20-F 1 axa20f.htm AXA 20F

As filed with the Securities Commission on June 22, 2005

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2004

Commission File Number: 1-14410

AXA
(Exact name of Registrant as specified in its charter)
   
                                 N / A
The Republic of France
                                 (Translation of Registrant’s
(Jurisdiction of incorporation
                                 name into English)
or organization)

25, avenue Matignon - 75008 Paris - France
(Address of registrant’s principal executive offices)
   
Securities registered or to be registered pursuant to Section 12(b) of the Act:
   
Title of each class:
Name of each exchange on which registered:
Ordinary shares
New York Stock Exchange
American Depositary Shares
(as evidenced by American Depositary Receipts),
 
each representing one Ordinary Share
New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of March 31, 2005 was: 1,909,548,432 Ordinary Shares of euro 2.29 nominal value per share, including 63,389,401 American Depositary Shares (as evidenced by American Depositary Receipts), each representing one Ordinary Share.
   
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
   
Yes [X]          No [  ]
   
Indicate by check mark which financial statement item the registrant has elected to follow:
 
Item 17 [  ]         Item 18 [X]
 

Table of contents:

Presentation of Information 1  
Exchange Rate Information 2  
Special Note Regarding Forward-Looking Statements 2  
       
       
PART I    
       
Item 01 Identity of Directors, Senior Management and Advisors 4  
Item 02 Offer Statistics and Expected Timetable 4  
Item 03 Key Information 4  
Item 04 Information on the Company 23  
Item 05 Operating and Financial Review and Prospects 64  
Item 06 Directors, Senior Management and Employees 135  
Item 07 Major Shareholders and Related Party Transactions 158  
Item 08 Financial Information 163  
Item 09 The Offer and Listing 164  
Item 10 Additional Information 167  
Item 11 Quantitative and Qualitative Disclosures About Market Risk 187  
Item 12 Description of Securities other than Equity Securities 202  
       
       
PART II    
       
Item 13 Defaults, Dividend Arrearages and Delinquencies 203  
Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds 203  
Item 15 Disclosure Controls and Procedures 203  
Item 16 a) Audit Committee Financial expert 204  
  b) Code of Ethics 204  
  c) Principal Accountant fees and services 205  
  d) Exemptions from the listing standards for Audit Committees 206  
  e) Purchase of Equity Securities by the Issuer and Affiliated Purchasers 207  
       
       
PART III    
       
Item 17 Financial Statements 208  
Item 18 Financial Statements F-1  
Item 19 Exhibits E-1  
Signatures   SS-1  
 

Presentation of Information

This Annual Report on Form 20-F (referred to herein as the “annual report”) has been filed with the United States Securities and Exchange Commission (referred to in this annual report as the “U.S. SEC” or “SEC”).

In this annual report and unless provided otherwise, the “Company” refers to AXA SA, a société anonyme organized under the laws of France which is the publicly traded parent company of the AXA Group, and “AXA”, “AXA Group” or “we” refers to the Company together its direct and indirect subsidiaries. The Company’s ordinary shares are referred to in this annual report as “Shares”, “ordinary shares”, or “AXA ordinary shares”. The principal trading market for the Company’s ordinary shares is the Premier Marché (continu A) of the Euronext Paris S.A., which we refer to in this annual report as “Euronext Paris” or the “ParisBourse”. The Company’s American Depositary Shares and American Depositary Receipts are referred to in this annual report as “ADSs” and “ADRs”, respectively.

The ADSs and ADRs are listed on the New York Stock Exchange (referred to in this annual report as “NYSE”).

At the annual general meeting of shareholders of AXA held on May 9, 2001, the Company’s shareholders approved a 4-for-1 stock split of its outstanding ordinary shares. Immediately following this stock split, which became effective on May 16, 2001, the ratio between the AXA ordinary share and the ADS was changed from one ADS representing one-half of an ordinary share to one ADS representing one ordinary share. Unless otherwise indicated, all information contained in this annual report is on a post-stock split basis and reflects the corresponding ratio change between the ADS and ordinary share.

This annual report includes AXA’s consolidated financial statements for the years ended December 31, 2004, 2003 and 2002 and as at December 31, 2004 and 2003. AXA’s consolidated financial statements, including the notes thereto, are included in “Item 18 – Financial Statements” and have been prepared in accordance with accounting principles generally accepted in France, which we refer to in this annual report as “French GAAP”. Unless noted otherwise, the financial information contained in this annual report is presented in accordance with French GAAP. French GAAP are based on requirements set forth in French law and in European regulations that are described in notes 1 and 2 to the consolidated financial statements. French GAAP differ significantly from accounting principles generally accepted in the United States of America, which we refer to in this annual report as “U.S. GAAP”. See notes 33 and 34 to the consolidated financial statements for a description of the significant differences between French GAAP and U.S. GAAP, a reconciliation of net income and shareholders’ equity from French GAAP to U.S. GAAP and additional U.S. GAAP disclosures.

Various amounts in this document are shown in millions for presentation purposes. Such amounts have been rounded and, accordingly, may not total. Rounding differences may also exist for percentages.

1

 

Exchange Rate Information

The Company publishes its consolidated financial statements in Euro (“Euro”, “euro” or €). Unless noted otherwise, all amounts in this annual report are expressed in Euro. The currency of the United States will be referred to as “US dollars” or “US$” or “$”. For historical exchange rate information, refer to “Item 3 – Key Information-Exchange Rate Information”. For a discussion of the impact of foreign currency fluctuations on AXA’s financial condition and results of operations, see “Item 5 – Operating and Financial Review and Prospects-Market Conditions in 2004”.

Special Note Regarding Forward-Looking Statements

This annual report and other publicly available documents concerning AXA may include, and AXA’s officers and representatives may from time to time make, statements which may constitute “forward looking statements” within the meaning of the U.S. Securities Litigation Reform Act of 1995. These statements are not historical facts but instead represent AXA’s belief regarding future events many of which, by their nature, are inherently uncertain and outside of AXA’s control.

These statements may address among other things, AXA’s financial condition, results of operations and business, including its strategy for growth, product development, regulatory approvals, market position, embedded value and reserves. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements, including those discussed elsewhere in this annual report and in AXA’s other public filings, press releases, oral presentations and discussions. Forward-looking statements include, among other things, discussions concerning the potential exposure of AXA to market risks, as well as statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. Forward-looking statements in this annual report are identified by use of the following words and other similar expressions, among others:

  – “anticipate” – “would”
  – “believe” – “objectives”
  – “outlook” – “could”
  – “probably” – “estimate”
  – “project” – “expect”
  – “risks” – “goals”
  – “seek” – “intend”
  – “should” – “may”
  – “target” – “shall”

2

 

The following factors could affect the future results of operations of AXA and could cause those results to differ materially from those expressed in the forward-looking statements included in this annual report:

–  

the intensity of competition from other financial institutions;

–   AXA’s experience with regard to mortality and morbidity trends, lapse rates and policy renewal levels relating to its life & savings operations, which also include health products;
–   the frequency, severity and development of property & casualty claims, including catastrophic events which are uncertain in nature, and policy renewal rates relating to AXA’s property & casualty business;
–   re-estimates of AXA’s reserves for future policy benefits and claims;
–   market risks related to (a) stock market prices, fluctuations in interest rates, and foreign currency exchange rates, (b) adverse changes in the economy in AXA’s major markets and other adverse developments that may affect the value of AXA’s investments and/or result in investment losses and default losses, (c) the use of derivatives and AXA’s ability to hedge such exposures effectively, and (d) counterparty credit risk;
–   AXA’s ability to develop, distribute and administer competitive products and services in a timely, cost-effective manner and its ability to develop information technology and management information systems to support strategic goals while continuing to control costs and expenses;
–   AXA’s visibility in the market place, the financial and claims-paying ability ratings of its insurance subsidiaries, as well as AXA’s credit rating and ability to access adequate financing to support its current and future business;
–   the effect of changes in laws and regulations on AXA’s businesses, including changes in tax laws affecting insurance (including annuity products) as well as operating income and changes in accounting and reporting practices;
–   the costs of defending litigation, the risk of unanticipated material adverse outcomes in such litigation and AXA’s exposure to other contingent liabilities;
–   terrorist attacks, events of war and their respective consequences;
–   adverse political developments around the world, particularly in the principal markets in which AXA and its subsidiaries operate;
–   the performance of others on whom AXA relies for distribution, investment management, reinsurance and other services; and
–   the effect of any pending or future mergers, acquisitions or disposals.

The above factors are in addition to those factors discussed elsewhere in this annual report including matters discussed under “Item 3 – Key Information – Risk Factors”; “Item 4 – Information on the Company”; “Item 5 –Operating and Financial Review and Prospects”; and “Item 11 – Quantitative and Qualitative Disclosures About Market Risk”.

You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as at the date of the particular statement. AXA undertakes no obligation to (and expressly disclaims any such obligations to) update publicly or revise any forward-looking statement as a result of new information, future events or otherwise. In light of these risks, AXA’s results could differ materially from the forward-looking statements contained in this annual report.

3

 

PART I

Item 1: Identity of Directors, Senior Management and Advisors

Not applicable

Item 2: Offer Statistics and Expected Timetable

Not applicable

Item 3: Key Information

Selected Consolidated Financial Data

The selected historical consolidated financial data presented below have been derived from AXA’s consolidated financial statements and related notes for the years ended December 31, 2004, 2003, 2002, 2001, and 2000. The historical data set out below is only a summary. You should read it in conjunction with the consolidated financial statements and related notes for the years ended December 31, 2004, 2003, and 2002 (for statement of income) and as of December 31, 2004 and 2003 (for balance sheet) included elsewhere in this Annual Report.

AXA’s consolidated financial statements have been prepared in accordance with French GAAP. At January 1, 2001, new French Regulations became effective in respect of consolidated financial statements prepared by French insurance companies and groups (Regulation No. 2000-05 of the “Comité de la Réglementation Comptable”). Most of the accounting policies set forth in the new French Regulations were already in effect at AXA and, therefore, the adoption had limited impact to the consolidated operating results and financial position of AXA. The after-tax cumulative effect of the changes in French accounting principles was a charge of €593 million against consolidated shareholders’ equity at January 1, 2001, or a decrease of 2%. In addition, the new French Regulations prescribed certain presentational changes. Consequently, certain financial data under French GAAP presented in the tables below as of and for the year ended December 31, 2000 have been restated unless otherwise indicated. The French GAAP accounting policies arising from the adoption of the new French Regulations are described in notes 1 and 2 to the consolidated financial statements included elsewhere in this Annual Report.

4

 

French GAAP differs in certain material respects from U.S. GAAP. For a description of the material differences between French GAAP and U.S. GAAP relevant to AXA, please see “Item 5 – Operating and Financial Review and Prospects – Other Matters – Reconciliation of French GAAP to U.S. GAAP” and notes 33 and 34 to the consolidated financial statements included as Item 18 in this Annual Report.

AXA Insurance Holding in Japan and its subsidiaries use a financial year-end of September 30 and are consolidated as of and for the year ended September 30 in AXA’s consolidated financial statements.

