Presentation of Information This Annual Report on Form 20-F (referred to herein as the “annual report”) has been filed with the United
Other data (non-GAAP): Number of ordinary shares outstanding – 1,734.2 1,664.9 1,425.3 1,401.2 1,325.6
(4) At the annual general meeting of shareholders of AXA held on May 9, 2001, AXA’s shareholders approved a 4-for-1 stock split of AXA’s outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the ADS was changed from one AXA ADS representing one-half of an AXA ordinary share to one AXA ADS representing one AXA ordinary share. All prior periods have been restated accordingly.
FINAXA MAY TERMINATE THE LICENSING TO AXA OF THE AXA TRADEMARK THAT WE CONSIDER TO BE IMPORTANT TO THE MARKETING OF OUR PRODUCTS AND SERVICES 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 has: • granted us a non-exclusive license to use the AXA trademark in the jurisdictions in which we currently have operations and in any additional jurisdictions in which the AXA trademark is registered, and
THE HOLDERS OF AXA ADSS MAY NOT BE ABLE TO EXERCISE THEIR VOTING RIGHTS DUE TO DELAYS IN NOTIFICATION TO AND BY THE DEPOSITARY The depositary for the AXA ADSs may not receive voting materials for AXA ordinary shares represented by AXA
• Improved offering to clients: financial advice, backed by an enlarged product and service offering including third-party “best-of-breed” products; higher service quality and client satisfaction; more focus on
Compagnie du Midi and operated under the name of AXA Midi, which subsequently reverted back to the AXA
Region (based in Hong Kong and owned by AXA Asia Pacific Holdings), and in AXA Aurora, in which the minority interest was held by Banco Bilbao Vizcaya SA (“BBVA”).
Please note that the percentage on the left represents the economic interest and the perrcentage on the right represents the percentage of control.
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Total surrenders for 2001 and the ratio of surrenders to average gross insurance reserves for the periods indicated are presented below.
(1) Approximately 69% of the products are distributed through affinity groups, which include the Chamber of Commerce and Industry and corporate direct sales (to individuals).
PROPERTY & CASUALTY SEGMENT AXA’s Property & Casualty Segment offers a range of personal and commercial property & casualty insurance products. The Property & Casualty Segment accounted for €15.9 billion, or 21% of AXA’s consolidated gross premiums and financial services revenues for the year ended December 31, 2001 (2000: €15.6 billion or 19%
In each of its principal markets, AXA operates through well-established property & casualty insurance companies. AXA’s principal property & casualty insurance subsidiaries are set out below: France: AXA Assurances IARD, AXA Courtage IARD, AXA Conseil IARD and Direct Assurance IARD.
INTERNATIONAL INSURANCE SEGMENT AXA’s International Insurance Segment business is primarily conducted by AXA Corporate Solutions through its reinsurance operations (AXA Corporate Solutions Reinsurance) and its large-risk corporate property & casualty business (AXA Corporate Solutions Insurance). The International Insurance Segment accounted for €5.7 billion, or 8% of AXA’s consolidated gross premiums and financial services revenues for the year ended December 31, 2001 (2000: €3.7 billion or 4.6%, respectively, or 5.3% after excluding the results of Donaldson Lufkin &
• a demand for risk transfer and alternative risk transfer products and
AXA made an up-front payment of approximately US$30 million in order to increase its equity interest from approximately 47% to approximately 75%, with effect from January 2002. This transaction is subject to an earn-out agreement whereby additional consideration may be paid that is contingent upon the future operating performance of AXA Rosenberg.
