shareholders’ equity.
Real estate investments are subject to periodic valuations conducted by qualified external appraisers based on local legal requirements. Such expert valuations are based on a number of techniques including comparative studies and capitalization of income.
Fair values of mortgage, policy and other loans are estimated by discounting future contractual cash flows using interest rates at which loans with similar characteristics and credit quality would be originated. Fair values of mortgage loans on real estate in the process of foreclosure and non-performing mortgages and other loans are limited to the estimated fair value of the underlying collateral, if lower than the estimated discounted cashflows.
The estimated fair value does not take into account supplemental charges or a reduction due to selling costs that may be incurred nor the tax impact of realizing the unrealized capital gains and losses.
The difference between the net carrying value and the estimated fair value represents the unrealized gains or losses. Upon disposal of the investment, the realized investment gains and losses included in AXA’s consolidated operations result may be impacted by the allocation to participating life insurance contracts
– Equity securities and holdings in equity security-based mutual funds – 37,918 38,711 – 471 500
Equity securities and holdings in mutual funds 66,061 64,537 65,981 614 562 605
Mortgages, policy and other loans 23,001 22,907 23,215 244 219 219
– Of which non listed – 81,880 85,455 – 2,131 2,259
Analysed by Segment: (1) The realization of unrealized gains and losses upon disposal of the investments may give rise to an allocation to participating insurance contracts, minority interests and tax.
Fixed Maturities: Other local governments and agencies 884 997 114 (4)
Allocated to UK with-profits business trading 19,792 Other trading securities 1,522
Amortized or Fair Gross unrealized Gross unrealized (in euro millions) historical cost value gains1 losses1
Fixed Maturities: Other local governments and agencies 1,589 1,657 84 (13)
Zealand, Germany and Belgium, which accounted for 89% of total fixed maturity investments and 94% of total equity investments at December 31, 2001 (2000: 90% and 96%, respectively).
In addition and in respect of investment holdings in fixed maturity and equity securities: – the insurance-related invested assets backing the insurance liabilities were predominantly holdings in domestic investments (or in the local currency of the liabilities); – the breakdown by industry sector was as follows: 32% in government institutions, 24% in financial services, 37% in non-financial services such as manufacturing and pharmaceuticals and 7% in mutual funds (2000: – there was no fixed maturity and / or equity investment in any one issuer that was in aggregate 10%
CONTRACTUAL MATURITIES OF FIXED MATURITY SECURITIES CLASSIFIED AS EITHER HELD-TO-MATURITY OR AVAILABLE-FOR-SALE Maturity information for fixed maturity investments classified as either “held-to-maturity” or “available-for-sale”
At December 31, 2001 (in euro millions) Amortized Cost Estimated Fair value
AXA did not sell any shares held in treasury (2000: €60 million and 1999: € nil, net group share).
Unlisted companies: Investment holdings under euro 50 million each 1,899 2,249
Balance at Balance at (in euro millions) January 1, 2000 Additions Deductions Other changes2 December 31, 2000
Fixed maturities and other fixed income securities 230 54 (37) (93) 153
(1) Includes provisions on assets from banking activities. (2) “Other changes” relate principally to changes in scope of consolidation and foreign currency fluctuations.
Depreciation of real estate used for operating purposes 1,127 224 – (232) 1,119
in the net investment result. 2001 was effected by the deterioration of the equity markets and, consequently, provisions for valuation allowances on equity securities increased. The provisions for valuation allowances relating to financial services operations were included in bank operating expenses.
7-Separate Account (Unit-Linked) Assets Assets that are represented by separate account (unit-linked) contracts and stated at market value are presented in the table below. “Holdings in other mutual funds” were essentially represented by investments of the French life insurance companies in mutual funds that invest predominantly in real estate.
Carrying value Change Other Carrying value Contribution (in euro millions) at January 1, 2000 in scope changes1 at December 31, 2000 to net Income
AXA Germany affiliates: – General Ré-CKAG 654 – – 654 –
Other affiliates under euro 30 million each 69 (13) (1) 55 11
(1) Includes foreign currency fluctuations and net income for the period adjusted for dividends received.
Receivables (in euro millions) Gross book value Provisions Carrying value Payables
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Deferred acquisition costs on unearned premiums 28 893 384 1,305 1,206 1,003
Other deferred acquisition costs (net) 9,613 – – 9,613 8,154 6,779
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In addition and effective from January 1, 2001, AXA changed its accounting principles relating to the UK
ADS was changed from one ADS representing one-half of an ordinary share to one ADS representing one ordinary share.
• The shareholders approved the declaration of a dividend in respect of 2000 of €2.20 per ordinary share on a pre-stock split basis (€0.55 per ordinary share on a post 4-for-1 stock split basis).
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Australia and New Zealand were accounted for as an investment under the equity method and no longer consolidated on the grounds of immateriality (see note 8 “Investments in Affiliated Companies (Equity
The decrease in minority interests in 2000 was primarily attributable to the buyout of minority interests in AXA
Financial (€3,457 million), Sun Life & Provincial Holdings, which was subsequently renamed AXA UK Holdings
The minority interests’ share in the 2001 net income included €325 million in respect of Alliance Capital, with the remaining balance from non-wholly owned operations in Australia / New Zealand, Germany and Japan.
In accordance with the French regulations, debt for which reimbursement is subordinated to other creditors in the event of a company’s liquidation, insolvency or bankruptcy and which has an original maturity date of at least five years (notice period of at least five years in the case of perpetual debt) is considered mezzanine capital.
Mandatorily Convertible Bonds and Notes In October 1995, in connection with its acquisition of Abeille Ré, the Company issued €320 million aggregate principal amount of 4.5% Mandatorily Convertible Bonds. In December 1996, certain of AXA’s subsidiaries repurchased in cash €128 million of aggregate principal amount. The 4.5% Mandatorily Convertible Bonds matured on January 1, 2001 and converted into an aggregate of 28.7 million ordinary shares (subject to certain anti-dilution adjustments) on a post 4-for-1 stock split basis, of which 11.2 million ordinary shares are held by subsidiaries of AXA. This increased AXA’s consolidated shareholders’ equity by €320 million and decreased subordinated debt by €192 million, as €128 million of debt held by AXA subsidiaries was eliminated on consolidation.
Equitable Life: AXA Life Japan (formerly Nichidan Life): Subordinated Notes, variable, due 2010 166 211
AXA Bank Belgium (formerly IPPA Bank): AXA Australia (National Mutual Life): Deferrable Loan Agreement, variable rate due 20015 – 174
Note: Certain increases year on year are attributable to the impact of foreign currency exchange rates. (1) In March 2000, the Company issued euro 500 million 7.25% undated subordinated notes to partly finance the acquisition of Nippon Dantaï
and the buyout of minority interests in AXA China Region. The notes can be redeemed by the Company in full at par (100% of the nominal amount) being euro 25.00 per note at any time.
(4) In connection with a US$5.0 billion debt “shelf” registration filed with the SEC in November 2000, on December 15, 2000 AXA issued an aggregate of US$1,940 million (euro 2,138 million using year-end exchange rates) of dated subordinated notes in three currency tranches as set out below: –US dollar tranche - US$900 million, due December 15, 2030, at an issue price of 99.712% and with annual interest of 8.60%, paid semiannually; – Euro tranche - euro 650 million, due December 15, 2020 redeemable after 10 years, at an issue price of 99.787% with an annual interest rate of 6.75% for 10 years and thereafter at Euribor 3 months plus 220 basis points paid on a quarterly basis; and – Sterling (GBP) tranche - £325 million, due December 15, 2020, at a price of 99.885% and with an annual interest rate of 7.125%. – In February 2001 and in response to favorable market conditions, AXA increased the amount of debt issued under its U.S.$5.0 billion debt shelf registration statement filed with the U.S. SEC in 2000 by U.S.$770 million (approximately euro 827 million at transaction date). The debt securities issued were denominated in two currencies: U.S. dollar and euro
Subordinated Debt Subordinated debt consists of the following: f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-42 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Life & Savings Property & Casualty International Insurance Total (in euro millions at December 31,) 2001 2000 2001 2000 2001 2000 2001 2000
Gross insurance reserves: Total insurance liabilities, gross of reinsurance ceded 224,892 220,725 33,079 31,890 14,154 10,560 272,125 263,174
Total reinsurance ceded on insurance liabilities 4,042 3,654 2,940 2,797 4,609 2,691 11,591 9,142
TOTAL INSURANCE LIABILITIES, NET OF REINSURANCE CEDED 336,127 334,448 30,140 29,092 9,544 7,868 375,811 371,409
The information provided is in respect of the Property & Casualty segment and the International Insurance segment.