                (in millions, except per ordinary share amounts)
                             
 
Years ended December 31,
 
    2004   2004   2003   2002   2001 (h)   2000 (g)  
    (US $) (f)   (€)   (€)   (€)   (€)   (€)  
                               
Income Statement Data:                          
                               
In accordance with French GAAP:                          
                               
Gross premiums and financial services revenues   97,696   72,164   71,628   74,727   74,832   79,971  
                               
Net investment result(a)   34,606   25,562   26,935   (8,713)   (1,244)   14,811  
                              
Total revenues   132,365   97,773   98,883   65,632   73,233   94,342  
                               
Income before income tax expense(i)   6,995   5,167   2,587   2,597   1,721   9,176  
                               
Income tax expense   (1,857)   (1,372)   (536)   (426)   (45)   (2,773)  
                              
Minority interests   (435)   (243)   (368)   (321)   (385)   (2,124)  
                              
Equity in income (loss) from affiliated entities   102   76   41   23   17   (23)  
                               
Net income(i)   3,411   2,519   1,005   949   520   3,904  
                               
Net income per ordinary share and per ADS:(b) (d) (j)                          
                               
   – basic (adjusted)   1.85   1.37   0.56   0.54   0.30   2.53  
                               
   – basic (as published)           0.57   0.55   0.30   2.57  
                               
   – diluted (adjusted)   1.78   1.32   0.55   0.54   0.31   2.40  
                               
   – diluted (as published)           0.56   0.55   0.32   2.44  
                               
In accordance with U.S. GAAP:                          
                               
Gross premiums, net of reinsurance(c)   48,120   35,544   35,574   38,845   40,099   35,538  
                               
Income from continuing operations (before tax)   6,605   4,879   5,203   (1,125)   876   1,478  
                               
Income from continuing operations                          
(after tax and minority interest)   4,380   3,235   3,673   (2,588)   356   951  
                               
Income from discontinued operations (net of tax)(i)             192  
                               
Gain on sale of discontinued operation (net of tax)(i)             2,105  
                               
Net income   4,380   3,235   3,673   (2,588)   356   3,248  
                               
Net income per ordinary share:(b) (d) (j)                          
                               
   Basic                          
                               
Income from continuing operations                          
(after tax and minority interest)   2.42   1.79   2.12   (1.52)   0.21   0.63  
                               
      Net income   2.42   1.79   2.12   (1.52)   0.21   2.16  
                               
   Diluted                          
                               
Income from continuing operations                          
(after tax and minority interest)   2.34   1.73   2.06   (1.52)   0.21   0.62  
                               
      Net income   2.34   1.73   2.06   (1.52)   0.21   2.10  
                               
Other data (non-GAAP):                          
                               
Number of ordinary shares outstanding     1,908.4   1,778.1   1,762.2   1,734.2   1,664.9  
                               
Net dividend distribution (in currency millions)(e)   1,576   1,164   676   599   971   926  
                                  

5

 
(in millions, except per ordinary share amounts)
                     
                          
                  Years ended December 31,      
          2004   2004   2003   2002   2001   2000  
          (US $) (f)   (€)   (€)   (€)   (€)   (€)  
                                         
Balance Sheet Data:                                
                                         
In accordance with French GAAP:                              
                                       
Total assets         651,125   480,961   449,233   444,657   485,599   486,513  
                                         
Shareholders’ equity         35,412   26,157   23,401   23,711   24,780   24,322  
                                         
Shareholders’ equity per ordinary share(b) (d)     18.6   13.7   13.2   13.5   14.3   14.6  
                                       
In accordance with U.S. GAAP:                              
                                       
Total assets (i)         681,747   503,581   459,346   450,707   493,065   499,161  
                                         
Shareholders’ equity         41,197   30,431   24,918   23,857   29,340   31,561  
                                         
Shareholders’ equity per ordinary share(b) (d)     21.8   16.1   14.0   13.8   17.2   19.2  
                                       
(a)   Includes investment income net of investment expenses and interest expense on short-term and long-term debt (other than interest expense relating to bank operating expenses of AXA’s other financial services operations), net realized investment gains and losses and net unrealized investment gains and losses on assets with financial risk borne by the policyholders (unit-linked) and on trading securities, including assets supporting the UK “With-Profit” business.
(b) Under both French GAAP and U.S. GAAP (i) the calculation of net income per ordinary share is based on the weighted average number of ordinary shares outstanding for each period presented and (ii) shareholders’ equity per ordinary share is calculated based on the actual number of ordinary shares outstanding at each period-end presented. The U.S. GAAP calculations deduct ordinary shares held by AXA and its subsidiaries (that is, treasury shares) in the calculation of weighted average number of ordinary shares outstanding (for net income per ordinary share) and ordinary shares outstanding (for shareholders’ equity per ordinary share). The calculation of basic and diluted net income per ordinary share for each of the three years ended December 31, 2004 is presented in note 24 “Net Income per Ordinary Share” to AXA’s consolidated financial statements.
(c) Gross premiums received from policyholders in respect of Life & Savings products classified as “universal life” or “investment contracts”, such as separate account (unit-linked) products, under U.S. GAAP, are recorded as revenue under French GAAP. Under U.S. GAAP, such amounts received are recorded as deposits, and only the policy-related fees charged to the policyholders for cost of insurance, administration, investment management, etc, are recorded as revenue.
(d)   Year 2000 financial data were restated to reflect the 4-for-1 stock split of AXA’s outstanding ordinary shares whereby 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, effective on May 16, 2001.
(e)   An annual dividend generally is paid each year in respect of the prior year after the annual ordinary general meeting of shareholders (customarily held in May or June) and before September of that year. Dividends are presented above in the year to which they relate not the year in which they are declared and paid. At the annual general meeting of shareholders of AXA held on April 20, 2005, the shareholders approved the declaration of a dividend in respect of 2004 of 0.61 per ordinary share. Dividends per ordinary share do not include any French avoir fiscal (or tax credit) which may be receivable from the French Treasury. In general, dividends per ordinary share are based on the number of ordinary shares outstanding at the end of the year for each year presented.
(f) The financial data have been translated from Euro to U.S. dollars using the Euro Noon Buying Rate at December 31, 2004 of 1.00 = US$1.3538 (see “Exchange rate information”). These translations are solely for the convenience of the reader and should not be construed as representations that the converted amounts actually represent such U.S. dollar amounts or could have been (at the relevant date) converted into U.S. dollars at the rate indicated or at any other rate.
(g) As a result of the sale of DLJ in 2000 and in accordance with U.S. GAAP accounting treatment and presentation of discontinued operations, the income statement data in accordance with U.S. GAAP for 2000 have been restated in respect of “total revenues” and “net income” from continuing operations. In respect of the balance sheet data in accordance with U.S. GAAP, “Total assets” data have been restated to include net assets of DLJ discontinued operations (which is reported as a single line item under total assets).
(h) In 2001, “Income before income tax expense” excludes the amortization of goodwill, whereas in prior periods, it included the amortization of goodwill. Consequently, prior periods have been restated accordingly.
(i) Financial data have been restated for the accounting for other-than-temporary decline in value for securities. See Note 33 to the consolidated financial statements for further information.
(j) Following any significant capital increase with a stock price lower than the market price, such as ORAN conversion in July 2004, French GAAP require that average number of shares and consequently EPS over each period be restated to take into account an adjustment to neutralize this event which is similar to a free distribution of shares. This adjustment is not applicable under U.S. GAAP.

6

 

Exchange rate information

The year-end and average exchange rates used in the preparation of the consolidated financial statements, to translate into Euro the results of operations of its principal subsidiaries and affiliates that are not denominated in euro, are set out in the table below.

      Year End Exchange Rate   Average Exchange Rate  
      2004   2003   2002   2004   2003   2002  
      (€)   (€)   (€)   (€)   (€)   (€)  
                                  
U.S. Dollar     0.73   0.79   0.95   0.80   0.88   1.06  
                                  
Japanese Yen (a) (x100)     0.73   0.77   0.84   0.76   0.77   0.87  
                                  
British Pound     1.42   1.42   1.54   1.47   1.45   1.59  
                                     

(a) The exchange rates presented correspond to the year-end exchange rate and average exchange rate for a September 30 financial year.

Information on euro noon buying rates

The following table sets forth, for the periods and dates indicated, certain information concerning the Noon Buying Rate of one Euro to U.S. dollars in New York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York, which we refer to in this Annual Report as the “Euro Noon Buying Rate”. The Euro Noon Buying Rates presented below are for your convenience and are not used by AXA to prepare AXA’s consolidated financial statements included elsewhere in this Annual Report.

         
Calendar period  
U.S. dollar per euro
 
   
Average rate (a)
 
         
2000   0.9207  
         
2001   0.8909  
         
2002   0.9495  
         
2003   1.1411  
         
2004   1.2478  
         
2005 (through May 31, 2005)   1.2912  
         
(a)   The average of the Noon Buying Rates on the last business day of each full month during the relevant period.

The table below sets forth the high and low Euro Noon Buying Rates for the most recent six months through to May 2005.

  U.S. dollar per euro  
Month        
  High   Low  
           
December 2004 1.3625   1.3224  
           
January 2005 1.3476   1.2954  
           
February 2005 1.3274   1.2773  
           
March 2005 1.3465   1.2877  
           
April 2005 1.3093   1.2819  
           
May 2005 1.2936   1.2517  
           
         
         
The Euro Noon Buying Rate on December 31, 2004 was €1.00 = US$ 1.3538.        

7

 

Dividends

AXA pays dividends in Euro. Future dividends will depend on AXA’s earnings, financial condition and other factors. Proposals for dividend payments are made by the Management Board, subject to approval by the Supervisory Board and final approval by AXA’s shareholders at the ordinary annual general meeting of shareholders. Dividends paid to holders of ordinary shares and ADSs will generally be subject to French withholding tax at a rate of 25% which, subject to certain procedures and exceptions, may be reduced to 15% for holders who are residents of the United States. Certain holders of ordinary shares and ADSs were entitled to receive a subsequent payment equal to the French avoir fiscal (or tax credit) in an amount equal to 50% of any dividends paid by the Company, less applicable French withholding tax. This French avoir fiscal regulation ended in 2004. The following table sets forth the total dividends paid per ordinary share with respect to each year indicated, with or without the French avoir fiscal, and before deduction of any French withholding tax. Dividends paid in each year are in respect of the prior year’s results.

           
  Net dividend   Gross dividend  
           
  per ordinary   per ordinary  
           
Year share   share (a)  
  (euros)   (euros)  
           
2000 (b) (c) 0.55   0.825  
           
2001 (c) 0.56   0.84  
           
2002 (d) 0.34   0.51  
           
2003 (e) 0.38   0.57  
           
2004 (f) 0.61    
           
(a)   Payment equivalent to the French avoir fiscal or tax credit, less applicable French withholding tax, will be made only following receipt of a claim for such payment, and, in any event, not until after the close of the calendar year in which the respective dividends are paid. Certain US tax exempt holders of ordinary shares or ADSs will not be entitled to full payments of avoir fiscal. The French avoir fiscal regulation ended in 2004.
(b)   Restated to take account of the 4-for-1 stock split approved by the shareholders at the annual general meeting of shareholders held on May 9, 2001.
(c)   In 2000, dividends per ordinary share were based on the number of AXA ordinary shares outstanding at December 31, 2000 and also included the 4.9 million ordinary shares issued to the remaining minority interests in AXA Financial, Inc. following the completion of the merger of AXA Merger Corp. with and into AXA Financial, Inc. on January 2, 2001.
(d)   At the annual general meeting of shareholders of AXA held on April 30, 2003, the shareholders approved the declaration of a dividend in respect of 2002 of 0.34 per ordinary share, or 599 million in the aggregate based on the number of AXA ordinary shares outstanding at December 31, 2002.
(e)   At the annual general meeting of shareholders of AXA held on April 21, 2004, the shareholders approved the declaration of a dividend in respect of 2003 of 0.38 per ordinary share, or 676 million in the aggregate based on the number of AXA ordinary shares outstanding at December 31, 2003.
(f)   At the annual general meeting of shareholders of AXA held on April 20, 2005, the shareholders approved the declaration of a dividend in respect of 2004 of 0.61 per ordinary share, or 1,164 million in the aggregate based on the number of AXA ordinary shares outstanding at December 31, 2004. This dividend will give rise to a 50% tax credit for individuals whose fiscal residence is in France as of January 1, 2005, equal to 0.305 per share.