Total equity investments, including holdings in mutual funds 53,698 54,858 9,491 9,792 1,349 1,331 64,537 65,981 30% 30%
The information within this section presents separately (i) AXA’s property & casualty insurance operations (the
Segment. AXA Corporate Solutions Reinsurance is presented separately because: (i) this business consists of insurance assumed from other insurers,
Re-estimated net claims reserves: 971 1,139 1,076 1,269 1,967 2,009 2,162 2,661 2,870 2,842
Life has responded to these subpoenas. In addition, a number of states have enacted legislation requiring insurers who sold policies in Europe prior to and during the Second World War to file information concerning those policies with state authorities. Although each of AXA’s U.S. insurance subsidiaries intends to comply with these laws with respect to its own activities, the ability of AXA and its European affiliates to comply may be impacted by various factors including the availability of relevant information after more than 50 years and privacy laws in effect in various European countries, which could result in state regulatory authorities seeking to take enforcement actions against AXA and its U.S. affiliates, including Equitable Life. Privacy provisions of the
Alliance Capital and certain of its subsidiaries as well as certain U.S. subsidiaries of AXA Investment Managers are investment advisers registered under the United States Investment Advisers Act of 1940. Each of Alliance’s
Certain information discussed below and elsewhere in this annual report includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” provided in the beginning of this annual report and “Item 3-Key Information-Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forwardlooking statements contained in this annual report.
January 2001. The Plan took effect on April 1, 2001, at which date the Inherited Estate had a fair value of £1.7 billion (€2.7 billion). In July 2001, AXA Equity & Law made a second and final proposal, with terms similar to the original proposal, to the remaining eligible policyholders who did not elect at the first opportunity in 2000. The Plan was finally approved by a total of approximately 87% of all with-profit policyholders, representing 91% of the eligible policyholders by value.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 Net income totaled to €520 million in 2001, as compared to €3,444 million in 2000. This decrease was due to: • The absence of exceptional operations in 2001 as compared to 2000. In 2000 the net income included several exceptional operations as noted below: – the consolidated net realized gain on the sale of DLJ, which totaled €2,004 million net group share
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– Conversion of 4.5% mandatorily convertible bonds at maturity 320 29
(iii) The “Investment margin” represents the net investment result in the Statement of Income and is adjusted to take into account the policyholders’ participation (see above) and to exclude the loading on (or contractual charges included in) unit linked business, which are included in “Fees and Revenues”.
• Life & Health (29% of total gross written premiums): premiums increased by 6%, as group premiums benefited from several large new contracts written in 2001.
Net technical margin increased by €95 million in 2001 as compared to 2000. This increase was mainly due to the improvement of (i) the mortality margin on individual health of €44 million, primarily attributable to more favorable loss reserve development in 2001, and (ii) group life technical margin of €24 million in line with the rise in new business. The remaining increase was due to reserve allowances recorded in 2000 on savings products.
Excluding the impact of net realized capital gains, adjusted earnings amounted to €284 million in 2001 as compared to €279 million in 2000.
Income tax expense decreased by €124 million in 2001 as compared to 2000, or a decrease of €130 million on a constant exchange rate basis. The decrease was due to lower taxable income and a lower effective tax rate due to settlement of open tax years.
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Mandatory Provident Fund or “MPF”) totaled €1,353 million for the 15 months ended December 31, 2001 and €1.077 for the 12 months ended September 30, 2001, an increase of 20% on a constant exchange rate basis compared to the same period last year. Excluding internal replacements, gross written premiums for the 12 months ended September 30, 2001 increased by 5% on a constant exchange rate basis, primarily due to external MPF new business. During the fifth quarter 2001, gross written premiums benefited also from MPF
Investment margin decreased by €23 million to €7 million in 2001 as compared to 2000 on a comparable basis. The fall in stock market performance affected investment income, which decreased by €171 million
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Amongst other countries, the adjusted earnings increased by (i) €60 million in Italy following reserve strengthening in 2000, by (ii) €28 million in Morocco, as 2000 was affected by impairment on nonconsolidated participating interests and by (iii) €47 million in Ireland, also primarily attributable to a better technical result after the reserve strengthening in 2000. These improvements were offset by the deterioration in the Netherlands (€– 39 million, due to unfavorable loss reserve development on automobile insurance bodily injury portfolio and in the run-off business), and in Hong Kong (€– 34 million, mainly due to the deterioration of the construction disability business).