(in euro millions) & Casualty Insurance & Casualty Insurance & Casualty Insurance
Gross claims reserves to be paid, January 1 24,012 8,602 23,007 8,194 17,332 6,943
Impact of foreign currency fluctuations 58 235 11 51 407 269
Total claims and claims expenses 11,863 6,020 12,127 3,635 10,592 2,969
Claims and claims expenses attributable to current year (4,882) (1,264) (4,992) (1,856) (4,851) (1,415)
Gross claims reserves to be paid, December 31 25,162 11,841 24,012 8,602 23,007 8,194
These estimates are based on the best information available to management; however, they may be effected by a number of factors including, for example, possible bankruptcies of reinsurers who provide reinsurance to
Environmental Pollution, Asbestos and Other Exposures In prior years, AXA has issued insurance policies and assumed reinsurance for cover related to environmental pollution and asbestos exposure. The insurance companies have been and continue to be involved in disputes regarding policy coverage and judicial interpretation of legal liability for potential environmental and asbestos claims. AXA has received and continues to receive notices of potential claims asserting environmental and asbestos losses under insurance policies issued or reinsured by AXA. Such claim notices are frequently merely precautionary in nature.
At December 31, 2001 and specific to environmental pollution and asbestos claims, AXA had insurance claim reserves for (i) reported insurance and reinsurance claims of €349 million (2000: €306 million) and (ii)
additional reserves for incurred but not reported (IBNR) claim liabilities of €577 million (2000: €497 million).
The IBNR liabilities are estimated and evaluated regularly based on information received by management. AXA
In France, the French Supreme Court has recently given a judicial decision in respect of employers’ liability relating to employee health. For further details, see note 35 “Events Subsequent to December 31, 2001”.
At December 31, At January 1,1 At December 31, (in euro millions) 1999 2000 2001
(1) As restated for the new French Regulations effective from January 1, 2001. See notes 2 and 32 for further information. (2) In 2001, the provision for the cost associated with settling / exchanging the outstanding stock options of AXA Financial of euro 539 million (net of tax) from AXA’s buyout of minority interests in AXA Financial in 2000 was reclassified from “pension obligations and other similar liabilities” to “other provisions”.
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The pension plan liabilities are calculated based on the application of the preferential method. It includes the total consolidated liability to be paid by the group for its employees from retirement date. The principal pension plans relate to the following AXA operations at December 31, 2001: U.S. life operations (€822 million),
Provisions for Restructuring Costs The provision for restructuring costs and charges thereto are presented in the tables below for the years indicated.
Impact of New French GAAP restatements1 – 33 33 – – –
(1) As restated for the new French Regulations effective from January 1, 2001. See notes 2 and 33 for further information.
The other provisions utilized in 2001 concerned restructuring costs in the United Kingdom, Belgium, Germany and Japan. In addition, of the €48 million restructuring provision established in connection with purchase accounting and released to income in 2001, €28 million concerned Germany.
Albingia acquired in 1999 in connection with the GRE acquisition (Germany), (ii) €45 million in respect of the restructuring of the UK and Irish operations of GRE acquired in 1999, (iii) €54 million relating to the restructuring of AXA’s Belgian operations that commenced in 1998, and (iv) €64 million relating to the restructuring of AXA’s French operations that commenced in 1999. In addition, €41 million established as part of the restructuring provision in France in 1999 was released to income in 2000.
Banque Worms, which was completed in April 2001 (see note 26 “Off balance sheet commitments” for further information), and (iii) a provision of €539 million (net of tax) recorded in 2000 associated with the cost of settling/exchanging outstanding share options of AXA Financial in connection with the buyout of minority interests of AXA Financial in 2000.
17-Employee Benefit Plans AXA sponsors a variety of pension benefit and retirement indemnity plans covering the majority of AXA
Change in plan assets: Fair value of plan assets, beginning of year 7,503 7,523 9 8
Expected return on plan assets 3.5% to 10.25% 4.5% to 9.0% 5.50% - 10.25% 5.50%
The net benefit cost for the years ended December 31, 2001, 2000 and 1999 included the following components: Item 1
AXA’s consolidated pension plan benefit obligation and fair value of plan assets as at December 31, 2000 included the underfunded defined benefit plan of Nippon Dantaï that was acquired in March 2000.
At December 31, 2001, the aggregate accumulated benefit obligation and aggregate fair value of plan assets for AXA Financial pension plans with accumulated benefit obligations in excess of plan assets were €399 million and €34 million (2000: €354 million and €45 million).
At December 31, 2001 and 2000, plan assets relating to pension plans sponsored by the Company and its
French and certain other European subsidiaries and represented by investment contracts issued by AXA’s consolidated life insurance subsidiaries amounted to €726 million and €615 million, respectively. AXA carries an equal amount as a liability for future policy benefits. Plan assets consist primarily of investments in corporate and government fixed maturity securities and equity securities, real estate investments, and investments in mutual funds.
Other Employee Benefits AXA provides certain medical and life insurance benefits (“post-retirement benefits’’) to qualifying employees, managers and agents who retire after having met certain age and service requirements. The life insurance benefits are related to age and salary at retirement. The expected costs of providing post-retirement benefit are accrued during the period that the employees earn such benefits. AXA funds post-retirement benefits costs as the benefits are utilized, and made post-retirement benefits payments of €41 million, €46 million and €33 million for the years ended December 31, 2001, 2000 and 1999, respectively.
December 31, 2001 would be increased by 0.02 %, representing an 0.9 % increase on the sum of the service cost and interest cost. If the health care cost trend rate assumptions were decreased by 1%, the accumulated post-retirement benefits obligation as of December 31, 2001 would be decreased by 5.5 % representing a 1.5 % decrease on the sum of the service cost and interest cost.
(4) Repayment of debt at maturity in December 2001. This debt was replaced by an intercompany loan from AXA (the Company). (5) In August 2001, Alliance issued U.S.$400.0 million 5.625% notes due 2006 in a public offering and are redeemable at any time. The registration statement filed with the U.S. Securities and Exchange Commission allows for the issuance of up to U.S.$600.0 million in senior debt securities. The proceeds were used to reduce commercial paper and credit facility borrowings and for other general partnership purposes.
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This program is available for general corporate purposes used to support Equitable Life’s liquidity needs and is supported by Equitable Life’s existing US $600 million bank credit facilities. There were no amounts outstanding under this program at December 31, 2001.
At December 31, 2001, aggregate maturities of non-subordinated debt instruments issued by AXA and its subsidiaries based on required principal payments at maturity for 2002 and the succeeding four years amounted to €2.1 million, €0.2 million, €0.7 million, €0.2 million and €0.7 million, respectively with the balance due in 2007 and thereafter.
AXA: Three year term loan, variable rate due 20031 – 3,011
Other financial services in France: Compagnie Financière de Paris 422 194
Note: Certain increases year on year are attributable to the impact of foreign currency exchange rates. (1) In December 2000 and in connection with the acquisition of the minority interests in AXA Financial, AXA borrowed U.S.$ 2.75 billion under a
U.S.$5.0 billion multi-currency dual tranche credit facility arrangement, in the form of a three year term loan due on December 31, 2003, denominated in U.S. dollars and Swiss francs. The interest on the amount was based on Libor or Euribor, as applicable, plus a margin of 0.30% per year during the first year, a margin of 0.325% per year during the second year, and a margin of 0.35% per year during the third and final year. This multi-currency dual tranche credit facility arrangement also included a U.S.$2.25 billion 364-day revolving credit facility that was not used and voluntarily cancelled by AXA before December 31, 2000. In 2001, the amount borrowed under this facility was refinanced by the proceeds from the issuance of euro 827 million under AXA’s US$5.0 billion U.S.-registered debt program (see note 14 “Mezzanine capital”).
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AXA (the Company) had standby committed credit facilities at December 31, 2001 of €4.6 billion, of which €145 million was outstanding (2000: €4.6 billion of which €188 million was outstanding). These committed credit facilities consist of several different credit lines with interest rates based on the Euro Inter-Bank Offered
AXA Financial, through Equitable Life, has a US$ 350 million bank 5-year credit facility and a $ 250 million 364-day credit facility. The interest rates are based on external indices dependent on the type of borrowing ranging from 2.09% to 4.75% . There were no amounts outstanding under these credit facilities at
During 1998, Alliance Capital entered into a US$ 425 million five-year revolving credit facility with a group of commercial banks to provide back-up liquidity for its US$ 425 commercial paper program (see note 18
“Non-subordinated Debt Instruments Issued”). Under the credit facility, the interest rate, at the option of the borrower, is a floating rate generally based upon a defined prime rate, a rate related to the London Interbank
Offered Rate (“LIBOR”) or the Federal Funds Rate. A facility fee is payable on the total facility. Borrowings under the credit facility and the commercial paper program (latter included under note 19) can not exceed
US $425 million in the aggregate. In July 1999, Alliance Capital entered into a US$ 200 million three-year revolving credit facility with a group of commercial banks. During October 2000, Alliance Capital entered into a US$ 250 million two-year revolving credit facility. The terms of the US$ 200 million and US$ 250 million credit facilities are generally similar to the US$ 425 million credit facility. The revolving credit facilities will be used to fund commission payments to financial intermediaries for the sale of Back-End Load Shares under
At December 31, 2001, Alliance Capital had no borrowings outstanding under its revolving credit facilities.