Following the 4-for-1 stock split approved at the annual general meeting held on May 9, 2001, one AXA ordinary share is equivalent to one AXA ADS and, therefore, dividend per ordinary share is equivalent to dividend per ADS information.

For information on AXA’s dividend policy, see “Item 8 - Financial Information” and “Item 10 - Additional Information - Dividends”.

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Risk Factors

Risks relating to the financial markets

A decline or increased volatility in the securities markets may adversely affect our business and profitability

Fluctuations in the securities markets may adversely affect sales of our participating life insurance and pension products, mutual funds, asset management services and products with financial risk borne by the policyholders (unit linked), including variable annuity products and variable life products. In particular, protracted or steep declines in the stock or bond markets typically reduce the popularity of these products.

The level of volatility in the financial markets in which we invest and the overall investment returns earned in those markets substantially affect our profitability. Our investment returns, and thus our profitability, may be adversely affected from time to time by conditions affecting our specific investments and, more generally, by stock market, real estate market and other market fluctuations. Our ability to make a profit on insurance products and investment products, including fixed and guaranteed products, depends in part on the returns on investments supporting our obligations under these products and the value of specific investments may fluctuate substantially depending on the foregoing conditions. Certain types of insurance, reinsurance and investment products that we offer may expose us, in particular, to risks associated with fluctuations in financial markets, including interest sensitive or variable products such as guaranteed annuities or variable annuities which have crediting or other guaranteed rates or minimum benefits not necessarily related to prevailing market interest rates or investment returns on underlying assets.

In addition, the growth of our asset management business depends to a significant extent on factors such as investment returns and risk management. Poor performance in the financial markets, in general, may adversely impact the value of the assets we manage, as well as our ability to accumulate and retain those assets because clients may withdraw assets under management under these circumstances. These trends may, in turn, adversely impact the revenues and profits that we earn from management of those assets.

Losses due to defaults by others and impairment of our investment assets could negatively affect the value of our investments and reduce our profitability

Third parties that owe us money, securities or other assets may not pay or perform under their obligations. These parties include the issuers whose securities we hold in our investment portfolios, borrowers under the mortgage loans we make, customers, trading counterparties, counterparties under swap and other derivative contracts, clearing agents, exchanges, clearing houses and other financial intermediaries. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, downturns in the economy or real estate values, operational failure or other reasons. Negative trends and investment climates in our major markets may result in an increase in investment impairments on our investment assets due to defaults, credit downgrades and overall declines in securities markets.

The default of a major market participant could disrupt the securities markets or clearance and settlement systems in our major markets, which could in turn cause market declines or volatility. A failure of a major market participant could also cause some clearance and settlement systems to assess members of that system or could lead to a

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chain of defaults that could adversely affect us. For risks relating to defaults by reinsurers and retrocessionaires to which we have ceded risks, see “Risks relating to the nature of our business and the environment in which we operate – Reinsurance may not be adequate to protect us against losses and we may incur losses due to the inability of our reinsurers to meet their obligations.”

Interest rate volatility may adversely affect our profitability

During periods of declining interest rates, life insurance and annuity products may be relatively more attractive to consumers, resulting in increased premium payments on products with flexible premium features, and a higher percentage of insurance policies remaining in force from year-to-year. During a low interest rate period, such as the current environment, our investment earnings may be lower because the interest earnings on our fixed income investments will likely have declined in parallel with market interest rates. In addition, mortgages and fixed maturities in our investment portfolios will be more likely to be prepaid or redeemed as borrowers seek to borrow at lower interest rates. Consequently, we may be required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, during periods of declining interest rates, our profitability may suffer as the result of a decrease in the spread between interest rates credited to policyholders and returns on our investment portfolio.

Conversely, in periods of increasing interest rates, surrenders of life insurance policies and fixed annuity contracts may increase as policyholders choose to forego insurance protection and seek higher investment returns. Obtaining cash to satisfy these obligations may require us to liquidate fixed maturity investments at a time when the market prices for those assets are depressed because interest rates have increased. This may result in realized investment losses. Regardless of whether we realize an investment loss, these cash payments would result in a decrease in total invested assets, and may decrease our net income. Premature withdrawals may also cause us to accelerate amortization of policy acquisition costs, which would also reduce our net income.

The profitability of our spread-based businesses depends in large part upon our ability to manage interest rate spreads, and the credit and other risks inherent in our investment portfolio. For example, in Japan the movements in rates over the last decade have had a significant impact on many Japanese life insurers, including our Japanese life insurance subsidiaries, which issued long-term policies and contracts with guaranteed fixed rates during periods of significantly higher interest rates but now operate (and invest their assets) in Japan’s low interest rate deflationary environment which has resulted in “negative spread” on certain of these guaranteed rate policies and contracts.

While we monitor and manage risks of this nature carefully, we cannot guaranty that we will successfully manage our interest rate spreads or the potential negative impact of those risks.

Fluctuations in currency exchange rates may affect our reported earnings

AXA publishes its consolidated financial statements in Euro. For the year ended December 31, 2004, approximately 49% of AXA’s gross premiums and financial services revenues and 54% of AXA’s benefits, claims and other deductions were denominated in currencies other than the Euro, primarily U.S. dollars, pounds sterling, Japanese yen and Australian dollars (2003: 51% and 58%, respectively).

AXA’s obligations are denominated either in Euro or other currencies, the value of which is subject to foreign currency exchange rate fluctuations. Approximately €121 million of the cash dividends received by the Company in 2004 were paid in currencies other than the Euro (2003: €250 million). In 2004, approximately €191 million and

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€437 million of interest payments in currencies other than the Euro were made by the Company and AXA, respectively (2003: €161 million and €451 million, respectively).

While AXA seeks to manage its exposure to foreign currency fluctuations through hedging, fluctuations in the exchange rates used to translate these currencies into Euro may have a significant impact on AXA’s reported results of operations and on cash flows available to the Company from year to year.

Risks relating to the nature of our business and the environment in which we operate

If our established reserves for our Property & Casualty and international insurance businesses are insufficient our earnings will be adversely affected

In accordance with industry practice and accounting and regulatory requirements, we establish reserves for claims and claims expenses related to our Property & Casualty and international insurance businesses. These reserves are not discounted unless final settlement has been agreed and the payments are generally fixed over a period of time. Reserves do not represent an exact calculation of liability, but instead represent estimates, generally using actuarial projection techniques at a given accounting date. These reserve estimates are expectations of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances then known, review of historical settlement patterns, estimates of trends in claims severity, frequency, legal theories of liability and other factors. The process of estimating the insurance claims reserves is based on information available at the time the reserves are originally established. However, claims reserves are subject to change due to the number of variables which affect the ultimate cost of claims, such as:

  • development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience;
  • changes arising due to the time lag between the occurrence of the insured event, notification of the claim (from the insured party, a third party or a ceding company) and the final settlement (payment) of the claim, primarily attributable to long tail casualty claims that may take several years to settle due to the size and nature of the claim, and the occurrence of large natural catastrophes late in the financial year for which limited information may be available at year end;
  • judicial trends;
  • expenses incurred in resolving claims;
  • regulatory and legislative changes;
  • changes in economic condition, including inflation and foreign currency fluctuations; and
  • changes in costs of repairs and medical costs.

Many of these items are not directly quantifiable, particularly on a prospective basis. As a result, actual losses may deviate from the original gross reserves established. Consequently, the reserve may be re-estimated reflecting those changes resulting in loss reserve redundancies (in cases where the original gross claims reserve was overstated) or deficiencies (in cases where the original gross claims reserve was understated). Adjustments to reserves are reflected in the results of the periods in which the estimates are changed. In addition, certain of our Property & Casualty operations are required by local regulations in the countries in which they operate to establish catastrophe risk equalization reserves characterized by high costs and low frequency.

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We continually review the adequacy of the established claims reserves, including emerging claims development, and actual claims compared to the original assumptions used to estimate initial gross claims reserves. Based on current information available, we believe that our claims reserves are sufficient. However, because the establishment of claims reserves is an inherently uncertain process involving estimates, we cannot assure you that ultimate losses will not materially exceed our claims reserves and have a material adverse effect on our earnings.

For example, there is a high degree of uncertainty with respect to future exposure from asbestos claims because of significant issues surrounding the liabilities of insurers, diverging legal interpretations and judgments in different jurisdictions and more aggressive asbestos related litigation, particularly in the U.S. These uncertainties include the extent of coverage under insurance policies, whether or not particular claims are subject to an aggregate limit, the number of occurrences involved in particular claims and new theories of insured and insurer liability. We have established reserves for insurance and reinsurance contracts related to environmental pollution and asbestos at December 31, 2004, which represent our best estimate of ultimate claims exposure at December 31, 2004 based on known facts and current law. However, given uncertainties surrounding asbestos related claims, we cannot assure you that ultimate losses will not materially exceed our claims reserves and have a material adverse effect on our earnings. For additional information, see “Environmental Pollution, Asbestos and other Exposures” in note 15 to AXA’s consolidated financial statements included in Item 18 of this Annual Report.

The claims experience on our Life and Savings businesses could be inconsistent with the assumptions we use to price our products and establish our reserves and adversely affect our earnings

In our Life & Savings businesses our earnings also depend significantly upon the extent to which our actual claims experience is consistent with the assumptions we use in setting the prices for our products and establishing the liabilities for obligations for technical provisions and claims. AXA uses both its own experience and industry data to develop estimates of future policy benefits including information used in pricing the insurance products and establishing the related actuarial liabilities. However, there can be no assurance that actual experience will match these estimates. To the extent that our actual benefits paid to policyholders is less favorable than the underlying assumptions used in initially establishing the future policy benefit reserves, or events or trends cause us to change the underlying assumptions, we may be required to increase our liabilities, which may reduce our net income. For example, certain variable annuity products issued or reinsured by certain of our subsidiaries contain guaranteed minimum death benefit (“GMDB”) and guaranteed minimum income benefit (“GMIB”) features. The determination of GMDB and GMIB liabilities is based on models which involve numerous estimates and subjective judgments, including those regarding expected market rates of return and volatility, GMIB election rates, contract surrender rates and mortality experience. Determination of liabilities for our other lines of Life & Savings business, such as our annuity business, as well as our disability income business, also involve numerous assumptions and subjective judgments as to mortality and morbidity experience, investment returns, expenses, policy surrender rates, policy lapse rates, and other matters. There can be no assurance that ultimate actual experience on these products will not differ, upwards or downwards, from management’s estimates. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on our balance sheet and are being

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amortized into income over time. If the assumptions relating to various factors including the future profitability of these policies (such as future claims, investment income and expenses) and policy lapses and surrenders are not realized, the amortization of these costs could be accelerated and may even require write-offs due to unrecoverability. These factors could have a material adverse effect on our business, results of operations and financial condition.

Our financial results may be materially adversely affected by the occurrence of catastrophes

As with other Property & Casualty insurers and reinsurers, our operating results and financial condition can be adversely affected by volatile and unpredictable natural and man-made disasters, such as hurricanes, windstorms, earthquakes, riots, fires and explosions. Over the past several years, changing weather patterns and climatic conditions, such as global warming, have added to the unpredictability and frequency of natural disasters in certain parts of the world and created additional uncertainty as to future trends and exposures. We generally seek to reduce our exposure to these events through individual risk selection, monitoring risk accumulation and purchase of reinsurance. We have experienced in the past, and could experience in the future, material losses from such disasters and catastrophic events, which could have a material adverse effect on our financial position and results of operations.