Equity investments (including trading accounts): Related assets at year end 11,636 11,409 10,502
The expense ratio improved from 25.4% in 2000 to 25.2% in 2001. Excluding the release of the agents termination agreement provision in 2001, the expense ratio would have increased to 26.4% in 2001.
Albingia and a €20 million restructuring reserve release, due to a lower actual incurred cost level. The expense ratio deteriorated by 0.3 point to 30.5% in 2001.
The net technical result increased by €214 million in 2001 as compared to 2000, or €224 million on a constant exchange rate basis. The increase was mainly due to a lower level of unfavorable loss reserves development in 2001 as compared to 2000.
• Commercial (33% of total gross written premiums): Premiums rose 4%, mainly driven by workers’
• Other (mainly Health, 5% of total gross written premiums): The other lines were stable.
• The loss ratio for all accident years net of reinsurance deteriorated by 2.0 points to 84.6% in 2001. The deterioration was mainly due to lower favorable loss reserve development in automobile insurance and workers’ compensation. Excluding workers’ compensation, a business line in which reserving is similar to life insurance, the loss ratio for all accident years net of reinsurance was 76.8% in 2001 (76.4% in 2000).
The Netherlands. The 3% increase in gross written premiums, on a comparable basis, was due to premium rate increases in automobile insurance in the beginning of 2001, in line with the whole domestic Property &
The following tables present the gross written premiums, adjusted earnings and net income for the
In 2001 and 2000 the International Insurance Segment accounted for approximately 8% and 5%, respectively, of AXA’s consolidated gross revenues. The net income generated by the International Insurance Segment represented (46)% and 5% in 2001 and 2000, respectively.
Asset Management Segment In 2001, the Asset Management Segment accounted for 5% of AXA’s consolidated gross revenues as compared to 4% in 2000. The Asset Management Segment includes third-party asset management and asset management on behalf of AXA insurance companies. The tables below present the gross revenues, adjusted earnings and net income for the Asset Management Segment for the periods indicated: Item 1
As a consequence, the operating cost income ratio increased by 6 points from 60% to 66% in 2001.
Adjusted earnings increased by €10 million in 2001 as compared to 2000. The increase was mainly due to an increase in fees, commissions and other revenues of €138 million, which was partially offset by an increase in administrative expenses of €132 million, of which €61 million were related to newly consolidated entities.
Foreign Holding Companies AXA Financial Inc. Adjusted earnings decreased by €65 million in 2001 as compared to 2000 or €48 million on a comparable basis (excluding minority interests in 2000 and on constant exchange rate basis), mainly due to the absence of a €52 million dilution gain on DLJ stock option exercise recorded in 2000. Interest expenses were relatively flat.
AXA UK Holdings. Adjusted earnings decreased by €21 million in 2001 as compared to 2000, or by €15 million on a constant exchange rate and at 100% group share. This decrease was mainly due to the release of certain tax provisions no longer deemed necessary in 2000 of €38 million, partially offset by higher realized gains and financial result in 2001.
The commentary below has been restated for financial information at December 31, 2000 and for the years ended December 31, 2000 and 1999 as a result of the implementation of new French Regulations effective from January 1, 2001, which changed certain balance sheet and statement of income presentations. For further information on the changes made refer to notes 2 and 32 to AXA’s consolidated financial statements included elsewhere in this annual report.
In the event of large catastrophic or other losses, AXA property & casualty operations would be able to liquidate their investment portfolio, a large portion of which is invested in listed securities, if necessary to pay claims.
On a consolidated basis at December 31, 2001, AXA’s total outstanding subordinated debt totaled € 8,868 million (after the reduction of €193 million for the impact from derivatives) as compared to € 8,453 million at
• In February 2001, the Company increased the U.S. dollar and euro tranches of its US$5.0 billion U.S.
• A net decrease of € 225 million attributable to a decrease of €1,250 million under AXA’s € 3.0 billion French commercial paper program, which was refinanced primarily by €1.0 billion issued in June 2001 under a €3.0 billion Euro Medium Term Note Program at 6% due in 2013.