Net investment gains/(losses): Change in fair value of separate account (unit-l assets (net)
Net investment income on: Mortgage, policy and other loans 1,790 1,575 1,278 – – – 14 8 – (82) (86) – 1,722 1,496 1,278
Years ended December 31, Life & Savings Property & Casualty International Insurance Total Insurance
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The global stock markets experienced significant deterioration in 2001, which had two significant impacts on the net investment result as indicated below.
• Assets supporting the separate account (unit-linked) contracts stated at market value had a negative impact of €11.6 billion on the net investment result (2000: negative impact of €4.7 billion and 1999: positive impact of €13.6 billion).
States) decreased by 7% and the Nikkei (Japan) tumbled by 24%.
(€8.4 billion) and included $2.4 billion in cash and 25.7 million shares of Credit Suisse Group. On November 6, 2000 Credit Suisse Group repurchased 6.4 million of its shares for $1.2 billion, leaving 19.3 million shares of
In addition and in connection with the Sanford C. Bernstein transaction in 2000, AXA Financial’s ownership interest in Alliance Capital decreased and, therefore, a realized gain of US$928 million (before tax and minority interests) was included in the net investment result. This gain was offset by a charge to establish a provision associated with the redemption rights offered by AXA Financial to the former shareholders of Sanford C. Bernstein
In May 1999, DLJ completed its offering of 18.4 million shares of a new class of its common stock, priced at
French Savings Contracts French Savings Contracts (ACAV and ACAVI) are supported by investments in the form of mutual funds or real estate funds (collectively referred to as funds) generally established by AXA. Real estate funds consist of nonlisted real estate companies or real estate joint ventures. The funds issue shares at fair value, which form the underlying investments of French Savings Contracts.
21- Reinsurance In the normal course of business, AXA seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results through reinsurance. Reinsurance does not relieve the ceding insurance company of its primary obligation to the policyholder in a reinsurance transaction.
Years ended December 31, Life & Savings Property & Casualty International insurance Intersegment eliminations Total insurance
Change in unearned premium reserve ceded 99 54 97 (46) (39) (46) 165 8 (24) (7) 11 – 210 34 27
Insurance benefits and claims ceded 762 713 411 1,003 1,101 1,305 2,338 1,709 936 (47) (52) – 4,056 3,471 2,652 f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-56 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Reinsurance assumed as a percentage of net premiums written 4.6% 2.8% 0.9%
Reinsurance assumed as a percentage of net premiums written2 102.4% 97.6% 77.0%
The classification of operating charges corresponds to the principal function to which the charge relates.
(2) Before amortization of value of purchased business in-force, the change in deferred acquisition costs and the change in unearned premium reserves. (3) Such costs are included within “insurance benefits and claims” in the consolidated statement of income. (4) Such costs are included within “net investment results” in the consolidated statement of income.
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There were no advances or loans given to these directors by the Company or any of the entities under its control.
Income tax (expense)/benefit: Income tax expense at French statutory base rate (340) (3,331) (1,673)
Permanent differences relating to: – Operating expenses and other (379) (326) (742)
Impact of difference between the statutory tax rate and the effective tax rate 309 463 149
The provisions for income taxes are different from the amounts determined by multiplying income before income tax expense by the French statutory income tax rate (36.43% in 2001, 38% in 2000 and 40 % in 1999). The sources of differences from the statutory rate and the tax effect of each are as follows: In 2001, deferred tax expense was affected by the German tax reform effective from January 1, 2002 whereby realized gains on the sale of equity securities will no longer be subject to tax. Consequently, this reduced the deferred tax liability by €221 million recorded through income.
Deferred income tax expense and benefit results from changes in temporary differences in the basis of assets and liabilities for financial reporting and income tax purposes. The sources of these differences are presented below.
United Kingdom of €99 million. These net operating loss carryforwards are included in income tax returns that are subject to examination by various tax authorities.
In addition, net operating loss carryforwards for tax purposes totaled €4 million (2000: €130 million).
Ordinary Net Adjusted Ordinary Net Adjusted Ordinary Net Adjusted (in euro millions except ordinary shares in millions) shares income earnings shares income earnings shares income earnings
Net Income and Adjusted Earnings (Group Share) 1,715.71 520 1,201 1,518.15 3,904 2,540 1,411.96 2,021 2,045
Net Income and Adjusted Earnings Per Ordinary Share (basic) – 0.30 0.70 – 2.57 1.67 – 1.43 1.45
Dilutive securities issued by subsidiaries2 – 0 0 – (5) (5) – (29) (29)
Net Income and Adjusted Earnings attributable to ordinary shares and potentially dilutive securities 1,787.33 571 1,252 1,623.81 3,954 2,592 1,504.56 2,031 2,057
(1) 2000 and 1999 have been restated, the number of shares as previously reported have been multiplied by four and the share price as previously reported has been divided by four to take account of the 4-for-1 stock split approved by the shareholders at AXA’s annual general meeting of the shareholders held on May 9, 2001.
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The basis for determining fair value for invested assets is set out in note 6 “Investments”.
The estimated fair value of insurance investment contracts having contract values determined by the value of underlying assets is measured at the estimated fair value of such assets. The estimated fair value of other insurance investment contracts is determined by discounting estimated contractual cash flows at current market interest rates.
Net carrying Net carrying (in euro millions) value Fair value value Fair value
Financial Assets: Equity investments, including holdings in mutual funds1,2 65,098 66,586 67,372 74,995
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Use of Derivative Instruments AXA uses derivatives instruments primarily for non-trading purposes and from time to time will also trade in derivative instruments as discussed further below.
At December 31, 2001, the notional value of all derivative instruments, for trading and non-trading purposes, totaled €101.8 billion (2000: €99.7 billion). The estimated fair value of these derivative instruments at
December 31, 2001 totaled €157 million (2000: €374 million). The use of credit derivatives across the group is limited to some credit default swaps written in prior years by AXA Corporate Solutions and investments in certain credit default swaps by AXA France and AXA Belgium. However, the overall impact on AXA’s consolidated financial condition and operating result was not material.
DERIVATIVE INSTRUMENTS USED FOR TRADING OR SPECULATIVE PURPOSES AXA uses derivative instruments to manage its asset and liability exposures principally as it relates to interest rate and foreign currency exposures. At December 31, 2001, the notional amount and fair value of such derivative instruments was €1,762 million and €38 million, respectively, relating principally to non-foreign exchange rated forward rate contracts and currency swaps. The impact on net income was a charge of €56 million in 2001. The principal AXA entity that uses such instruments for trading purposes is AXA Bank
DERIVATIVE INSTRUMENTS USED FOR NON-TRADING OR HEDGING PURPOSES AXA primarily uses derivative instruments for non-trading purposes to manage risk, principally interest rate and foreign currency exposures. The risk management and associated hedging strategies are determined and managed by AXA’s local operations in light of both local GAAP and French GAAP requirements. Such hedging strategies include (i) managing interest rate exposures on fixed maturity investments, long term debt and guaranteed interest crediting rates on insurance contracts, (ii) managing foreign currency exposures to foreign currency denominated investments and liabilities, and (iii) managing liquidity positions (including the ability to pay benefits and claims when due) in light of asset-liability mismatch and local regulatory requirements for
• Swap contracts are agreements between two parties to exchange one set of cash flows for another.
Payments are based on a notional amount. In connection with the use of such derivatives instruments, under French GAAP the balance sheet may include a net receivable or net payable at period end for cash flow exchanges that have been accrued for but not yet settled as at period end. AXA uses primarily (i)
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26- Off Balance Sheet Commitments In the normal course of business, AXA principally through its financial services operations enters into letters of credit for the purpose of facilitating certain financing transactions and for securing various margin requirements. Additionally, financial guarantees are provided to customers and other financial institutions.
Banque (France), AXA Crédit (France) and AXA Bank Belgium, AXA provides financial guarantees and commitments to finance to its customers. In 2001, there was a significant increase in such commitments related principally to AXA Banque in respect of performance guarantees given to its customers.
Collateralized commitments: As at December 31, 2001 and 2000, substantially all of the collateralized commitments related to the AXA Bank Belgium operations. In the normal course of its banking operations AXA
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On September 12, 2001 an agreement was established between AXA and BNP Paribas for a period of three years, under which AXA guaranteed the liquidity of BNP Paribas’ holdings in ordinary shares of FINAXA.
Deutsche Bank on April 2, 2001. Under the terms of the agreement, AXA will retain certain of Banque Worms’
Banque Worms in the event of payment defaults associated with loans transferred with Banque Worms in the transaction. AXA and Deutsche Bank are currently in the process of finalizing the amount of this guarantee.
AXA’s consolidated financial statements for 2000 included an exceptional charge of €125 million relating to the provision in respect of current and future losses under this guarantee and was still deemed appropriate based on current available information.