A downgrade in the claims paying and financial strength ratings of AXA could adversely impact our business and results of operations

Claims paying and financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies. The ratings held by AXA and its principal insurance subsidiaries are set forth in Item 4 – Ratings of this Annual Report. Rating agencies review their ratings periodically and our current ratings may not be maintained in the future. A downgrade in these ratings could adversely affect our business and results of operations including through a reduction in the number of new insurance policies that we write and/or an increase in surrender or termination of policies already in-force. A downgrade in our rating may also adversely affect our cost of raising capital.

Reinsurance may not be adequate to protect us against losses and we may incur losses due to the inability of our reinsurers to meet their obligations

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. Under the reinsurance arrangements, other insurers assume a portion of the losses and related expenses; however, we remain liable as the direct insurer on all risks reinsured. Consequently, ceded reinsurance arrangements do not eliminate our obligation to pay claims and we are subject to our reinsurers’ credit risk with respect to our ability to recover amounts due from them. Although we evaluate periodically the financial condition of our reinsurers to minimize our exposure to significant losses from reinsurer insolvencies, our reinsurers may become financially unsound by the time their financial obligation becomes due. The inability of any reinsurer to meet its financial obligations to us could negatively impact our results of operations.

In addition, the availability, amount and cost of reinsurance depends on general market conditions and may vary significantly. Reinsurance may not be available to us in the future at commercially reasonable rates and any decrease in the amount of our reinsurance will increase our risk of loss.

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Elimination of tax benefits for our products and other changes in laws and regulations may adversely affect sales of our insurance and investment advisory products

Changes to tax laws may affect the attractiveness of certain of our products, which currently have favorable tax treatment. From time to time, governments in the jurisdictions in which we do business, including in France and the United States, have considered or implemented proposals for tax law changes that could adversely affect our products. These proposals have included, for example, proposals to tax the undistributed increase in value of life insurance policies or similar proposals that affect the tax-favored status of life insurance products in certain jurisdictions. In addition, legislation enacted in the United States in the spring of 2001 increased the size of estates exempt from the federal estate tax, phasing in reductions in the estate tax rate between 2002 and 2009 and repealing the estate tax entirely in 2010. Under the legislation, however, the estate tax will be reinstated, without the increased exemption or reduced rate, in 2011 and thereafter. This legislation, and possible future changes to it such as extending or making permanent such repeal, could have a negative impact on the sales of estate planning products by U.S. life insurance companies including our U.S. subsidiaries. The enactment of these or other types of or other tax legislation in the various countries where we operate including proposals in the U.S. to create or favor alternative tax-favored long term savings vehicles, could result in a significant reduction in sales of our currently tax-favored products.

The Property & Casualty insurance business is cyclical, which may impact our results

The Property & Casualty insurance business is cyclical. Although no two cycles are the same, these cycles have typically lasted for periods ranging from two to six years. Periods of intense price competition due to excessive underwriting capacity, periods when shortages of underwriting capacity permit more favorable rate levels, consequent fluctuations in underwriting results and the occurrence of other losses characterize the conditions in these markets. Historically, Property & Casualty insurers have experienced significant fluctuations in operating results due to volatile and sometimes unpredictable developments, many of which are beyond the direct control of the insurer, including competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions and other factors. This may cause a decline in revenues at times in the cycle if we choose not to reduce our Property & Casualty product prices in order to maintain our market position because of the adverse effect on profitability of such a price reduction. We can be expected therefore to experience the effects of such cyclicality and changes in customer expectations of appropriate premium levels, the frequency or severity of claims or other loss events, or other factors affecting the Property & Casualty insurance business on the segments on which we operate that, generally, could have an adverse effect on our results of operations and financial condition.

Our business is subject to extensive regulation in the various countries where we operate and changes in existing, or new, government regulations in these countries may have an adverse effect on our business, financial conditions or results of operations

We are subject to detailed and comprehensive regulation and supervision in all the jurisdictions in which we transact business. Our insurance operations are subject to insurance laws and regulations, which are generally intended to protect policyholders, not our shareholders. Changes in existing insurance laws and regulations may materially affect the way in which we conduct our business and the products we may offer. In addition, changes in pension and employee benefit regulation, social security regulation, financial services regulation, taxation and the regulation of securities products and transactions may also adversely affect our ability to sell new policies or

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our claims exposure on existing policies. Our asset management operations are also subject to extensive regulation in the various jurisdictions where they operate. These regulations are primarily intended to protect investors in the securities markets or investment advisory clients and generally grant supervisory authorities broad administrative powers. Changes to these laws and regulations may adversely affect our asset management operations. We are also subject to increasing regulations at the consolidated Group level under various laws and regulations such as capital adequacy, intra-group transactions, “double-gearing” of capital at both the holding company and operating company levels.

We are faced with significant compliance challenges due to the fact that our regulatory environment is evolving rapidly and our supervisory authorities are assuming an increasingly active role in interpreting and enforcing regulations. We have been and may become in the future subject to regulatory investigations which, together with the civil actions often following these investigations, may affect our image, brand, relations with regulators and/or results of operations.

For a discussion of regulations which affect our business, please see Item 4 “Information on the Company –Additional Factors which may affect AXA’s Business.” We cannot predict with any certainty the effect that any change in applicable laws or regulations or in their interpretation or enforcement, or any enactment of future regulation may have on the business, financial condition or results of operations of our various businesses whether by restructuring these activities, imposing increased costs or otherwise.

Certain business practices of the insurance industry have become the subject of regulatory investigations which have resulted in negative publicity and may have a material adverse impact on the industry and us

Recently, the insurance industry has been the subject of litigation, investigations and regulatory activity by various insurance, governmental and enforcement authorities concerning practices within the insurance industry. These practices include the payment of contingent commissions by insurance companies to insurance brokers and agents and the extent to which such compensation has been disclosed, the solicitation and provision of fictitious or inflated quotes, the use of inducements to brokers or companies in the sale of group insurance products, and the accounting treatment of finite reinsurance or other non-traditional or loss-mitigation insurance products. AXA Re has received subpoenas, inquiries and requests for documents and other information from the SEC, New York Attorney General, Federal Bureau of Investigations / Department of Justice and various other U.S. regulators and law enforcement authorities seeking information relating to (i) specific reinsurance transactions with MBIA concerning the 1998 bankruptcy of Allegheny Health, Education and Research Foundation, and (ii) the purchase and/or sale of non-traditional products (including finite reinsurance) by AXA Re and its affiliates. Certain of the Company’s other subsidiaries with operations in the United States have also received subpoenas, inquiries and requests for documents or other information, principally focussed on purchases and/or sales of non-traditional products (including finite reinsurance), in connection with these on-going investigations. We cannot predict at this time the effect that current litigation, investigations and regulatory activity, will have on the insurance industry or our business. It is possible that we may become subject to investigations or have lawsuits filed against us in connection with these matters which may adversely affect our image, sales, earnings or financial condition.

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We are involved in various legal proceedings and regulatory investigations and examinations and may be involved in more in the future, any one or combination of which could have a material adverse effect on our financial condition and results of operations

We have been named as defendants in lawsuits (both class action and individual), are subject to regulatory investigations or examinations and/or are involved in similar actions or proceedings arising in the various jurisdictions where they do business. These actions arise in various contexts including in connection with our activities as an insurer, securities issuer, employer, investment advisor, investor and taxpayer. Certain of these lawsuits and investigations seek significant or unspecified amounts of damages, including punitive damages, and certain of the regulatory authorities involved in these investigations have very substantial powers over the conduct and operations of our business.

Due to the nature of certain of these lawsuits and investigations, we cannot make an estimate of loss or predict with any certainty the potential impact of these suits or investigations on our business, financial condition or results of operations. Please see Item 18, Note 28 – “Litigation” and Item 4 “Information on the Company –Additional Factors which may affect AXA’s Business” of this Annual Report for additional information on these matters.

We face increased competition in all of our business lines including in the global financial services industry as a result of continuing consolidation

We face strong and increasing competition in all our business lines. Our competitors include mutual funds companies, asset management firms, commercial banks and other insurance companies, many of which are regulated differently than we are and offer alternative products or more competitive pricing than we do. The recent consolidation in the global financial services industry has also enhanced the competitive position of some of our competitors by broadening the range of their products and services, and increasing their distribution channels and their access to capital. In addition, development of alternative distribution channels for certain types of insurance and securities products, including through the internet, may result in increasing competition as well as pressure on margins for certain types of products. These competitive pressures could result in increased pricing pressures on a number of our products and services, particularly as competitors seek to win market share, and may harm our ability to maintain or increase our profitability.

Increased geopolitical risks following the terrorist attacks on the United States and any future terrorist attacks may have a continuing negative impact on certain of our businesses

We cannot assess with any degree of certainty the future effects on our businesses of terrorist attacks that have occurred and may occur in the future throughout the world and other responsive actions, including war.

The terrorist attacks and responsive actions in recent years have significantly adversely affected general economic, financial market and political conditions, increasing many of the risks in our businesses noted in the previous risk factors. This may have a negative effect on our businesses and results of operations over time. Our general account investment portfolios include investments in industries that we believe may be adversely affected by the terrorist attacks and responsive actions, including airlines, lodging and entertainment companies and non-life insurance companies. The effect of these events on the valuation of these investments is uncertain and could lead

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to impairments due to other-than-temporary declines in the value of investments. The cost, and possibly, the availability, in the future of reinsurance covering terrorist attacks for our various insurance operations is uncertain. In addition, the rating agencies could reexamine the ratings affecting the insurance industry generally, including our companies.

As a global business, we are exposed to different local political, regulatory, economic conditions, business risks and challenges which may affect the demand for our products and services, the value of our investments portfolio and the credit quality of local counterparties

We offer our products and services in Europe, North America, the Asia/Pacific zone, the Middle East and Africa through wholly-owned and majority-owned subsidiaries, joint ventures, companies in which we hold a noncontrolling equity stake, agents and independent contractors. Our international operations expose us to different local political, regulatory, business and financial risks and challenges which may affect the demand for our products and services, the value of our investment portfolio, the required levels of our capital and surplus, and the credit quality of local counterparties. These risks include, for example, political, social or economic instability in countries in which we operate, fluctuations in foreign currency exchange rates, credit risks of our local borrowers and counterparties, lack of local business experience in certain markets, risks associated with the exposure to insurance industry insolvencies through policyholder guarantee funds or similar mechanisms set up in foreign markets and, in certain cases, risks associated with the potential incompatibility with foreign partners, especially in countries in which we are conducting business through entities we do not control.

Our expansion in emerging markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We may not continue to succeed in developing and implementing policies and strategies that are effective in each location where we do business.

Finally, our results of operations and financial condition may be materially affected from time to time by the general economic conditions such as the levels of employment, consumer lending or inflation, in the countries in which we operate.

Inadequate or failed processes or systems, human factors or external events may adversely affect our profitability, reputation or operational effectiveness

Operational risk is inherent in our business and can manifest itself in various ways including business interruption, poor vendor performance, information systems malfunctions or failures, regulatory breaches, human errors, employee misconduct, and/or external fraud. These events can potentially result in financial loss, harm to our reputation and/or hinder our operational effectiveness. Management attempts to control these risks and keep operational risk at appropriate levels by maintaining a sound and well controlled environment in light of the characteristics of our business, the markets and regulatory environment in which we operate. Notwithstanding these control measures, operation risk is part of the business environment in which we operate and we may incur losses from time to time due to these types or risks.

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Other risks relating to our operations

As a holding company, we are dependent upon our subsidiaries to cover our operating expenses and dividend payments

Our insurance and financial services operations are generally conducted through direct and indirect subsidiaries. As a holding company, our principal sources of funds are dividends from subsidiaries and funds that may be raised from time to time through the issuance of debt or equity securities or through bank or other borrowings.