For further information see note 18 to the consolidated financial statements.
to partly finance the buyout of minority interests of AXA Financial in December 2000. The repayment was partly funded by the use of proceeds from the issuance of €827 million under AXA’s US$5.0 billion U.S.
The activity in 2001 is in contrast with 2000. In 2000, there was a 240 million increase in AXA’s ordinary shares, of which (i) 83.6 million ordinary shares were issued to partly finance the buyout of minority interests in AXA Financial (December 2000 tender offer), and (ii) 120.8 million were issued by AXA, raising net cash proceeds of €3.7 billion, and used to finance the buyout of minority interests in AXA UK Holding (formerly AXA
and Sanford C. Bernstein. Whereas in 2001, a majority of the cash activity related to the repayment of existing amounts owed to credit institutions, which decreased by €2.8 billion. The decrease was mainly attributable to the repayment of the three-year variable rate term loan facility that was obtained by the Company in
(ii) a value of purchased life business in force of €466 million.
net income decreased by €104 million in 1999 as the amount calculated under French GAAP was greater than the corresponding amount under U.S. GAAP, which related to the issuance of shares by SLPH (now
(ii) Surrender margin: The difference between the benefit reserve and the surrender value paid to the policyholder in the event of early contract termination.
SUPERVISORY BOARD Under French law, a Supervisory Board may consist of no less than three and no more than eighteen members. French company law provides, however, that a Supervisory Board may temporarily consist of up to twenty-four members for a period ending on May 16, 2004 or, in particular circumstances, such as in the event of a merger, for a period of up to three years. Members of the Company’s Supervisory Board generally are appointed for a four-year term and appoint a Chairman and a Vice-Chairman from among the members.
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François Pierson (54) In charge of Insurance in France and Assistance
Management Board as Chairman for a period corresponding to his term as member of the Management
G. DE LA MARTINIERE 350.000 08/05/2011 32.32 – – – – – – –
The purchaser may maintain that option on each subsequent determination date upon payment of an additional fee.
CERTAIN DUTIES AND POWERS OF DIRECTORS Under French law, agreements between the Company and a member of the Management or Supervisory Board must be communicated to the Chairman of the Supervisory Board, and a list of all such agreements, together with a description of the purpose thereof, must be transmitted to the other members of the Supervisory Board and the Company’s statutory auditors and must be put each year at the disposal of the Company’s shareholders no less than 15 days before the annual shareholders’ meeting. The same applies to any agreement (i) in which a member of the Management or Supervisory Board has an indirect personal interest, (ii) entered into between the
Company and entities that are wholly owned by, or in unlimited partnership with, any members of the
Supervisory Board receive a fixed annual fee, the amount of which is determined by the shareholders at their annual meeting and is apportioned by the Supervisory Board among its members, such determination and apportionment is made upon the proposal of the Compensation Committee (see paragraph below).
In addition, the statuts of AXA provide that any individual or entity acting alone or in concert with others that acquires ordinary shares resulting in a direct or indirect holding of 0.5% or more of the outstanding share capital or voting rights of AXA, including through the acquisition of AXA ADRs representing the AXA ADSs, must notify AXA by registered letter with return receipt requested within five calendar days of the date of the acquisition (“inscription en compte”) of the ordinary shares or in the case of a holder of ADSs, within five days of the registration of the ADRs representing the ADSs, as a result of which the shareholder, acting alone or in concert with others, has reached or exceeded that percentage. The individual or entity must further notify
ordinary shares refer only to book-entry transfers and do not contemplate the physical transfer or delivery of certificates evidencing such AXA ordinary shares. See “Description of Capital Stock of AXA-Form, Holding and
If a distribution by AXA consists of a dividend in, or other distribution without payment of any subscription price of, AXA ordinary shares, including pursuant to any program under which holders of Deposited Securities may elect to receive cash or AXA ordinary shares, the depositary may distribute pro rata to each holder e • Items 8-17 (V5) 1/07/02 11:41 Page 165 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
Voting instructions may be given only in respect of a number of ADSs representing an integral number of AXA
Item 10 exchangeable into shares, the contribution of a substantial part of the Company’s assets, the transformation and/or the liquidation of the Company require a prior vote of shareholders at an extraordinary general meeting. Shareholders’ meetings are held for the purposes of discussion and decision as provided by French company law.