In addition to participating in the ICHEIC process, AXA is also participating in Holocaust related initiatives undertaken by various European governments. In Germany, AXA’s German affiliates are working closely under guidance of the German insurance regulatory authority, the BAV, and are also involved in the implementation of the intergovernmental agreement on Holocaust matters reached during 2000 between Germany and the
United States (the “German Foundation Initiative”) as it relates to the German insurance industry. Management believes that the totality of claims against AXA’s German affiliates should be covered under the German
position of AXA, taken as a whole. Due to the significant uncertainties and complexities involved in resolving these matters (including the risk of regulatory sanctions against AXA’s US affiliates under legislation that has been adopted in various US jurisdictions and/or future Holocaust related litigation) and the likelihood that these uncertainties and complexities will not be fully resolved in the near future, AXA management is not in a position at this time to make an estimate of loss or predict whether or not these matters will have a material adverse effect on AXA’s consolidated results of operations in any particular period.
In January 2002, Nationwide, an American insurance company, commenced an arbitration proceeding before the International Chamber of Commerce in Paris relating to the sale by various AXA Group companies in January 1999 of Paneurolife, a Luxembourg company. Nationwide is seeking damages in this proceeding on the grounds of alleged misrepresentation and failure to disclose material facts. In February 2002, AXA and various of its subsidiaries were named as defendants in a lawsuit, Kyurkjian, et al. v. AXA, et al., which was filed in the United States District Court for the Central District of California on behalf of a purported class of plaintiffs composed of descendants of Armenians killed in the genocide of 1915. Plaintiffs have alleged in this lawsuit that such descendants are entitled to benefits under certain life insurance policies issued by two insurance companies (now owned by the AXA Group) between 1880 and 1930 to Armenians living in Turkey.
• A number of lawsuits have been filed against Alliance Capital arising out of the Enron affair. The suits currently pending include (i) several suits against Alliance Capital and a fund, the Alliance Premier Growth
Fund, managed by an affiliate of Alliance Capital alleging that Alliance Capital breached its duty of loyalty to the fund because one of the directors of Alliance Capital’s general partner served as a director of Enron Corp.
when the fund purchased shares of Enron Corp. – plaintiffs are seeking recovery of certain fees paid by the fund to Alliance Capital; (ii) a suit against Alliance Capital filed in Texas federal court alleging certain violations of the U.S. federal securities laws by Alliance Capital in connection with a sale of certain securities by Enron
Corp. – plaintiffs are seeking recission or a recissionary measure of damages, and (iii) against Alliance Capital by the Florida State Board of Administration (“SBA”) alleging breach of contract relating to an investment management agreement – the SBA is seeking more than $300 million in compensatory damages and an unspecified amount of punitive damages. At the present time, Alliance Capital’s management is unable to estimate the impact, if any, that the outcome of these actions may have on Alliance Capital’s results of operations or financial condition.
• Certain of AXA’s US subsidiaries (particularly AXA Financial, Equitable Life and Alliance Capital) are involved in various other types of lawsuits (both class action and individual), investigations or actions arising in connection with the ownership and/or management of real estate, asset management activities, corporate transactions (including the restructuring of Alliance Capital in 1999 and the sale of DLJ in 2000), employee benefit disputes, alleged discrimination in employment practices, as well as other matters. The lawsuits, investigations and other actions described in this and the two preceding subparagraphs are described more fully in the Annual Reports on Form 10-K for the year ended December 31, 2001 of AXA Financial, Equitable
Some of these lawsuits and other actions have been brought on behalf of various alleged classes of claimants, and certain of the claimants in these actions seek significant or unspecified amounts of damages, including punitive damages. In some jurisdictions, juries have substantial discretion in awarding punitive damages. To date no such lawsuit, investigation or action has resulted in an award or settlement against AXA in an amount material to the consolidated financial position or results of operations of AXA, taken as a whole. Although the outcome of any lawsuit cannot be predicted with certainty, particularly in the early stages of an action, management believes that the ultimate resolution of the lawsuits and investigations referred to in this paragraph should not have a material adverse effect on the consolidated financial position of AXA, taken as a whole.
Due to the nature of such lawsuits and investigations, AXA’s management cannot make an estimate of loss, if any, or predict whether or not such lawsuits or investigations will have a material adverse effect on the AXA’s consolidated results of operations in any particular period.
In addition to the matters described above, AXA and certain of its subsidiaries are involved in various legal actions and proceedings of a character normally incident to their business. Some of these actions and proceedings have been brought on behalf of various alleged classes of claimants, and certain of these claimants seek significant or unspecified amounts of damages, including punitive damages. While the ultimate outcome of such matters cannot be predicted with certainty, based on information currently available to it, in the opinion of management no such matter is likely to have a material adverse effect on the consolidated financial position or results of operations of AXA, taken as a whole. It should be noted, however, that the frequency of large damage awards in certain jurisdictions, particularly the United States, that bear little or no relation to actual economic damages incurred by plaintiffs continues to create the potential for an unpredictable judgement in any given matter.
The Company has been party to the following transactions in 2000 and 2001 which may be deemed to have been either material to AXA or the related party in question or unusual in their nature or conditions which involved goods, services, or tangible or intangible assets: AXA/FINAXA Trademark License. The name “AXA” and the AXA trademark are owned by FINAXA. On May 21, 1996, the Company and FINAXA entered into a licensing agreement pursuant to which FINAXA (1)
granted the Company 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 (2)
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 the Company hold, directly or indirectly, an interest in that company or partnership.
Acquisition of the Minority Interest in AXA Financial. On December 29, 2000, AXA completed its tender offer in the buyout of minority interests in AXA Financial, which was followed by the subsequent merger of AXA Merger Corp. (a wholly-owned special purpose subsidiary of AXA created speciifically for the purpose of effecting the transaction) with and into AXA Financial on January 2, 2001 pursuant to the Merger
Agreement dated October 17, 2000. This acquisition was partially financed through a financing arrangement between AXA, AXA Financial and AXA Merger Corporation. As part of this intragroup financing arrangement relating to the offer and the merger, AXA Financial: (i) sold to the Company for $1.2 billion, 6.5 million shares of Credit Suisse Group received by AXA Financial in connection with the sale of DLJ, and
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
AXA’s 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, formerly Chief Executive Officer of AXA Financial and currently a member of AXA’s supervisory board; and Stanley
Securities and Exchange Commission on November 21, 2000 (registration no. 333-50438) and note 4 “Business
Combinations” to the consolidated financial statements included elsewhere in this annual report.
AXA loan note, which is a debt obligation of the Company. For additional information, see note 4 “Business
AXA Life Japan (formerly known as AXA Nichidan). In connection with AXA’s acquisition of Nippon
Dantaï in March 2000, as described in note 4 “Business Combinations”, AXA contributed cash of approximately
Loans/Guarantees. The Company from time to time makes capital contributions and/or loans to its subsidiaries and affiliates to finance their business operations. As at December 31, 2001, the aggregate amount outstanding in respect of loans made by the Company to its subsidiaries or affiliates was approximately €3.2 billion (2000: €2.88 billion). This amount represents approximately 30 separate loans originated at different times and bearing interest at varying rates which generally reflected prevailing market rates at the respective dates such loans were originated. In order to facilitate certain intra-group financing arrangements and to promote efficient use of the Group’s capital resources, the Company from time to time guaranties repayment of loans extended from one of its subsidiaries to another and/or guaranties other obligations of its subsidiaries. As of December 31, 2001, the principal amount of such intra-group loans guaranteed by the Company was €754 million and the aggregate liabilities covered by the other guaranties extended to its subsidiaries was approximately €150 million. The beneficiaries of these guaranties are generally required to compensate the Company at a negotiated rate based on prevailing market rates and conditions for guaranties of a similar nature. In addition, from time to time the Company provides comfort or similar letters to rating agencies and/or regulators for the benefit of its subsidiaries for various business purposes, including for purposes of facilitating specific transactions, achieving target ratings levels and, more generally, helping develop the business of these subsidiaries. At December 31, 2001 and 2000, there were no loans from the Company to any member of AXA’s Management Board or Supervisory Board.
(the “BNP Agreement”) which provides for maintaining a certain level of cross-shareholding between the parties and facilitating the potential disposition of BNP Paribas’ investment in FINAXA. Specifically, the BNP
Company a preemptive right to acquire the other party’s equity investment (not including any shares held in excess of the minimum amount) during a one-year period following any termination of the agreement.
Further, each party has an option to repurchase the ownership interests of the other party if there is a change in control of the other party.
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The following table provides a list of the principal agreements entered into during 2001 between the Company and various of its affiliates : PARTIES
Loan Agreements between the Company, as lender, and CFP, as borrower
Amendment to Loan Agreement dated 28 September 2000 between the Company, as lender, and AXA Asia Pacific
Sale to the Company of a debt obligation held by AXA
Shareholder advance/loan agreement between the Company, as lender, and Financière Mermoz, as borrower
Subordinated Loan Agreeements between the Company, as lender, and CFP as borrower
Substitution Agreement concerning obligation to repurchase shares of AXA Investment Managers SA
Spa between the Company, as seller, and AXA Italia Spa, as purchaser
Managers totaled approximately €211 billion (2000: €207 billion) and generated approximately €370 million in management fees for year ended December 31, 2001 (2000: €368 million). In addition, the Asset Managers manage most of the separate account (unit-linked) assets of the Company’s insurance subsidiaries, which totalled approximately €81 billion at
Reinsurance. In order to achieve optimal pricing in the market and cost efficiencies on a Group level, various insurance subsidiaries of the Company cede reinsurance through AXA Cessions. AXA Cessions acts on behalf of the ceding AXA
In accordance with European Union directives, insurance companies organized in European Union member countries are required to maintain minimum solvency margins which must be supported by capital, retained earnings and reserves, including unrealized appreciation or depreciation on securities and, in France and in certain other countries (as approved by local regulators), unrealized capital gains on real estate as reported in regulatory filings. AXA’s insurance operations in countries outside of the European Union are also subject to capital adequacy and solvency margin regulations. At December 31, 2001, management believes AXA’s subsidiaries are in compliance with all applicable solvency and capital adequacy margin requirements.