We expect that dividends received from subsidiaries will continue to cover our operating expenses, including (i) interest payments on our outstanding financing, operating and subordinated debt and (ii) dividend payments with respect to our outstanding ordinary shares during each of the next three years. We expect that future acquisitions and strategic investments will be funded from available cash flow remaining after payment of dividends and operating expenses (including interest expense), cash on hand from previous securities offerings, proceeds of future offerings of securities, and proceeds from the sale of non-core assets. Certain of our significant subsidiaries, including AXA France Assurance, AXA Financial, AXA UK Holdings, AXA Japan, AXA Asia Pacific Holdings, and AXA Germany, are also holding companies and are dependent on dividends from their own subsidiaries for funds to meet their obligations.

In addition, certain of our principal insurance subsidiaries are subject to restrictions on the amount of dividends and debt repayments that can be paid to us and our affiliates. While we do not believe that these restrictions currently constitute a material limitation on our ability to meet our obligations or pay dividends on our shares, these restrictions may constitute a material limitation in the future. For further detail, see Item 5 under “Liquidity and Capital Resources” and also note 30 “Dividends restrictions and minimum capital requirements” to AXA’s consolidated financial statements included in Item 18 of this Annual Report.

Our French GAAP results may differ significantly from our U.S. GAAP results

The Company’s primary financial statements are in French GAAP until December 31, 2004, after which the Company will report its financial statements according to IFRS. For purposes of its listing on the NYSE, the Company reconciles its French GAAP annual financial results to U.S. GAAP each year. There are significant differences between French GAAP and U.S. GAAP which lead to different results under the two systems of accounting. Differences in AXA’s consolidated French GAAP and U.S. GAAP results have been significant over the last several years. In 2004, the most significant differences related primarily to differing rules with respect to treatment of goodwill, impairments for “other-than-temporary” declines in the value of fixed maturity and equity securities, recoverability of deferred tax assets, valuation of holdings in mutual funds, the accounting for derivatives instruments in hedging activities and the accounting for UK “With-Profits” contracts.

Our transition to international accounting standards may affect our operating results

Due to the adoption by the European Union’s Council of a regulation, effective on January 1, 2005, requiring listed European companies to prepare consolidated financial statements in accordance with International Financial

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Reporting Standards (“IFRS”), we are currently converting our accounting standards from French GAAP into IFRS, as described in note 34 (m) included in Item 18 of this Annual Report. While we do not believe that this transition to IFRS will have a material adverse effect on our reported financial condition or results of operations, there are various significant differences between French GAAP and IFRS.

On June 21, 2005 AXA announced its 2004 financial results under IFRS. Under IFRS, AXA's net income for the year ended December 31, 2004 was € 3.8 billion (compared to € 2.5 billion under French GAAP) and its shareholders equity was €28.5 billion ( compared to € 26.2 billion under French GAAP). AXA's June 21 IFRS press release has been filed with the SEC on a Form 6-K and is available on the SEC's EDGAR website (www.sec.gov).

Compliance with the Sarbanes-Oxley act entails significant expenditure and managerial attention, and non-compliance with the Sarbanes-Oxley act may adversely affect us

The US Sarbanes-Oxley Act of 2002 that became law in July 2002 and rules subsequently implemented by the SEC and the NYSE require changes to some of our accounting and corporate governance practices, including the requirement that we issue, for the year ending December 31, 2006 and future years, a report on our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. We expect that compliance with the new rules and regulations will continue to require significant management attention and will result in increased accounting, legal and other costs. In addition, because Section 404 of the Sarbanes-Oxley Act requires our auditors to audit and issue a report on our internal controls over financial reporting, undertaking significant IT, internal restructuring, corporate development or other initiatives that may affect our internal control environment, may become more difficult and/or costly, particularly during periods when our internal controls over financial reporting are undergoing audit. This may have an adverse effect on our business and/or our ability to compete with our competitors who are not subject to the Sarbanes-Oxley Act. We cannot predict the outcome of the Section 404 process and whether changes will be required to our internal controls. In the event we are unable to maintain or achieve Compliance with Section 404 and other provisions of the Sarbanes-Oxley Act and related rules, it may have a material adverse effect on us.

Our acquisitions may divert management attention and other resources and involve risks of undisclosed liabilities and integration issues

In recent years we have completed a number of acquisitions around the world and we may make further acquisitions in the future. Growth by acquisition involves risks that could adversely affect our operating results, including the substantial amount of management time that may be diverted from operations to pursue and complete acquisitions, difficulties in managing and integrating the additional operations and personnel of acquired companies, significant delays in completing the integration of acquired companies and the potential loss of key employees or customers of these companies. In connection with certain of our mergers and acquisitions, we have experienced difficulties in rationalizing and integrating multiple information technology (“IT”) systems of acquired companies, including accounting information systems from different vendors such as general ledger packages, with our existing IT systems. Integration and rationalization of multiple and sometimes outdated IT systems in acquired companies may cause various issues including delay and unforeseen costs in the integration process, the necessity for extensive management attention and resources, as well as issues in the timely production of financial information required for inclusion in consolidated financial statements prepared on a local GAAP, French GAAP, IFRS and/or U.S. GAAP basis. Our acquisitions could also result in the incurrence of additional indebtedness, costs, contingent liabilities and amortization expenses related to goodwill and other intangible assets, all of which could materially adversely affect our businesses, financial condition and results of operations. Future acquisitions may also have a dilutive effect on the ownership and voting percentages of existing shareholders.

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The businesses we have acquired include life & savings, property & casualty insurance, asset management and retail banking operations. There could be unforeseen liabilities that arise out of the businesses we have acquired and may acquire in the future which may not be covered by, or exceed the amount of, the indemnification obligations of sellers.

We may have contingent liabilities from discontinued, divested and run-off businesses and may incur other off-balance sheet liabilities that may result in income statement charges

We may from time to time retain insurance or reinsurance obligations and other contingent liabilities in connection with our divestiture, liquidation or run-off of various businesses and our reserves for these obligations and liabilities may prove to be inadequate. The costs and liabilities associated with the divested and run-off businesses and other contingent liabilities could cause us to take additional charges that could be material to our results of operations. We may also from time to time in the course of our business give guarantees and enter into derivative and other types of off balance sheet transactions that could result in income statement charges. For additional information, see note 26, “Off Balance Sheet Commitments” and also note 25 “Financial Instruments”, to AXA’s consolidated financial statements included in Item 18 of this Annual Report.

The failure to maintain and modernize our information systems could adversely affect our business

Our business depends significantly on effective information systems, and we have many different information systems for our various businesses. We must commit significant resources to maintain, enhance our existing information systems and develop new ones in order to keep pace with the continuing changes in the information technology, evolving industry and regulatory standards and changing customer preferences. If we do not maintain adequate information systems we may not be able to gather and rely on adequate information to base our pricing, underwriting and reserving decisions. We may also have difficulties to attract new customers and may loose existing ones. In addition, underperforming information systems could cause us to become subject to a higher number of customer, provider and agent disputes, may increase our litigation and regulations exposure and make us incur higher administrative expenses, including remediation costs.

Significant shareholders of AXA may have interests conflicting with your interests

The Mutuelles AXA, three French mutual insurance companies, acting as a group, owned at February 28, 2005, directly and indirectly through FINAXA, a holding company they control, approximately 20.34% of the issued ordinary shares of AXA representing approximately 32.20% of its voting power. Most of the shares owned by the Mutuelles AXA have double voting rights pursuant to the provisions of AXA’s statuts, see “Item 10 – Additional Information – Certain Rights of AXA’s shareholders – Voting Rights” of this Annual Report. The Mutuelles AXA are parties to agreements pursuant to which they have stated their intention to collectively exercise majority control over Finaxa. On April 19, 2005, the Supervisory Board of AXA and the Board of Directors of FINAXA announced their intention to merge FINAXA into AXA. Following the merger, Mutuelles AXA, which currently own 2.72% of AXA outstanding shares representing 4.38% of AXA voting rights and 71.69% of FINAXA outstanding shares representing 80.53% of FINAXA voting rights, would become the principal AXA shareholder, holding less than 14% of AXA ordinary shares representing less than 23% of voting rights. It is expected that the merger will be presented

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to both AXA and FINAXA shareholders for approval before the end of 2005. Given the long-term nature of their relationship with AXA, we cannot assure you that the interests of the Mutuelles AXA will not, from time to time, conflict with your interests as a shareholder. For example, even though the Mutuelles do not hold a majority of the total voting power in AXA, a decision by the Mutuelles AXA to decline or deter a future offer to acquire control of AXA, which other shareholders may find attractive, may prevent other shareholders from realizing a control premium for their AXA ordinary shares or ADRs. The Mutuelles AXA may decide to increase their interest in AXA or to sell all or a portion of the ordinary shares they own at some future date.

Risks related to ownership of AXA ADSs or ordinary shares

The trading price of AXA ADSs and dividends paid on AXA ADSs may be materially adversely affected by fluctuations in the exchange rate for converting euro into U.S. dollars

Fluctuations in the exchange rate for converting Euro into U.S. dollars may affect the value of AXA ADSs. Specifically, as the relative value of the Euro against the U.S. dollar declines, each of the following values will also decline:

  • the U.S. dollar equivalent of the Euro trading price of AXA ordinary shares on the Paris Bourse, which may consequently cause the trading price of AXA ADSs in the United States to also decline;
  • the U.S. dollar equivalent of the proceeds that a holder of AXA ADSs would receive upon the sale in France of any AXA ordinary shares withdrawn from the depositary; and
  • the U.S. dollar equivalent of cash dividends paid in Euro on the AXA ordinary shares represented by the AXA ADSs.

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 ADSs in time to ensure that holders of AXA ADSs can instruct the depositary to vote their shares. In addition, the depositary’s liability to holders of AXA ADSs for failing to carry out voting instructions or for the manner of carrying out voting instructions is limited by the deposit agreement governing the AXA American Depositary Receipt facility. As a result, holders of AXA ADSs may not be able to exercise their right to vote and may not have any recourse against the depositary or AXA if their shares are not voted as they have requested.

Holders of AXA ADSs will have limited recourse if AXA or the depositary fails to meet their obligations under the deposit agreement or if they wish to involve AXA or the depositary in a legal proceeding

The deposit agreement expressly limits the obligations and liability of AXA and the depositary. Neither AXA nor the depositary will be liable if they:

  • are prevented, delayed or forbidden from performing any obligation by circumstances beyond their control,
  • exercise or fail to exercise discretion under the deposit agreement, or
  • take any action based upon the advice of, or information from, legal counsel, accountants, any person presenting ordinary shares for deposit, any holder or owner of an AXA ADR or any other person believed by it in good faith to be competent to give such advice or information.

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In addition, the depositary and AXA only have the obligation to participate in any action, suit or other proceeding with respect to the AXA ADSs which may involve them in expense or liability only if they are indemnified. These provisions of the deposit agreement will limit the ability of holders of AXA ADSs to obtain recourse if AXA or the depositary fails to meet their obligations under the deposit agreement or if they wish to involve AXA or the depositary in a legal proceeding.

The holders of AXA ADSs in the United States may not be able to participate in offerings of rights, warrants or similar securities to holders of our ordinary shares on the same terms and conditions as our ordinary shareholders

In the event that we offer rights, warrants or similar securities to the holders of our ordinary shares or distribute a dividend payable, in whole or in part, in securities, the Deposit Agreement provides that the Depositary (after consultation with AXA) shall have discretion as to the procedure to be followed in making such rights or other securities available to ADR holders including disposing of such rights or other securities and distributing the net proceeds in U.S. dollars to ADR holders. Given the significant number of AXA’s ADR holders in the U.S., AXA generally would be required to register with the SEC any public offering of rights, warrants or other securities made to its U.S. ADR holders unless an exemption from the registration requirements of the U.S. securities laws is available. Registering such an offering with the SEC can be a lengthy process which may be inconsistent with the timetable for a global capital raising operation. Consequently, we have in the past and may in the future elect not to make such an offer in the United States, including to our ADR holders in the United States but rather to conduct such an offering in an “offshore” transaction in accordance with Regulation “S” under the Securities Act of 1933. Consequently, there can be no assurance that our ADR holders will be able to participate in such an offering in the same manner as our ordinary shareholders.