SHAREHOLDER SUITS Under French company law, one or more shareholders can sue the members of the Management Board and the Supervisory Board of AXA, on behalf of AXA, for damages caused to AXA by the members of the
Internal Revenue Service rulings and judicial opinions as well as the Convention between the United States and The Republic of France for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
“Treaty”), all as in effect on the date of this annual report and all subject to change, possibly with retroactive effect. In particular, the following discussion does not take into account any changes to the French tax law provisions relating to the précompte and the avoir fiscal. The French Government has recently amended the rules relating to the avoir fiscal. Under these amendments, the avoir fiscal granted to shareholders who are not individuals was reduced from 25% to 15% for distributions effected in 2002. For a discussion of the avoir e • Items 8-17 (V5) 1/07/02 11:41 Page 176 Philippe Jobs Phil 1:JOBS 1:AXA:04-587-COB 2001:COB (US):
• were earned and taxed more than five years before the distribution, would be subject to the précompte (a French equalization tax). The précompte is a tax paid by the corporation at the time of a dividend distribution that is equal to 50% of the net dividend distributed, except that, when a dividend is distributed from the long-term capital gains reserve, the précompte is equal to the difference between a tax based on the regular corporate tax rate applied to the amount of the declared dividend and the taxes previously paid by the corporation on the income being distributed. The amount of any précompte would be charged to shareholders’ equity as part of the dividend distribution.
SPECIAL RULES FOR CERTAIN TAX-EXEMPT SHAREHOLDERS Under the Treaty, special rules apply to: • any “Eligible Pension Fund”, which is a tax-exempt entity established in, and sponsored or established by a resident of, the United States, the exclusive purpose of which is to provide retirement or employee benefits and which does not own, directly or indirectly, 10% or more of the capital of AXA,
FRENCH TRANSFER AND STAMP TAXES Transfers of AXA ordinary shares and ADRs representing ADSs will not be subject to French transfer taxes unless the transfer is effected by means of a written agreement that is executed or enforced within France.
In certain cases, a stock exchange stamp tax also may be payable.
AXA ordinary shares or the ADRs will generally equal the amount paid by that U.S. Holder for the AXA ordinary shares or the ADRs or, in the case of AXA ordinary shares acquired by way of Stock Distribution, the amount included in income at the time of the Stock Distribution. Gain or loss arising from a sale or exchange of AXA
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Primary responsibility for risk management rests with the local subsidiaries that know best their respective products, clients and risk profile. This approach allows subsidiaries to react in a timely manner to changes in financial markets, insurance cycles, and economic and political environments. Risk exposures are managed across the group using various analysis and valuation techniques, such as asset-liability matching analysis, duration analysis, dynamic financial analysis, including stochastic modeling to calculate the economic capital required to support adverse risk scenarios, along with other cash flow analyses, and prudent and diversified underwriting and investing.
AXA’s exposure to market risk is minimized as a result of the nature of its operations, including the geographic diversification that reduces the impact of local economic, local financial market and insurance cycles.
Life & Savings. At December 31, 2001, approximately 34% of the total gross life insurance liabilities, including separate account liabilities, represented separate account (unit-linked) contracts, whereby principally all investment risks and rewards are transferred to the policyholders. Amounts due to policyholders are based on the fair value of the investments supporting such contracts. Therefore, changes in the fair value of assets generally result in an equal and opposite change in the value of the related linked liability.
DERIVATIVES AXA uses derivatives principally for non-trading activities in its operations to manage customer and shareholder exposures to interest rate fluctuations, foreign currency fluctuations and equity price movements.