Belgium accounted for over 90% of AXA’s consolidated gross policyholder benefits and insurance claims reserves at December 31, 2001 (2000: nearly 90%). The table below presents certain statutory information that relate to these entities (and before allocation to minority interests).
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Item 10 30- Share Options Total employee stock based compensation cost charged to earnings was €9 million, €21million and €21million for the years ended December 31, 2001, 2000 and 1999, respectively.
A summary of the status of the Company’s share options for the periods indicated is presented below: (in euro millions) Shares Price2 Shares1 Price1,2 Shares1 Price1,2
Options exercisable at year end 12,504,725 16.78 9,231,744 12.92 5,710,008 9.51 Options available for future grants at year end 15,899,428 1,412,688 9,429,720
(1) 2000 and 1999 number of shares and price restated to reflect the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May 9, 2001. (2) Price refers to weighted average exercisable price in euro. (3) In June 2000, AXA issued 30.2 million ordinary shares, which were issued with preferential subscription rights and according to the terms and conditions of the AXA
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Financial common stock were either settled in cash or exchanged into options in AXA ordinary shares (in the form of AXA ADSs). The number of AXA Financial stock options that were exchanged into options in AXA
ADSs amounted to 9.1 million (or an equivalent of approximately 18.3 million AXA ordinary shares on a post 2-for-1 ADS stock split basis), of which 8.5 million (or an equivalent of 16.8 million AXA ordinary shares )
became immediately exercisable upon exchange.The cost of settling or exchanging these outstanding options in AXA Financial common stock was included in the purchase price of the transaction (see note 4 “Business
Combinations” for further information). In addition and at the same time, certain employees exchanged their
Beginning in 2001, under AXA Financial’s 1997 Stock Incentive Plan, AXA Financial can issue options to purchase AXA ADSs. The options are issued at the fair market value of the AXA ADSs on the date of grant.
Generally, one-third of the share options vest and become exercisable on each of the first three anniversaries of the date such options were granted. Options are currently exercisable up to ten years from the date of grant.
According to the terms and conditions of the share options, AXA Financial will acquire existing ordinary shares in the open market to be sold to its employees upon their exercise of the options to purchase AXA ADSs. As stated in note 6 “Investments”, the treasury shares held by AXA are intended to cover the potential ordinary shares to be sold. Relevant information is summarized in the tables below.
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Combinations”). As a result of these acquisitions, AXA increased significantly its participation in insurance, financial services and other operations throughout AXA. No customer accounted for 10% or more of AXA’s consolidated revenues in 2001. No segment is dependent upon a single customer, or a few customers, the loss of which would have a significant effect on the earnings of the segment. AXA is not dependent on any one, or a few, independent brokers or independent agents or other insurance companies for which a loss of business would have a material adverse effect on the earnings of any one of the segments or AXA.
that are designed to meet a broad range of its customers’ needs throughout their financial life-cycles.
Outstanding Weighted average Exercisable at Weighted average at December 31, 2001 exercise price at December 31, 2001 exercise price
Property & Casualty Segment products and services. Includes a full range of products including principally automobile and homeowners’ insurance to individuals and commercial property and liability insurance to corporate customers, including workers’ compensation benefits.
(in euro millions, except percentages) 2001 2000 1999 at December 31, 2001
Income before income tax expense 1,751 (60) (551) 974 47 (439) – 1,721
Life Property International Asset Other Holdings Intersegment & Savings & Casualty Insurance Management Financial companies eliminations Total
Total Benefits, Claims and Other deductions (50,405) (17,411) (3,910) (2,454) (11,267) (122) 404 (85,166)
Income before income tax expense 4,381 303 207 865 751 2,669 – 9,176
Equity in income from affiliated entities 41 1 – (5) (60) – – (23)
(1) See note 32 for the unaudited pro-forma financial information presenting the impact of the new French Regulations No. 2000-05 that were adopted by AXA on
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Bank operating expenses – – – – (5,310) – 24 (5,286)
Total Benefits, Claims and Other deductions (60,430) (15,353) (3,544) (1,646) (10,046) (137) 166 (90,990)
Income before income tax expense 1,967 927 (24) 510 977 459 – 4,816
Income after income tax expense 1,475 678 (42) 356 632 424 – 3,524
Equity in income from affiliated entities 31 4 – – (45) (1) – (10)
(1) See note 32 for the unaudited pro-forma financial information presenting the impact of the new French Regulations N° 2000-05 that were adopted by AXA on f • Item 18 (partie 1) (V5) 1/07/02 11:40 Page F-83 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Net change in separate account (unit-linked) assets1 (11,613) – (11,613) (4,713) 13,638
Other revenues, net of benefits, claims and other deductions 219 189 –
(1) The sum of the net investment result included in the technical result, the net change in separate account (unit-linked) assets and the net investment result (other) equals total net investment result for the segment as detailed in note 20 “net investment result”.
Net investment result included in technical result1 378 – 378 501 479
Other revenues, net of benefits, claims and other deductions 27 1 –
(1) Restated to take account of the new French Regulations adopted on January 1, 2001.
• Equalization provisions are no longer permitted to be recognized as provisions if such provisions are not established to cover catastrophic risks. Such provisions were eliminated with the cumulative effect of the change recorded in shareholders’ equity.
• Re-estimation of insurance liabilities in particular relating to adverse changes (that is an additional charge)
on insurance liabilities from a change in mortality tables. The impact of such change is to be recorded in the year the change occurs whereas previously the impact of such change was recorded on a systematic basis over the contract periods.
(in euro millions) At December 31, 20001 At January 1, 20012
Statement of Income for the year ended December 31, 2000 The unaudited pro forma statement of income for the year ended December 31, 2000 after taking into account the impact of the new French Regulations is presented below. The impact of such changes would have reduced net income for the year ended December 31, 2000 by €459 million, or 12%, as compared to the 2000 net income as reported of €3,904 million. The principal changes that would have impacted the statement of income are discussed below.
• The U.S. Life & Savings operations ceded its Disability Income business portfolio in 2000. The cost of reinsurance was €211 million (net group share of 60% prior to AXA’s buyout of minority interests in AXA
• The elimination of realized gains on sale of treasury shares of nearly €60 million.
• The elimination of the equalization provisions that do not cover catastrophic risks, principally relating to the
German property & casualty operations (€115 million) and to a lesser extent in Austria (€5 million) as well as Créalux in the international insurance operations (€43 million).
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Year ended December 31, 2000 (in euro millions, except per ordinary share amounts) As reported Unaudited
(2) The exceptional items included: In 2000: – the consolidated net realized gain on the sale of Donaldson, Lukfin & Jenrette (“DLJ”), which totaled euro 2,004 million net group share (euro 2,071 million net group share and net of realized and unrealized losses on Credit Suisse Group shares received in respect of that transaction of euro 67 million); – realized losses and valuation allowances of euro 236 million (net group share) relating primarily to the Equitable Life high yield bond portfolio as a result of broad weaknesses in credit markets from a slowing economy during the third and fourth quarter of 2000, coupled with a review of investment strategy following AXA’s acquisition of the minority interests in AXA Financial; and
GAAP measure, which management believes provides a meaningful understanding of the results. It should be noted that “Adjusted earnings” as defined may not be comparable with similarly-titled measures reported by other companies as it is not defined under either French GAAP or US GAAP.
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33 - Summary of Material Differences between French GAAP and U.S. GAAP AXA’s consolidated financial statements are prepared in accordance with French GAAP. These accounting principles differ in certain material respects from U.S. GAAP. In addition, certain significant differences between
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133 “). FAS 133 established new accounting and disclosure requirements for all derivative instruments, including certain derivative instruments embedded in other contracts (referred to as “embedded derivatives”) and hedging activities. FAS 133 requires all derivatives to be recognized on the balance sheet and measured at fair value.
Accounting for embedded derivatives: AXA elected a January 1, 1999 transition date, thereby effectively
Group (“DIG”) with regard to insurance contracts and features therein, adoption of the new requirements for embedded derivatives had no material impact on AXA’s consolidated financial condition and operating results under U.S. GAAP. There are currently no requirements to measure and recognize embedded derivatives under
Under U.S. GAAP, the accounting for changes in the fair value of a derivative (that is, the gains and losses) is recorded in income, unless the derivative is used as a hedging instrument. If the derivative is used as a hedging instrument, the accounting for such changes in fair value depends on the hedging relationship as summarized below.