Our ADS and ordinary share price could be volatile and could drop unexpectedly and you may not be able to sell your ADRs or ordinary shares at or above the price you paid

The price at which our ADSs and ordinary shares will trade may be influenced by a large number of factors, some of which will be specific to us and our operations and some of which will be related to the insurance industry and equity markets generally. As a result of these factors, you may not be able to resell your ADSs or ordinary shares at or above the price which you paid for them. In particular, the following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our ADSs or ordinary shares:

  • investor perception of our Company, including actual or anticipated variations in our revenues or operating results;
  • announcement by us of intended acquisitions, disposals or financings or speculation about such acquisitions, disposals or financings;
  • changes in our dividend policy, which could result from changes in our cash flow and capital position;
  • sales of blocks of our shares by significant shareholders;
  • hedging activities on our shares;
  • a downgrade or rumored downgrade of our credit or financial strength ratings, including placement on credit watch;
  • potential litigation involving us, the insurance or asset management industries generally;
  • changes in financial estimates and recommendations by securities research analysts;

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  • fluctuations in foreign exchange rates and interest rates;
  • the performance of other companies in the financial services’ sector;
  • regulatory developments in the principal markets in which we operate;
  • international political and economic conditions, including the effects of terrorist attacks, military operations and other developments stemming from such events and the uncertainty related to these developments; and
  • general economic and market conditions.

As a “foreign private issuer” in the U.S., AXA is exempt from a number of rules under the U.S. securities laws and is permitted to file less information with the SEC

As a “foreign private issuer,” AXA is exempt from rules under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) that impose certain disclosure and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, AXA’s officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of AXA ordinary shares and ADRs. Moreover, AXA is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor is it required to comply with Regulation FD, which restricts the selective disclosure of material information. Accordingly, there may be less information concerning AXA publicly available than there is for U.S. public companies.

Judgments of U.S. courts may not be enforceable against us

Judgment of U.S. courts, including those predicated on the civil liability provisions of the Federal securities laws of the United States, may not be enforceable in French courts. As a result, our shareholders who obtain a judgment against us in the United States may not be able to require us to pay the amount of the judgment.

Item 4: Information on the Company

Introduction

The Company is a French “société anonyme à directoire et conseil de surveillance” (a form of limited liability company) with a Management Board and a Supervisory Board. The Company’s headquarters are located at 25 Avenue Matignon, 75008 Paris, France and its telephone number is (331) 40 75 57 00. For information on AXA’s principal trading markets for its ordinary shares and ADSs, see “Item 9 – The Offer and Listing” included elsewhere in this Annual Report. The founding predecessor of AXA was organized under the laws of France in 1852. The Company’s corporate existence will continue, subject to dissolution or prolongation until December 31, 2059.

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Recent developments

On April 19, 2005, the Supervisory Board of AXA and the Board of Directors of FINAXA announced their intention to merge FINAXA into AXA. Each Board appointed (a) a committee of independent directors to evaluate the transaction and make a recommendation to its Board on the appropriate exchange ratio between FINAXA and AXA ordinary shares and (b) UBS and HSBC CCF to act as independent experts respectively for FINAXA and AXA and render fairness opinions on the exchange ratio. It is expected that the terms and conditions of the contemplated merger will be approved by each Board by the end of June 2005 and presented to both AXA and FINAXA shareholders for approval before the end of 2005. This merger would simplify the shareholding structure of the AXA Group and increase the proportion of AXA ordinary shares publicly traded. AXA would also become the owner of its trademark which is currently licensed to it by FINAXA. FINAXA currently has 75,591,703 ordinary shares outstanding1 (77,693,701 ordinary shares on a fully diluted basis assuming exercise of all outstanding stock options and conversion of all convertible securities) all of which will be exchanged for AXA ordinary shares upon consummation of the merger. The Mutuelles AXA and FINAXA currently own 20.35% of AXA’s outstanding ordinary shares and 32.20% of AXA’s voting rights. Following the consummation of the merger, Mutuelles AXA, which currently own 2.72% of AXA outstanding shares representing 4.38% of AXA voting rights and 71.69% of FINAXA outstanding shares (69.75% on a fully diluted basis2) representing 80.53% of FINAXA voting rights (79.18% on a fully diluted basis3), would become the principal AXA shareholder, holding less than 14% of AXA ordinary shares representing less than 23% of AXA voting rights.

For a description of significant acquisitions and disposals undertaken by AXA see Item 5, “Operating and Financial Review and Prospects – December 2004 operating highlights” and note 4, “Business Combinations”, and note 20 “Net Investment Result” to the consolidated financial statements included under Item 18 of this Annual Report.

For information relating to the ownership structure of the Group, see “Item 7 – Major Shareholders and Related Party Transactions”, included elsewhere in this Annual Report.

General Information

The Company is the holding company for AXA, a worldwide leader in financial protection and asset management, with consolidated gross revenues of €72.2 billion for the year ended December 31, 2004 and total assets under management as at December 31, 2004 of €868.6 billion, including assets managed on behalf of third party clients in an aggregate amount of €445.9 billion. Based on available information at December 31, 2003 and taking into account banking companies engaged in the asset management business, AXA was the world’s 7th largest asset manager including, with total assets under management of €774.6 billion.

AXA operates primarily in Western Europe, North America and the Asia Pacific region and, to a lesser extent, in other regions including in particular the Middle East and Africa. AXA has five operating business segments: Life & Savings, Property & Casualty, International Insurance (including reinsurance), Asset Management, and Other Financial Services. In addition, various holding companies within the AXA Group conduct certain non-operating activities.

(1)   Before payment of the dividend of FINAXA in FINAXA shares, as the case may be.
(2)   Idem.
(3)   Idem.

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AXA’s Vision and Strategy

AXA aims to be the world “best-in-class” in financial protection and wealth management.

AXA seeks to protect its clients against a variety of risks and to help them build wealth over their lifetime. It does so by providing insurance, reinsurance, investment management, financial advice and related financial services. AXA is a global company and offers its services mainly in the world’s major developed markets. It is also present in a number of other markets where sizeable businesses can be developed ethically and profitably.

AXA capitalizes on its core strengths: over 50 million clients worldwide; a 44,000-strong captive distribution force; a global brand; unique product skills in areas as diverse as insurance underwriting, long-term investments, and financial advice, all on a scale that enables AXA to leverage best practices and operations platforms across the group.

In realizing its vision, AXA strives to fulfill the needs of its three principal stakeholders:

1.   Clients: AXA seeks to address the needs of individual clients, as well as the needs of small to medium-sized companies, either directly or through proprietary and third party distribution channels. AXA also serves institutional and large corporate clients by leveraging strong market positions. AXA answers the needs of these clients by offering competitive advice, products and service.
2.   Shareholders: AXA aims to provide its shareholders with attractive total returns, derived from steady growth in earnings per share and embedded value under normal market conditions. AXA is also developing strong corporate governance policies and transparency in order to build long-term confidence with its shareholders.
3.   Employees and sales associates: AXA values professionalism, innovation, pragmatism, team spirit and integrity. AXA aims at attracting employees in each local market by providing competitive compensation, training, coaching and mobility, and seeks to be one of the most attractive companies to work for in the global financial services industry.

To meet its objectives, AXA has a strategy of disciplined focus both on geography and on operational performance, namely:

1.    A more focused geographical presence aimed at “Regional leadership or exit”, a strategy that focuses on either (i) becoming the reference company and attaining a leading position in the markets or region in which it operates, notably through opportunistic acquisitions centered on Western Europe, the United States and selected Asian or East European markets; or (ii) exiting the region if AXA believes it cannot attain a sizeable market penetration or build an efficient regional platform without undue cost and effort; and
2.    Continued focus on operational efficiency, as set out below:
  –    Enhanced organic growth – Financial advice, backed by an enlarged product and service; higher service quality and client satisfaction; continued training and resources for AXA’s captive distribution forces; and the expansion of third-party distribution channels.
  –    Improved margins and productivity – Group-wide optimization and standardization of core processes such as underwriting and claims handling; consolidation and leveraging of group-wide resources such as developments in information technology, global procurement, resources and platforms.
  –    Continuous focus on human resources – By promoting its values, developing skills and motivation, AXA strives to attract, develop and reward talent in its core activities.

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AXA Group: Simplified Organization Chart as at December 31, 2004

Set forth below is a simplified organization chart of AXA as at December 31, 2004. For additional information, please see note 3 “Principal Subsidiaries and Companies accounted for under the equity method” to the consolidated financial statements.

Please note that the percentage on the left represents the economic interest and the percentage on the right represents the percentage of voting rights.

(a)   Holding Company that owns AXA Equitable Life Insurance Company.
(b) Holding Company that owns MONY Life Insurance Company and MONY Life Insurance Company of America.
(c) Holding Company that owns AXA Assurance Maroc.
(d) Holding Company that owns AXA Versicherung AG, AXA Lebenversicherung AG and AXA Art.
(e) Holding Company that owns AXA Belgium.
(f) Holding Company that owns AXA Aurora Iberica and AXA Aurora Vida.

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(g) Holding Company that owns AXA France Vie, AXA France IARD, Avanssur (previously Direct Assurances IARD) and AXA Corporate Solutions Assurance.
(h) Holding Company that owns AXA Assicurazioni SpA.
(i) Holding Company that owns AXA Assurance Luxembourg and AXA Assurance Vie Luxembourg.
(j) Holding Company that owns AXA Leven NV and AXA Schade.
(k) Holding Company that owns. AXA Sun Life Plc, AXA Insurance Plc and AXA PPP Healthcare limited.
(l) Holding Company that owns AXA Oyak.
(m) Holding Company that owns AXA Australia New Zealand.
(n) Holding Company that owns AXA Life Insurance Co. Ltd and AXA Non-Life Insurance Co. Ltd.
(o) Holding Company that owns AXA Life Insurance Singapore Plc Ltd.

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Ratings

The Company and certain of its insurance subsidiaries are rated by recognized rating agencies. The significance of individual ratings varies from agency to agency. In the opinion of the rating agencies, companies assigned ratings at the top end of the range have a stronger capacity to repay debt and make payment on claims compared to companies assigned ratings at the lower end of the range.

Insurance rating agencies focus on the financial strength of the relevant insurance company and its capacity to meet the obligations arising on insurance policies. Certain of these agencies and their respective insurance rating scales are set out below.

Rating Agency   Highest Rating Lowest Rating
       
Standard & Poor’s Corp. (“Standard & Poor’s”)   AAA R
    (“extremely strong”) (“regulatory action”)
 
Moody’s Investor Services (“Moody’s”)   Aaa C
    (“extremely strong”) (“lowest”)
 
Fitch, Inc. (“Fitch”)   AAA D
    (“extremely strong”) (“order of liquidation”)
         

Debt ratings focus on the likelihood that the company will make timely payments of principal and interest. The rating scales for the agencies above are set out below.