Other limitations on the sensitivity analyses include: (i) the use of hypothetical (but reasonably possible) market movements which do not represent management’s view of expected future market changes, (ii) the assumption that interest rates in all countries move identically, (iii) the assumption that all global currencies move in tandem against the euro, and (iv) the lack of correlation of interest rates, equity prices and foreign currency exchange rates. In addition, the analyses do not include certain significant items such as real estate, deferred acquisition costs and value of purchased business in-force. These factors limit the ability of these analyses to accurately predict the impact of future market movements on fair values and future earnings.
Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds Not applicable
Total minority interests and shareholders’ equity 28,189 28,023 23,812 14 Mandatorily convertible bonds and notes – 192 474 15 Insurance liabilities, gross of reinsurance 272,125 263,174 222,932 15 Separate account (unit-linked) liabilities, gross of reinsurance 115,305 117,469 109,090 16 Provisions for risks and charges 10,553 11,530 8,730 9 Payables arising from insurance and reinsurance activities 8,806 9,543 6,512
Payables arising from non-insurance activities 26,541 29,340 120,132 18 Non-subordinated debt instruments issued 6,140 6,897 5,905 19 Amounts owed to credit institutions 6,609 9,412 13,578
Revenues from banking activities 1,127 11,754 10,799 31 Gross Premiums and Financial Services Revenues 74,832 79,971 66,528
(4) Adjusted earnings represents AXA’s consolidated net income before goodwill amortization and exceptional operations. Adjusted earnings is a non-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.
Regulations for preparing and presenting consolidated financial statements of French insurance companies, and (ii) in respect of the accounting for UK “with-profit” contracts. A summary of the significant changes in accounting principles is summarized below.
– Unexpired risk provision: Interest income generated by earned premiums is deducted from the amount of the reserve to be established.
Net Investment Result The net investment result in respect of insurance activities includes: • investment income from the insurance-related invested assets, net of depreciation expense on real estate investments (depreciation expense on real estate not held for investment is included in administrative expenses); • financial charges and expenses; • realized investment gains and losses net of valuation allowances for investment impairment; and
Portugal AXA Portugal Companhia de Seguros 99.62 99.39 93.76 99.30 AXA Portugal Companhia de Seguros de Vida 95.09 95.09 95.09 95.09
AXA Aurora (acquisition of minority interests) – 104 – – – 104 – – (3) – 101 29
Agreement dated October 17, 2000 for all of the outstanding shares of common stock of AXA Financial, other than the shares owned by AXA and its subsidiaries and the shares held in treasury by AXA Financial. Each share of AXA Financial validly tendered was exchanged for U.S.$35.75 in cash and 0.295 of an AXA American
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Total fixed maturities 156,069 Equity investments (including holdings in mutual funds)
Other trading securities 1,520 Total equity investments (including holdings in mutual funds) 74,995 Investment in participating interests 6,820 TOTAL 226,440
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PPP Columbia (subsidiary of PPP Group) 116 (116) – – –
Since 1994 and on a regular basis, AXA offers its employees to become shareholders. In 2001, AXA employees invested €321 million in share purchase plans (€25 million on July 20, 2001 and €296 million on December 14, 2001). Consequently, the number of AXA ordinary shares held by AXA employees increased by 18.3 million.
(3) Primarily due to the buyout of minority interests in 2000 of AXA Financial, Sun Life & Provincial Holdings (subsequently renamed AXA UK Holdings), AXA China Region and AXA Aurora. The 1999 impact was due to the impact of the GRE acquisition, which was acquired by Sun Life & Provincial Holdings.
Reinsurance ceded on separate account (unit-linked) liabilities 28 92 – – – – 28 92
In 2000, AXA Financial negotiated a US $1.0 billion 364-day revolving credit facility to replace a promissory note from which the proceeds were used to purchase new Alliance Capital units. This credit facility was cancelled in June 2001.