• Net Investment Hedges relate to hedges of a net investment in a foreign operation. The change in fair value of the derivative or non-derivative instrument attributable to the effective portion of the foreign currency hedge, together with the associated foreign exchange gain or loss on the hedged item, is recorded in a component of “Other comprehensive income” as a part of the cumulative foreign translation adjustment. The change in fair value of the derivative attributable to the ineffective portion of the hedge is recorded in income.
The strict guidance set out by the FASB and the DIG limits the extent to which existing hedge arrangements qualify for hedge accounting under FAS 133. AXA manages its risks and, therefore, its hedging strategies to meet the hedging requirements as set forth under French GAAP, rather than U.S. GAAP. As a result, certain hedging relationships established by AXA could not be designated as qualifying hedging relationships under
Reclassification of fixed maturity and equity investments. Under the transition rules of FAS 133, AXA
recorded the following reclassifications (i) £ 19,806 million (or approximately €31,492 million at transition date) of Available-for-Sale securities as Trading securities, resulting in an after-tax cumulative-effect-type adjustment of €2,698 million from Other Comprehensive Income to the Statement of Income, representing the after-tax unrealized gain of the assets backing the UK with-profit business at January 1, 2001, and (ii) US$
Income (or approximately €10 million at transition date), representing the after-tax unrealized gain at January 1, 2001. Under the transition provision of FAS 133, this reclassification does not call into question AXA’s intent to hold current or future debt securities to their maturity. This reclassification under U.S. GAAP had no impact on AXA’s accounting for its fixed maturity and equity investments under French GAAP.
ACCOUNTING FOR DEMUTUALIZATIONS In January 2001, AXA adopted the American Institute of Certified Public Accountants (“AICPA”) Statement of
Position No. 00-3 “Accounting by Insurance Enterprises for Demutualizations and Formations of Mutual
Insurance Holding Companies and for Certain Long-Duration Participating Contracts” (“SOP 00-3”). SOP 00-3 addresses new accounting and reporting standards for demutualizations. SOP 00-3 applies to AXA’s US life operation, Equitable Life, which demutualized in July 1992 resulting in a closed block of business, and it has been adopted prospectively as of January 1, 2001 with no financial impact upon initial implementation.
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ACCOUNTING FOR BUSINESS COMBINATIONS In June 2001, FAS No. 141 “Business Combinations” (“FAS 141”) was issued. FAS 141 addresses financial accounting and reporting for business combinations including investments accounted for under the equity method, collectively referred to in this section as “business combinations”. All business combinations in the scope of FAS 141 are to be accounted for using one method, the purchase method and, therefore, poolingof -interests is no longer permitted. Under the purchase method of accounting, which was the principal basis used by AXA in accounting for its business combinations completed prior to July 1, 2001, a goodwill asset is recorded for the excess of the purchase price over the estimated fair value of net identifiable assets acquired.
(VBI) will continue to be amortized over their estimated useful lives.
FAS 142 was effective for AXA’s business combinations with an acquisition date on or after July 1, 2001 and related to Sterling Grace, with goodwill and other intangible assets of €129 million which were subject to the non-amortization and amortization provisions of FAS 142.
January 1, 2002 and, therefore, will be presented in AXA’s consolidated financial statements for the year ended
U.S. GAAP purposes, investment securities held by the funds are classified as trading and, therefore, are stated at estimated fair value and changes in estimated fair value are included in net income.
Business Combinations - Purchase Accounting Business acquisitions are generally accounted for using the purchase method of accounting under both
PURCHASE PRICE • Under both French GAAP and U.S. GAAP, the purchase price is determined at transaction date unless newly issued ordinary shares are exchanged. If ordinary shares are issued in connection with an acquisition, under
GAAP the purchase price is determined at the date the merger agreement is signed and announced (so long as the terms of exchange are fixed), using the average market rate over a period consisting of a number of days before and after such date.
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For all acquisitions completed on or after January 1, 2001, the difference between the purchase price and the value of the portion of net assets acquired is recorded as a goodwill asset and is the same basis as used in determining goodwill under U.S. GAAP. However, the new French GAAP basis may not generate a goodwill asset value that is equal to that determined under U.S. GAAP due to, and as previously discussed, (i) the accounting for net assets acquired in respect of a buyout of minority interests, (ii) the accounting for the value of shares exchanged, if applicable, (iii) the accounting for the settlement or exchange of outstanding employee share options of the acquired company, and (iv) the identification and valuation of identifiable intangible assets.
FIXED MATURITIES, EQUITY AND REAL ESTATE, OTHER THAN ASSETS ALLOCATED TO UK “WITH-PROFIT” CONTRACTS In respect of the accounting for fixed maturity and equity investments outside of the separate accounts
• securities classified as “trading’’ are reported at fair value with changes in unrealized gains and losses included in income, and
In respect of valuation allowances on impairment fixed maturity and equity securities and real estate investments, under French GAAP an impairment for an other-than-temporary decline in value is recorded as a valuation allowance and can be reversed in future periods in the event that market conditions change. Under U.S. GAAP, such impairment is recorded as a realized loss against income and is not reversible in future periods.
The UK “with-profit” contracts are participating contracts and distribution from the “with-profit” long term fund is based on legal restrictions whereby policyholders have a 90% right to all risks and rewards of the “with-profit”
Under French GAAP, assets supporting the UK “with-profit” fund are stated at market value with changes in market value included in income, as the unrealized investment gains and losses on these investments are included in the determination of the related insurance liability. These assets include fixed maturity and equity securities, real estate and loans.
Under U.S. GAAP, real estate assets and loans allocated to UK “with-profit” contracts are carried at historical cost less accumulated depreciation and amortized cost or unpaid principal balance, respectively. In addition and prior to January 1, 2001, the fixed maturity and equity investments allocated to UK “with-profit” contracts were classified as “Available-for-Sale” and stated at market value. Consequently, the entire change in market value, being the net unrealized investment gains or losses, was recorded in “Other comprehensive income” (a separate component of shareholders’ equity) even though the related impact of the change in unrealized gains and losses on assets on UK ”with-profit” policyholder benefits was recorded against income in the same period. Accordingly, AXA believed that this exclusion under U.S. GAAP did not reflect fully the economic effect of the UK “with-profit” contracts. An increase in the estimated fair value of these assets resulted in an increase in the liability for policyholder benefits, and a reduction of AXA’s consolidated net income. A decrease in the estimated fair value of assets resulted in a decrease in the liability for policyholder benefits, and an increase in
Effective from January 1, 2001 and as permitted under the transition rules of FAS 133, the fixed maturity and equity securities supporting the “with-profit” business have been reclassified from “Available-for-Sale” to “Trading”.
contracts”, in the reconciliations of consolidated net income and consolidated shareholders’ equity from
French GAAP to U.S. GAAP, is no longer necessary in 2001.
and expenses, a premium deficiency reserve is established by a charge to earnings.
Long-Duration Participating Contracts’’. Under French GAAP, the liability for terminal dividends is accrued in proportion to gross margins over the life of the contract. For U.S. GAAP purposes, management elected not to implement FAS 120 for AXA’s consolidated financial statements and, accordingly, has maintained its U.S.
GAAP methodology for all long-duration participating life insurance contracts based on FAS 60 whereby the terminal dividends are taken into account in the establishment of reserve factors, and the reserves are accrued in proportion to premium revenue over the life of the contract.
Equalization Reserves Under French GAAP, equalization reserves are recognized in respect of future catastrophe risks, which are determined in accordance with local regulatory requirements in certain jurisdictions in which AXA operates.
ACCOUNTING FOR THE TRANSACTION In connection with the Plan as described in note 4 “Business Combinations” to the consolidated financial statements, a portion of the surplus assets held in the participating (“with-profit”) fund, referred to as the
“Inherited Estate” was attributed to AXA, as the shareholder. AXA’s portion of the Inherited Estate along with the non-participating insurance business was transferred out of the participating (“with-profit”) fund into separate legal non-participating funds in which 100% of the operating results would inure to AXA in future periods. As a consequence of the Plan and effective from January 1, 2001, additional significant differences arose between French GAAP and U.S. GAAP as set out below.