   Rating Agency Highest Rating Lowest Rating
 
Standard & Poor’s AAA D
  (“extremely strong”) (“default”)
 
Moody’s Aaa C
  (“best”) (“lowest”)
 
Fitch AAA D
  (“highest”) (“default”)
 
     
     
The commercial paper rating scales for the agencies above are as follows:  
 
     
Rating Agency Highest Rating Lowest Rating
 
Standard & Poor’s A-1 D
  (“extremely strong”) (“default”)
 
Moody’s Prime-1 or P-1 Not Prime
  (“superior”) (“Not Prime”)
       
Fitch F-1 D
  (“highest”) (“default”)

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At the date of this Annual Report, the relevant ratings for the Company and its principal insurance subsidiaries are as follows:

        
 
2004
 
  Agency Rating  
        
Insurer Financial Strength Ratings      
        
The Company’s principal insurance subsidiaries Standard & Poor’s AA–  
        
  Moody’s Aa3  
        
  Fitch Ratings AA  
        
Ratings of the Company’s Long Term and Short Term Debt      
        
Senior Debt Standard & Poor’s A  
        
  Moody’s A2  
        
  Fitch Ratings A+  
        
Long Term Subordinated Debt Standard & Poor’s BBB+  
        
  Moody’s A3  
        
  Fitch Ratings A– (Non Dated debt)  
    A (Dated debt)  
        
Short Term Debt (Commercial Paper) Standard & Poor’s A-1  
        
  Moody’s P-1  
        
  Fitch Ratings F-1  
         

The ratings set forth above may be subject to revision or withdrawal at any time by the assigning rating organization. None of these ratings are an indication of the historic or potential performance of the ordinary shares, ADSs, ADRs or debt securities and should not be relied upon with respect to making an investment in any of these securities. The Company accepts no responsibility for the accuracy or reliability of the ratings.

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Business Overview

The tables below summarize certain key financial data by segment for the periods and as at the dates indicated.

CONSOLIDATED GROSS PREMIUMS AND NET INCOME (in euro millions, except percentages)  
     
  Years ended December 31,  
  2004   2003   2002  
                     
Consolidated gross premiums                        
and financial services revenues                        
                               
Life & Savings (a) (b) 47,063   65%   46,799   65%   48,586   65%  
                               
Property & Casualty (b) 17,852   25%   17,098   24%   15,948   21%  
                               
International Insurance 3,371   5%   3,972   6%   5,762   8%  
                               
Asset Management 3,087   4%   2,922   4%   3,411   5%  
                               
Other financial services 791   1%   836   1%   1,020   1%  
                               
Consolidated gross premiums                        
and financial services revenues 72,164   100%   71,628   100%   74,727   100%  
                               
Net income                        
                               
Life & Savings (b) 1,390   49%   671   49%   1,063   88%  
                               
Property & Casualty (b) 907   32%   448   33%   (19)   (2%)  
                               
International Insurance 227   8%   142   10%   (176)   (15%)  
                               
Asset Management 265   9%   (24)   (2%)   218   18%  
                          
Other financial services 22   1%   138   10%   119   10%  
                               
Net income from operating segments 2,812   100%   1,376   100%   1,206   100%  
                               
Holding companies (292)       (371)       (257)      
                               
Net income 2,519       1,005       949      
                                  
(a)   Gross premiums received from policyholders in respect of Life & Savings products which are classified as “universal life” or “investment contracts” (including assets backing contracts with financial risk borne by policyholders (unit-linked)) for U.S. GAAP, are recorded as revenue under French GAAP. Under U.S. GAAP, such amounts received are recorded as deposits, and only the policy-related fees charged to the policyholders for costs of insurance, administration, investment management, etc, are recorded as revenue.
(b)   UK Health activities are presented from January 1, 2003 in “Property & Casualty” Segment, while presented under “Life & Savings” until 2002.
             
Other Financial Data 2004   2003   2002  
                
For the years ended December 31,            
                
Net income per ordinary share (in euros) (a)            
                
Basic 1.37   0.56   0.54  
                
Diluted 1.32   0.55   0.54  
                
At December 31,            
                
Shareholders’ equity (in euro millions) 26,158   23,401   23,711  
                
Average share price (in euros) 17.5   14.1   17.8  
                
Share price as at December 31 (in euros) 18.2   17.0   12.8  
                
(a)   Following any significant capital increase with a stock price lower than the market price, such as ORAN conversion in July 2004, average number of shares and consequently EPS over each period must be restated to take into account this event, in accordance with French regulation.

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AXA’S TOTAL ASSETS UNDER MANAGEMENT       (in euro millions)  
                   
        At December 31,  
        2004   2003   2002  
                       
AXA (general account assets)     308,914   281,328   275,531  
                     
Assets with financial risk carried by policyholders              
(Unit-linked)       113,786   101,002   90,458  
                       
Sub-total       422,700   382,330   365,989  
                       
Managed on behalf of third parties     445,923   392,305   375,567  
                     
TOTAL       868,623   774,635   741,556  
                         

For additional information on AXA’s business segments, see “Item 5 – Operating and Financial Review and Prospects – Operating Results by Segment” and note 32 “Segment Information” to the consolidated financial statements included in Item 18 of this Annual Report.

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The table below sets forth AXA’s consolidated gross premiums and financial revenues by segment for each of its major geographic markets for the years indicated.

BREAKDOWN OF AXA’S GROSS PREMIUMS AND FINANCIAL SERVICES REVENUES    
                    
  Years ended December, 31    
  2004   2003   2002  
  Segment   Contribution   Segment   Contribution   Segment   Contribution  
  contribution   to total   contribution   to total   contribution   to total  
  (%)   segment (%)   (%)   segment (%)   (%)   segment (%)  
                    
Total gross premiums and financial                                    
services revenues (in euro millions) 72,164 71,628 74,727    
            
Life & Savings 65%           65%           65%          
                                      
France       25%           23%           21%    
                                      
United States       27%           29%           26%    
                                      
United Kingdom       13%           12%           17%    
                                      
Japan       12%           13%           13%    
                                      
Germany       7%           7%           6%    
                                      
Belgium       5%           4%           3%    
                                      
Southern Europe (a)       3%           3%           3%    
                                      
Other countries(a)       7%           8%           9%    
                                      
Property & Casualty 25%           24%           21%          
                                      
France       27%           27%           27%    
                                      
Germany       16%           17%           18%    
                                      
United Kingdom       25%           25%           21%    
                                      
Belgium       8%           8%           9%    
                                      
Southern Europe(a)       16%           15%           15%    
                                      
Other countries(a)       8%           8%           10%    
                                      
International Insurance 5%           6%           8%          
                                      
AXA RE(b)       31%           48%           60%    
                                      
AXA Corporate Solutions Assurance       45%           39%           31%    
                                      
AXA Cessions       3%           2%           2%    
                                      
AXA Assistance       14%           10%           7%    
                                      
Others (b)       7%           0%           1%    
                                      
Asset Management 4%           4%           5%          
                                      
Alliance Capital       75%           79%           81%    
                                      
AXA Investment Managers       25%           21%           19%    
                                      
Other Financial Services 1%           1%           1%          
                                      
French banks       19%           17%           13%    
                                      
German banks       7%           15%           12%    
                                      
AXA Bank Belgium       73%           64%           70%    
                                      
Others       1%           4%           5%    
                                         
(a)   Starting January 1st, 2004, Italy, Spain and Portugal activities (previously reported under “Other countries”) are now reported as one geographical region “Southern Europe”.
(b)   In 2004, transfer of AXA RE US entities from AXA RE segment to “Other Transnational Activities” reported in “Others”.

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Segment information

Life & Savings segment

AXA’s Life & Savings segment offers a broad range of life insurance products including retirement and health insurance products for both individuals and groups, with an emphasis on savings-related products including assets with financial risk carried by policyholders (unit-linked) products. The Life & Savings segment accounted for €47.1 billion or 65% of AXA’s consolidated gross premiums and financial services revenues for the year ended December 31, 2004 (2003: €46.8 billion or 65%, respectively).

The table below summarizes AXA’s Life & Savings gross premiums and gross insurance liabilities by geographic region for the periods and as at the dates indicated.

                               
      (in euro millions, except percentages)  
                               
      Gross premiums and financial services revenues       Gross  
          Years ended December 31,       insurance  
          2003   2002   liabilities at  
                          December 31,  
  2004   FAS 131   As   FAS 131   As   2004  
          basis (b)   published   basis (b)   published      
                                    
France 25%   11,893   10,882   10,882   10,423   10,423   87,862  
                                    
United States 27%   12,880   13,732   13,732   12,726   12,726   87,925  
                                    
United Kingdom (a) 13%   6,309   5,831   5,831   7,228   8,362   67,603  
                                    
Japan 12%   5,526   6,078   6,078   6,428   6,428   26,307  
                                    
Germany 7%   3,499   3,428   3,428   3,140   3,140   28,461  
                                    
Belgium 5%   2,203   2,050   2,050   1,629   1,629   14,330  
                                    
Southern Europe (b) 3%   1,364   1,182     1,515     7,600  
                                    
Others (b) 7%   3,389   3,615   4,798   4,362   5,877   21,797  
                                    
Australia and New Zealand 3%   1,496   1,697   1,697   2,018   2,018   9,583  
                                    
Hong Kong 2%   751   791   791   936   936   3,560  
                                    
TOTAL 100%   47,063   46,799   46,799   47,452   48,586   341,886  
                                    
Represented by:                            
                                    
Gross written premiums   46,242   46,286   46,286   46,939   48,048    
                                    
Others revenues (c)   821   513   513   512   539    
                                    
(a)   Since FY 2003, UK Health business has been tranfered to UK Property & Casualty segment. Consequently FY 2002 have been adjusted to exclude UK Health business.
(b)   Starting January 1st, 2004, Italy, Spain and Portugal activities (previously reported under “Other countries”) are now reported as one geographical region named “Southern Europe”.
(c)   Includes revenues from other activities (commissions and related fees associated with the management of AXA’s general account assets and mutual funds sales).

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Market

In 2004, the European, U.S. and Japanese markets continued to grow mainly due to stronger financial markets and a rising demand for insurance and investment products especially in unit linked type products in most countries where AXA operates.

France experienced mixed results in 2004 mainly due to a delay in the effectiveness of the new regulation on PERP/PERE affecting pension-relating products which delayed the launch of new products in that business.

In U.S., investors responded favorably to a second year of positive returns in the U.S. equity markets with continued net inflows to long-term mutual funds and increased sales of equity linked insurance products.

The Japanese insurance market experienced growth for the first time after a 6-year decline, in particular with respect to individual annuity products sold through distribution agreements entered into with banks.

In Germany, the financial markets continued to recover as volatility declined. A new retirement earnings law (“Alterseinkünftegesetz”) came into effect on 1 January 2005. It changed the taxation of and thus the demand for pension products.

In the United Kingdom, the principal growth area was group pensions. During the second half of 2004, companies began the process of positioning themselves to exploit opportunities in the run-up to Pensions Simplification A-Day in April 2006. Pensions Simplification will replace the eight existing tax regimes with a single universal regime for tax-privileged pension savings.

In each of its principal markets, AXA operates through well-established life insurance companies. AXA’s principal life insurance subsidiaries are set out below.

France: AXA France Vie,
United States: AXA Equitable Life Insurance Company and MONY Life Insurance Company and their insurance and distribution subsidiaries and affiliates,
United Kingdom: AXA Sun Life Plc,
Japan: AXA Life Insurance Co. and AXA Group Life Insurance,
Germany: AXA Lebensversicherung AG and AXA Krankenversicherung AG,
Belgium: AXA Belgium SA,
Southern Europe:  
Italy: AXA Assicurazioni e Investimenti and AXA Interlife,
Spain: AXA Aurora Vida and AXA Aurora Iberica,
Portugal: AXA Companhia de Seguros Vida.

Commentary on the 2004 market conditions in the geographical markets in which AXA operates is provided in “Item 5 – Operating and Financial Review and Prospects – Market Conditions in Year 2004”.