(1) Amounts do not include inve expenses” in the consolidated included in “Bank operating
Mortgage, policy and other loans (129) 17 (43) – (41) 40 (25) 1 (1) – – – (154) (23) (4)
Change in fair value of separate account (unit-linked) assets (net) (11,613) (4,713) 13,638 – – – – – – – – – (11,613) (4,713) 13,638
In 1999, AXA tendered its Paribas stock in the public offer of exchange initiated by BNP, at which time it held an 8.3% interest in BNP-Paribas. Based on the average price of BNP stock on the three trading days preceding and following the initial offer made by Société Generale, the realized gain on this transaction totaled €331 million, net group share.
Reinsurance assumed as a percentage of net premiums written 3.2% 3.4% 3.5%
Including: (1) Represents total acquisition expenses as presented in the statement of income including amortization expense for value of purchased life business in-force (VBI) and the change in deferred acquisition costs (DAC) net of changes in unearned premium reserves.
Financial Liabilities: Short-term and long-term debt and borrowings (including bank overdrafts)1 12,748 12,842 16,309 16,343
(ii) AXA Bank Belgium mainly to hedge interest rate exposures in connection with its ordinary course of business to achieve an appropriate interest rate spread between the interest earning assets and the interest bearing liabilities. Currency swaps constitute another part of AXA’s hedging strategies through the use of swap contracts as it relates to managing foreign currency cash flow exposures and are primarily used by AXA
Other – Other engagements (given): AXA had subordinated convertible debt instruments of (i) €1,524 million 2.5% debt instrument issued in February 1999 and due in 2014, and (ii) €1,009 million 3.75% debt instrument issued in February 2000 and due in 2017. At maturity, if such debt instruments are not converted to ordinary shares of AXA, they will be redeemed by AXA at a price in excess of the original issue price per note. Based on the number of notes outstanding at December 31, 2001, the aggregate amount payable upon maturity could be approximately €1.3 billion in excess of the existing obligation reported in AXA’s consolidated balance sheet at such date.
business assets, including those related to discontinued businesses, as well as the majority of its investment securities. In addition, AXA will provide a guarantee to Deutsche Bank covering certain losses incurred by
The non-exclusive license grants the Company the right, subject to the prior written approval of FINAXA, to grant sublicenses to companies controlled, directly or indirectly, by the Company. FINAXA has no obligation to grant any such approval. Over the past several years, a number of our principal subsidiaries around the world have begun to use the AXA name pursuant to sublicenses granted by the Company. The Company is obligated to pay FINAXA pursuant to the licensing agreement an annual fee of €762,245 as well as 50% of any net royalties received from sublicensees. AXA’s non-exclusive license may be terminated at any time by either party, three months after delivery to the other party of a written notice of termination. FINAXA has, however, agreed not to exercise its right to terminate the license so long as FINAXA is the Company’s largest shareholder. Upon termination, the Company and the companies to which it has granted sublicenses are required to cease utilization of the AXA trademark and any sublicenses will immediately terminate.
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Agreement with BNP Paribas. On September 12, 2001 AXA and BNP Paribas entered into an agreement
Subordinated Loan Agreement between the Company, as lender, and AXA Asia Pacific Finance Ltd and AXA Asia Pacific
AXA’s principal insurance operations in France, the United States, the United Kingdom, Japan, Germany and
Of the 2 million options, 758,250 have been exercised at December 31, 2001. The balance of outstanding options at December 31, 2001 was 1.2 million.
Revenues from banking activities – – – – 11,793 – (39) 11,754
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“grandfathering” existing accounting for derivatives embedded in hybrid instruments acquired, issued or substantively modified on or before that date. As a consequence of this election, coupled with interpretative guidance issued by the Financial Accounting Standards Board (“FASB”) and the Derivatives Implementation
equity). The amount recorded in “Other comprehensive income” is subsequently reclassified into income in the same period in which the forecasted transaction affects income. The change in fair value of the derivative attributable to the ineffective portion of the hedge is recorded in income.