Under U.S. GAAP, the profit recognized by AXA on such business represents 10% of all revenues and expenses in the period, with the remaining 90% attributed to “unallocated policyholder dividend liability” in recognition of the consequences of the fundamental legal restructuring of the funds undertaken in connection with the
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For example and as described in note 4 “Business Combinations”, AXA’s ownership interest in SLPH decreased from 71% to 56% in connection with the 1999 GRE acquisition. Based on the value of the net assets disposed, an after-tax gain of €486 million (group share) was recorded in income under French GAAP as compared to an after-tax gain of €425 million (group share) recorded in income under U.S. GAAP, or a difference of €61 million.
equity under French GAAP. At the point in time when a portion or all of the issued shares are repurchased a portion or all of the provision will be released with a corresponding reduction in goodwill arising on the acquisition. Under U.S. GAAP, the after-tax gain is accounted for as a capital transaction and recorded in shareholders’ equity. For example and as described in note 4 “Business Combinations”, in connection with the acquisition of Sanford C. Bernstein (i) AXA Financial’s percentage ownership in Alliance Capital decreased from 56.3% to 52.8% and, therefore, a realized gain of €928 million (before tax and minority interests) was recorded, and (ii) AXA Financial provided redemption rights to the former shareholders. Under French GAAP, the gain of €928 million was recorded and fully offset by a corresponding provision whereas under U.S. GAAP
Impact of Changes in French Accounting Principles in 2001 The implementation of new French Regulations effective from January 1, 2001 resulted in certain one-time adjustments to the reconciliations of consolidated net income and consolidated shareholders’ equity from
The cumulative effect of the elimination of equalization reserves (in respect of future unusual losses) under
French GAAP was recorded as an adjustment to opening consolidated shareholders’ equity at January 1, 2001. As a result, the reconciling difference in net income is lower in 2001 as compared to 2000 and 1999.
However, in prior periods, French GAAP differed from U.S. GAAP, as French GAAP did not eliminate such gains and losses if the seller or buyer was an insurance or reinsurance company. Consequently, this difference is still presented in AXA’s reconciliation of consolidated net income and consolidated shareholders’ equity from
Under French GAAP, realized gains are recognized when securities or real estate with appreciated values are contributed to mutual funds or real estate funds established for the purpose of supporting French Savings
U.S. GAAP requirement that the benefit arrangement be communicated to employees and include sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are terminated. As a result of this and other conditions, certain costs included in restructuring provisions under
There are two principal differences that arise between French GAAP and U.S. GAAP as set out below.
a compensation charge is recorded if at grant date the options are issued at a significant discount; and
– for all other share option plans issued by AXA (the Company) and other AXA entities, the principles for measuring share-based compensation under French GAAP are principally similar to those used under U.S.
GAAP. However, the compensation expense is recorded over the vesting period in the income statement and included as a liability under French GAAP (decrease in net assets) whereas under U.S. GAAP the amount is recorded against shareholders’ equity (no impact on net assets), unless it is to be settled in cash and would be included as a liability as well.
Long-Term Debt with Early Redemption Rights. Under French GAAP when long term debt is issued with early redemption rights whereby the redemption price is in excess of the original issue price per bond or note, the excess premium may not be amortized over the period from original issue date to earliest redemption period. Under U.S. GAAP, as the value of the long term debt accretes according to the stated redemption price, this accretion, if significant, is amortized over the period up to earliest redemption date and is recorded as interest expense with a corresponding increase in the value of the principal outstanding in the balance sheet.
Consolidated Net Income in Accordance with French GAAP 520 3,904 2,021
– Reclassification of fixed maturities and equity securities at January, 1 20011 3,853 – –
Elimination of gain on sale of treasury shares – (75) –
Consolidated Net Income in Accordance with U.S. GAAP 1,484 3,248 1,209
Unrealized investment gains (losses) on assets allocated to UK with-profit contracts, net of deferred income tax NA (477) 1,030
Consolidated Net Income in Accordance with U.S. GAAP, except for adjustment for the change in unrealized investment gains on assets allocated to UK with-profit contracts NA 2,771 2,239
Unrealized investment gains on real estate assets allocated to UK “with-profit” contracts NA 273
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• Royale Belge (1998). The annual goodwill amortization under U.S. GAAP was €5 million lower than the annual goodwill amortization charge under French GAAP. This was primarily attributable to (i) the portion of goodwill (€337 million) charged directly to shareholders’ equity when ordinary shares of AXA were issued that increases U.S. GAAP goodwill, which was more than offset by (ii) the differences in the underlying accounting principles used for determining the value of net assets acquired between French GAAP (based on carrying value as it was an acquisition of a minority interest) and U.S. GAAP (based on estimated fair value).
GAAP while under U.S. GAAP the total goodwill calculated was recorded as an asset.
34 - Condensed U.S. GAAP Financial Statements and Additional U.S. GAAP Disclosures The following condensed U.S. GAAP financial statements reflect the effects of the material differences between
French GAAP and U.S. GAAP on consolidated net income and shareholders’ equity identified in note 33 as well as differences of presentation between French GAAP and U.S. GAAP.
Presentational Differences Discontinued operations. Under U.S. GAAP, the sale of a reportable segment (or a significant portion thereof) is subject to specific disclosure requirements. The sale of DLJ completed on November 3, 2000 resulted in discontinued operation accounting treatment and, therefore, (i) the condensed consolidated statements of income under U.S. GAAP for the years ended December 31, 2000 and 1999 present separately the net income and net income per ordinary share (on a basic and diluted basis) arising from continuing operations and discontinued operations of DLJ (including the gain realized on the sale), and (ii) the condensed consolidated balance sheets under U.S. GAAP at December 31, 2000 present separately the net assets attributable to DLJ as a single line item. Such presentational requirements do not exist under French
Closed Block Business in Equitable Life. The business of AXA Financial includes a Closed Block of participating policies established in connection with the demutualization of The Equitable Life Assurance
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At December 31, 2001 (in euro millions) U.S. GAAP French GAAP
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Year ended December 31, 2000 (in euro millions) U.S. GAAP Adjusted1 French GAAP
(1) US GAAP, except for adjustment for the increase in net unrealized investment gains and losses on assets allocated to UK with-profit contracts of euro (477) million (net group share).
(2) Total revenues attributable to the discontinued DLJ operations were euro 10,894 million under both French GAAP and US GAAP. (3) Financial data restated in accordance with the new French Regulations adopted on January 1, 2001.
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Year ended December 31, 1999 (in euro millions) U.S. GAAP Adjusted1 French GAAP
Variations of unearned premium reserves, net of reinsurance3 (31) (31) (93)
Income from continuing operations before income tax expense 970 3,566 3,140
(1) US GAAP, except for adjustment for the increase in net unrealized investment gains and losses on assets allocated to UK with-profit contracts of euro 1,030 million (net group share).
Comprehensive Income Comprehensive income includes net income and represents the change in shareholders’ equity during a period from non-owner sources. It includes “other comprehensive income” which represents revenues, expenses, gains and losses that under U.S. GAAP are excluded from net income. The changes in AXA’s U.S.
(in euro millions) U.S. GAAP U.S. GAAP Adjusted1 U.S. GAAP Adjusted1
Cumulative effect of a change in accounting principles, net of tax (2,698) – – – –
(1) U.S. GAAP, except for adjustment for the increase in net unrealized gains (net of deferred tax) on real estate allocated to UK with-profits contracts.
Comprehensive income, being net income plus the change in other comprehensive income in accordance with U.S. GAAP totaled (€2,552) million, €1,586 million and €2,227 million in 2001, 2000 and 1999, respectively.
Income to the Statement of Income, representing the after-tax unrealized gain of the assets backing the UK
At December 31, 2001 and 2000, accumulated net unrealized investment holdings gains from available-forsale securities included in accumulated other comprehensive income in accordance with the U.S. GAAP
– Treatment of treasury shares held by AXA and its subsidiaries, and
– Impact of discontinued operations and the accounting for the sub-ordinated debt with stipulated step-up redemption prices on the calculation of net income per ordinary share on a diluted basis.
In accordance with the terms and conditions of the €1,524 million 2.5% subordinated convertible debt issued in February 1999 and €1,099 million 3.75% subordinated convertible debt issued in February 2000, the
January 2005 and 2007. The additional interest expense, which also increases the value of the subordinated debt under U.S. GAAP, was approximately €61 million in 2001 (2000: €61 million and 1999: €32 million).
Net income per ordinary share Income from continuing operations per ordinary share1
Assumed exercise of stock options4 8 22 11 8 22 11
(1) Excludes income from discontinued DLJ operations (primarily decreases income and decreases the impact of “dilutive securities issued by subsidiaries”) for 2000 and 1999.
(6) Refer to comments in text below as treated as “anti-dilutive” for U.S. GAAP purposes.
At December 31, 2001, AXA’s consolidated balance sheet included derivative assets and derivative liabilities at estimated fair value of €1,381 million and €1,227 million, respectively. Derivative assets and liabilities were included under AXA’s condensed consolidated balance sheet captions of “Other assets” and “Other liabilities”.
Certain hedge arrangements met the U.S. GAAP criteria for measurement and recognition primarily in respect of (i) certain hedges of changes in fair value attributable to interest rate risk (through the use of interest rate swaps), and (ii) certain hedges of changes in fair value attributable to foreign currency risk (primarily through the use of currency swaps and foreign currency forwards using the change in the spot rate).
In respect of the derivative instruments used for these qualifying U.S. GAAP hedges,
• the amount of hedge ineffectiveness included in AXA’s 2001 U.S. GAAP consolidated net income under the caption “Net investment result” was a credit of €14 million.
• the net gain included in AXA’s 2001 U.S. GAAP consolidated net income under the caption “Net investment result”, representing the component of the derivative instruments gain excluded from the assessment of hedge effectiveness, totaled €51million.
Deferred Tax Differences between the French GAAP and U.S. GAAP components of the net deferred tax asset and liability are as follows: Item 1
(1) As previously discussed, no longer presented for 2001 and thereafter.