GAAP and U.S. GAAP, the purchase price includes the cost of settling or exchanging outstanding employee share options of the target company. However, in respect of a minority interest buyout, costs associated with settling or exchanging outstanding employee share options are included in the purchase price under French GAAP, but are excluded from the purchase price and recorded as compensation expense under U.S. GAAP.
Under both French GAAP and U.S. GAAP (in respect of acquisitions completed before July 1, 2002, which do not yet comply under the new requirements set out in FAS 142), the goodwill asset is amortized over the remaining estimated useful life.
(unit-linked) asset portfolios, under French GAAP, fixed maturities and equity investments are, in general, carried at amortized cost and historical cost, respectively, less valuation allowances. Under U.S. GAAP, the accounting for these securities depends on the investment classification: • securities classified as “held to maturity’’ are reported at amortized cost,
Under French GAAP, the Plan was accounted for as a business combination as it was a transaction with the policyholders, an equivalent third party interest. As a result, (i) assets and insurance liabilities transferred from the participating fund to the non-participating fund were re-estimated at fair value and or based on new assumptions for interest rates and mortality, (ii) VBI was recognized in respect of the profits to emerge on the unit linked business transferred to the non-participating fund, and (iii) the cost of the incentive bonus paid to policyholders that elected in favor of the Plan was established as goodwill. Under U.S. GAAP, the transaction could not be accounted for as a business combination, as it was a portfolio transfer within a commonly controlled group and, therefore, (i) no VBI was recognized, and (ii) the cost of the incentive bonus was recorded as an expense in the period, which was recorded as a decrease to U.S. GAAP net income of €433 million (adjustment in the reconciliation under the caption “Purchase Accounting and
Cost of Reinsurance. Due to the implementation of new French regulations, the cost of reinsurance is recorded in income in the year the reinsurance arrangement is placed with a third party reinsurer, including for long duration contracts. Under U.S. GAAP, the cost of reinsurance on long duration contracts is amortized into income over the lifetime of payments.
Investment accounting for UK “with-profit” business assets: – Elimination of net unrealized investment losses (gains) – 682 (1,486)
In prior periods, the Closed Block assets and Closed Block liabilities were presented in AXA’s condensed consolidated balance sheets as separate line items. Due to the implementation of SOP 00-3, as discussed in note 33, such presentation is no longer permitted and, therefore, prior period reclassifications have been made to include Closed Block assets and liabilities on a line-by-line basis.
(1) US GAAP, except for adjustment for the unrealized investment gains on real estate and related deferred tax asset allocated to UK with-profits contracts.
Insurance claims and claims expenses, net of reinsurance3 (33,056) (33,056) (53,953)
The calculation of basic and diluted net income per ordinary share under U.S. GAAP is based on the same methodology as for French GAAP (see note 24 “Net Income per Ordinary Share”). However, certain differences arise due to the underlying differences in accounting principles as noted below.
Company has the right of early redemption at a price greater than the original issue price per note starting in
Derivative Instruments AXA manages its risks and, therefore, its hedging strategies to meet the hedging requirements as set forth under French GAAP, rather than according to the requirements of U.S. GAAP. As a result, certain hedging relationships established by AXA could not be designated in qualifying hedging relationships under FAS 133 and, therefore, have no hedge designation and are referred to as “free standing derivatives” with the change in fair value recorded in income effective from January 1, 2001. However, certain existing hedge arrangements met the criteria for measurement and recognition as fair value hedges under FAS 133.
December 31, 2001, 2000 and 1999, deposits related to investment contracts amounted to €17,718 million, €20,690 million and €14,674 million, respectively, and withdrawals related to investment contracts amounted to €13,973 million, €12,566 million and €7,004 million, respectively, and are part of operating cash flow under French GAAP. Such deposits and withdrawals would be reflected as financing activities in a statement of cash flows prepared in accordance with U.S. GAAP.
AXA before July 1, 2001, the adoption date of FAS 141 and FAS 142 is January 1, 2002 and, therefore, in 2002 in respect of these business combinations are described below.