Supplemental Cash Flow Information This information should be read in conjunction with the Statement of Cash Flow. For the years ended
Employee Benefit Plans AXA Financial recorded, as a reduction of its shareholders’ equity, an additional minimum pension liability (net of tax) of €25 million and € 14 million at December 31, 2001 and 2000, respectively, under U.S. GAAP. The
(net of tax) of €62 million and €27 million at December 31, 2001 and 2000, respectively. The German subsidiaries also recorded, as a reduction of its shareholders’ equity, an additional minimum pension liability
(net of tax) of €128 million and €55 million at December 31, 2001 and 2000, respectively. This liability, which primarily represents the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability, is not recorded under French GAAP. The change in additional minimum pension liability is included in “other comprehensive income”.
Share-Based Compensation Details on share option plans in respect of AXA are provided in note 30 “Share Options”.
Total U.S. GAAP compensation cost recognized in income for stock-based employee compensation in 2001 was €57 million (2000: €684 million and 1999: €64 million). The 2001 U.S. GAAP charge includes income of U.S.
$74 million in connection with the AXA Financial SAR liability (see note 30 “Share Options”), as the SARs are subject to variable accounting based on the change in market value of AXA ADSs for the year ended December
Had AXA accounted for share options granted since January 1, 1995 in accordance with FAS 123, net income and net income per ordinary share under U.S. GAAP (on a pro forma basis) would be as follows: F-114
U.S. GAAP: Net Income: Net Income per Ordinary Share1: Basic: Diluted: (1) 2000 and 1999 Net Income per Ordinary Share data have been restated to take into account the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May 9, 2001.
(2) 1999 net income per ordinary share (diluted) has been restated due to the accounting treatment of DLJ as discontinued operations. (3) In connection with the buyout of the minority interests in AXA Financial, certain outstanding stock options in AXA Financial common stock were subject to accelerated vesting.
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The weighted average fair value per option granted by the Company in 2001, 2000 and 1999 was €11,
Unaudited Pro Forma Information Relating to Acquisitions This information is additional to that required under French GAAP and should be read in conjunction with note 4 “Business Combinations”.
The unaudited pro forma consolidated results of operations have been prepared for comparative purposes only and are not indicative of the results of operations which actually would have resulted had the acquisition occurred on the dates indicated, or which may result in the future.
Impact of the buyout of the minority interests in AXA Financial and Sun Life & Provincial Holdings
The following summarized unaudited pro forma information presents the consolidated results of operations of
(3) Guardian Royal Exchange is a subsidiary of SLPH, its results are also included for a full year in 1999 on a pro forma basis for the first four months of 1999 prior to its acquisition, and actual results for the post-acquisition eight month period in 1999.
(4) As a result of the acquisition of minority interests in AXA Financial, 25.8 million ordinary shares were issued, which effects the net income per ordinary share (basic and diluted).
(5) Per ordinary share data restated to take account of the 4-for-1 stock split approved by the shareholders at the annual general meeting held on May 9, 2001.
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New Accounting Pronouncements Not Yet Adopted As mentioned previously under “Changes in accounting methodologies under U.S. GAAP”, FAS 141 and FAS
• There were no reclassifications between goodwill and intangible assets (apart from goodwill), as permitted by FAS 141.
• AXA’s gross deferred credit balance in respect of negative goodwill in the U.S. GAAP consolidated balance sheet at January 1, 2002 of €12 million is to be written off and recognized as a cumulative-effect-type change in accounting principle on an after-tax basis in AXA’s consolidated income statement under U.S.
• AXA’s total goodwill less accumulated amortization included in its consolidated balance sheet under U.S.
GAAP at January 1, 2002 totaled €17.1 billion and will no longer be amortized but will be subject to initial impairment testing in 2002 and at least annual impairment testing in future periods. AXA’s U.S. GAAP 2001 consolidated net income would have increased by €795 million due to the non-amortization of goodwill.
Any impairment loss on goodwill at January 1, 2002 will be reported as an after-tax cumulative-effect-type change in accounting principle in AXA’s consolidated income statement under U.S. GAAP for the year ending December 31, 2002. AXA is currently reviewing the impairment testing in accordance with FAS 142.
Assets to Be Disposed Of”. FAS 144 supersedes the accounting and reporting provisions in Accounting
FAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. An impairment for such assets that are not considered to be disposed of is recognized only if the carrying amounts of long-lived assets are not recoverable and exceed their fair values.
FAS 144 extends the scope of discontinued operations to include all components of an entity with operations and cash flows that (i) can be distinguished from the rest of the entity, and (ii) will be eliminated from the ongoing operations of the entity in a disposal transaction. In addition, FAS 144 also eliminated the exception to consolidation for a subsidiary for which control is likely to be temporary. FAS 144 became effective for AXA as at January 1, 2002. The provisions are generally to be applied prospectively and had no impact on AXA upon its adoption.
2001 DIVIDEND At the annual general meeting of shareholders of AXA held on May 3, 2002, the shareholders approved the dividend in respect of 2001 financial year of €0.56 per ordinary share, or €971 million in the aggregate based on the number of shares outstanding at December 31, 2001. The approved dividend will be paid in 2002.
liability in respect of diseases arising from employment, including employment-related conditions. AXA
companies that may be affected by this recent judicial decision are currently reviewing their portfolios to identify any potential exposure.
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Total liabilities, subordinated debt, bonds mandatorily convertible into ordinary shares and shareholders’ equity 39,371 39,762
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(1) Includes a liability at December 31, 2000 of euro 2,973 million, which related to the amount of cash to be paid by AXA (the Company) in 2001 following the completion of the squeeze out merger on January 2, 2001 (discussed further in footnote (3) below). Of the euro 2,973 million, euro 2,078 million was paid out in 2001 to former minority shareholders.
(2) Non-cash transactions in 2000 included: (i) conversion of the 6.0% mandatorily convertible bonds into ordinary shares at maturity in January 2000 of euro 282 million, (ii) the merger of AXA Participations (an existing wholly-owned subsidiary) with and into AXA (the Company) of euro 216 million, and (iii) ordinary shares exchanged in connection with AXA’s buyout of minority interests in AXA Financial of euro 3,131 million as at December 31, 2000.
(3) Non-cash transactions in 2001 included: (i) conversion of the 4.5% mandatorily convertible bonds into ordinary shares at maturity in January 2001 of euro 320 million, (ii) the merger of Lor Finance and Financière 45 (existing wholly-owned subsidiaries) with and into AXA (the Company) of euro 2,198 million, and (iii) ordinary shares exchanged in connection with AXA’s buyout of minority interests in AXA Financial following the completion of the squeeze out merger of AXA Merger Corp. (a wholly-owned subsidiary of AXA created to effectuate the transaction) with and into AXA Financial on January 2, 2001 of euro 737 million.
(4) Reclassifications have been made in respect of 2000 (i) euro 2,973 million from “changes in other assets and liabilities” to “investment in subsidiaries”, for the amount payable to former minority shareholders of AXA Financial attributable to AXA's buyout of minority interests in AXA Financial, which represents an “investing activity”, and (ii) adjustments to “investment in subsidiaries”, “repayment of debt” and “issuance of ordinary shares”, primarily to eliminate the impact of non-cash transactions described in footnote (2) above.
S-4 1. Financial Statement Policies and Changes in Presentation These parent company condensed financial statements should be read in conjunction with AXA’s consolidated financial statements and the notes thereto prepared in accordance with French GAAP and reconciled to U.S.
The parent company condensed financial statements of AXA (the Company), a French société anonyme à
Information relating to the subordinated debt (including terms of redemption by the issuer and share conversion) and bonds mandatorily convertible into ordinary shares of AXA, which were converted at maturity into AXA ordinary shares on January 1, 2001, is provided in note 14 to AXA’s consolidated financial statements.
The principle difference between French statutory GAAP and French GAAP (on a consolidated basis) as well as U.S GAAP (at the parent company level) relates to the accounting for the Company’ s equity investments.
French GAAP (on a consolidated basis) and U.S. GAAP (parent company level), the equity method of accounting is used. Other differences between French GAAP and U.S. GAAP are described in notes 33 and 34 to AXA’ s consolidated financial statements included elsewhere in this annual report.
Net income in accordance with French GAAP (statutory basis) 1,620 1,057 1,160
Net income in accordance with French GAAP (consolidated basis) 520 3,904 2,021
Shareholders’ equity in accordance with French GAAP (statutory basis) 26,928 22,754
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3. Voting Trust Agreement, as amended, dated as of January 22, 1997, filed as Exhibit 9.2 to the
4. (a) Merger Agreement, dated as of October 17, 2000, between AXA, AXA Merger Corp. and AXA
(c) Employment Agreement, dated May 11, 2001, between Christoper M. Condron, and AXA
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Signatures The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
(b) Continuity Agreement between, Edward D. Miller and AXA Financial, Inc. dated September 29, 2000, filed as exhibit 10.6 to the Company’s Registration Statement on Form F-4 filed on November 21, 2000
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