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The table below presents the life insurance markets in which AXA operates ranked by worldwide gross premiums in 2003, along with AXA’s ranking (by market share).

BASED ON WORLDWIDE GROSS LIFE INSURANCE (INCLUDING ANNUITY) PREMIUMS IN 2003

  Country Statistics (a)   AXA (b)  
   Countries                
  Ranking   % premiums written   Ranking   Market share  
                     
   United States 1   29%   3 (c)   7% (c)  
                     
   Japan 2   22%   12   3%  
                     
   United Kingdom 3   10%   6 (d)   5%  
                     
   France 4   6%   3   9%  
                     
   Germany 5   5%   7   4%  
                     
   Belgium 15   1%   3   12%  
                     
   Southern Europe (e)   6%      
                     
(a)   Source: Swiss Re, Sigma report 2004 “World insurance in 2003”.
(b)   In general, based on 2003 market data for each specific country or an estimate for 2004.
(c)   Relates to the variable annuity products (December 2004 data).
(d)   Based on annualized new business premium equivalent (regular premiums plus one-tenth of new business single premiums).
(e)   Southern Europe: In 2004, AXA ranking and market share are respectively: in Spain 10 with 2.2%, Portugal 7 with 2.6% and Italy 14 with 1.03%.

In addition to the principal markets mentioned above, AXA offers life, health and retirement products in other countries in Europe (Netherlands, Luxembourg, Switzerland and Turkey), Morocco, Canada, Australia, New Zealand, Hong Kong, Singapore, and China, as well as other countries in the Asia Pacific region, the Middle East and Africa. The products in these markets are offered through various distribution channels, including general agents, salaried sales forces, bank networks, financial advisers and brokers.

Competition

The nature and level of competition vary among the countries in which AXA operates. There is strong competition among companies for all the types of individual and group Life & Savings products sold by AXA. Many other insurance companies offer one or more products similar to those offered by AXA, in some cases using similar marketing techniques. In addition, AXA still competes with banks, mutual funds, investment advisers and other financial institutions for sales of savings-related investment products and, to a lesser extent, life insurance products.

The principal competitive factors affecting the Life & Savings segment’s business include:

  • price,
  • investment management performance,
  • historical levels of bonuses with respect to participating contracts,
  • ratings for an insurer’s financial strength and claims paying ability (at December 31, 2004, the main Life & Savings entities of AXA Group were rated AA by Fitch Ratings, AA– by Standard & Poor’s and Aa3 by Moody’s),
  • size, strength and quality of the distribution platform, in particular the quality of advisers,
  • range of product lines and product quality,
  • quality of service,

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  • Reputation, visibility and recognition of brand,
  • Changes in regulations that may affect the policy charging structure relating to commission and administrative charges,
  • Quality of management, and
  • Product innovation.

Products

AXA’s Life & Savings products include a broad range of life, health, retirement and savings-related products marketed to individuals and corporate clients, the latter in the form of group contracts. The Life & Savings related products offered by AXA include term life, whole life, universal life, mortgage endowment, deferred annuities, immediate annuities, variable life and other investment-based products. The health products offered include critical illness and permanent health insurance products. The nature of the products offered by AXA varies from market to market.

The table below presents consolidated gross written premiums (after intersegment elimination) and gross insurance liabilities by major product for the periods and as at the dates indicated for AXA’s Life & Savings segment.

LIFE & SAVINGS SEGMENT     (in euro millions, except percentages)  
               
      Gross written premiums   Gross insurance  
      Years ended December 31,   liabilities at  
      2004   2003   2002   December 31, 2004  
                                 
   Individual     55%   25,510   25,433   24,136   201,675    
                                 
   Group     9%   4,174   4,674   5,298   35,870    
                                 
Retirement/annuity/investment contracts     64%   29,684   30,107   29,435   237,545    
                                 
Life contracts (including endowment contracts)   21%   9,938   10,043   10,481   76,977    
                               
Health contracts     10%   4,590   4,064   6,067   11,530    
                                 
Other     4%   2,030   2,073   2,065   15,835    
                                 
TOTAL     100%   46,242   46,286   48,048   341,886    
                                 
Total includes:                          
                                 
Contracts with financial risk borne                          
by the policyholders (unit-linked)     35%   16,415   15,022   14,344   113,998    
                                
UK “With-Profit” business     2%   1,034   1,288   3,128   30,282    
                                  
(a)   Since January 1, 2003, UK Health business is presented in the UK Property & Casualty segment (1.134 million of gross revenues in 2002).

Certain of AXA’s Life & Savings products are participating contracts which enable the policyholders to participate in the excess assets over the liabilities (the surplus) of the life company issuing the contract through an interest or bonus crediting rate. AXA offers participating contracts in most its principal Life & Savings operations. The policyholder may participate in the investment return and/or in part of the operating profits earned by the issuing company. The nature and extent of such participation vary from country to country. Therefore, such participations, including policyholder participations on UK “With-Profit” business (explained below), are treated as dividends that may either increase the present value of future policy benefits or be paid in cash to the policyholder in the year the bonus is credited.

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UK “With-Profit” business

A participating contract, specific to United Kingdom and known as the “With-Profit” contract, is offered by many life insurance companies in the United Kingdom, including AXA Sun Life. In 2002, AXA decided to cease the marketing of new products for the On Shore “With-Profit” contracts. Under “With-Profit” contracts, policyholders’ premiums are paid into a fund and are invested in a range of assets, including fixed maturity and equity securities, real estate and loans. The policyholders are entitled to receive a share of the profits arising from these investments which includes regular bonuses and terminal bonuses. The regular bonuses are designed to provide a return to the policyholder through a periodic increase in benefits and are credited to the policyholder. Periodically, they do not reflect the return earned by the issuing company over period. Once credited, regular bonuses are guaranteed to be paid at maturity, death or as otherwise specified in the policy. Terminal bonuses, which are not guaranteed in advance of payment and are designed to provide policyholders with their share of total investment performance (including investment income and realized and unrealized investment gains or losses) and other experience of the fund (including expenses, mortality experience and income tax). Terminal bonuses can represent a significant portion of the total amount paid at maturity (which has in the past often exceeded 50% and currently exceeds 25% in some cases) or upon surrender prior to maturity. The amount of terminal bonus to be paid is determined at the discretion of the board of directors.

Following policyholder and court approvals, in 2001 AXA Equity & Law underwent a financial reorganization whereby the life insurance funds were transferred to AXA Sun Life and fundamentally restructured. A portion of the assets that accumulated over the years (which we refer to in this Annual Report as the “inherited estate”) were attributed to AXA as the shareholder, less a portion allocated to the “With-Profit” policyholders in the form of a reorganization bonus, based on the number of eligible policyholders that elected in favor of this plan.

Variable life and annuity products

Variable life and variable annuity products may be linked to investments supporting such contracts and are referred to in this Annual Report as “assets with financial risk carried by policyholders contracts” or “unit-linked contracts”. In general, the investment risk (and reward) is transferred to the policyholder while the issuing company earns fee income from managing the underlying assets. However, there may be certain types of variable products that offer guarantees, such as guarantees of minimum income benefits or death benefits.

In 2004, AXA’s Life & Savings operations continued experienced growth in savings-related unit linked products. This growth has been notable in Europe and is attributable to (i) an increase in consumer awareness of such products, (ii) government initiatives to move away from state funded pensions to private funded pensions, and (iii) favorable financial market performance in 2003 and 2004. In United States, variable annuity premiums decreased due to a very high level last year. Gross premiums on such business have increased from €14.3 billion in 2002 to €15 billion in 2003. In 2004, mainly due to the continued growth of financial markets, gross premiums in unit-linked reached €16.3 billion, representing at constant exchange rates 35% of total gross revenues, compared to 32% in 2003.

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Distribution

AXA distributes its Life & Savings products through a number of channels that vary from country to country, including notably exclusive agents, independent brokers, salaried sales forces, direct marketing (mail, telephone, or internet sales) and specialized networks (including banks and other financial services providers). In Europe, numbers of distribution channels are used by both AXA’s Life & Savings operations and its Property & Casualty insurance operations.

The split by distribution channels used by AXA’s principal Life & Savings operations, based on consolidated gross premiums from new business for the year ended December 31, 2004, is presented below.

             
  Agents and
direct sales force
  Intermediaries,
independent
advisers & brokers
  Other networks,
including direct marketing,
corporate partnerships
and bank networks
 
   Based on gross premiums      
   from new business in 2004:      
       
                
   France (a) 66%   26%   8%  
                
   United States 39%   40%   21%  
                
   Japan 70%   16%   14%  
                
   United Kingdom 7%   83%   10%  
                
   Germany 48%   39%   13%  
                
   Belgium 4%   79%   17%  
                
   Southern Europe (b) 64%   10%   25%  
                
(a)   In 2004, a more refined segmentation has been set up for the group retirement branch. Part of the gross revenues that were attributed to brokerage is now transferred to the direct sales force. Pro forma figures for 2003 distribution network data are as follows: Agents and direct sales force: 66%, Intermediairies/Independent advisers/Brokers: 30%, Other networks: 4%.
(b)   In 2003, the distribution channels in Southern Europe were respectively 71%, 8%, and 21%.

Surrenders and Lapses

For most Life & Savings products, costs to the issuing company in the first year are higher than costs in subsequent years due to first year commissions and the costs of underwriting and issuing a contract. Consequently, the rate of policies remaining in-force and not lapsing, also known as the “persistency rate”, plays an important role in profitability. The majority of individual Life & Savings products issued by AXA may be surrendered for a cash surrender value. Most of the individual Life and Savings products issued by AXA have front-end charges (or subscription fees), which are assessed at the inception date of the contract and/or surrender charges (charges assessed in the case of early surrender). Both front-end charges and surrender charges are intended to offset a portion of the acquisition costs.

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Total surrenders and lapses for 2004 and the ratio of surrenders and lapses to gross insurance reserves for the periods indicated are presented below:


                     
    Years ended December 31,
    2004 2004   2003 2002
    Total surrenders & lapses Surrenders & lapses ratio
    (in euro millions) %   % %
                     
French operations   5,045     6.6%   7.1%   6.6%  
US operations (a)                    
Individual life   1,242     4.9%   4.4%   4.0%  
Individual retirement   3,951     8.2%   8.4%   9.8%  
Japan (b)   2,864     10.7%   12.0%   9.5%  
UK operations   4,476     8.4%   7.6%   7.6%  
German operations (excluding Health)   477     1.8%   1.5%   1.2%  
Belgian operations   936     7.6%   7.7%   6.4%  
Southern Europe operations (c)   372     5.5%          
                     
(a) Amounts reported for the US operations exclude lapses and institutional assets with financial risk carried by policyholders (1,958 million).
2003 reflects updated information since publication of French Annual Report. US surrenders were previously estimated to be 4.0% and 6.7% respectively for individual life and individual retirement.
Excluding MONY in 2004, surrenders & lapses rates were Individual life: 5.2% and Individual retirement: 8%.
(b)    Including conversions in Japan.
(c)    In 2002 and 2003, surrenders & lapses rates in Southern Europe were 6.7% and 4.9% respectively.

Property & Casualty segment

AXA’s Property & Casualty segment offers a range of personal and commercial insurance products. The Property & Casualty segment accounted for approximately €17.9 billion, or 25% of AXA’s consolidated gross premiums and financial services revenues for the year ended December 31, 2004 (2003: €17.1 billion or 24% respectively).

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The table below summarizes AXA’s consolidated gross premiums and financial services revenues (after inter-segment eliminations) and claims reserves for the Property & Casualty segment for the periods and as at the dates indicated.

PROPERTY & CASUALTY SEGMENT       (in euro millions, except percentages)    
                                      
  Gross premiums and financial services revenues        
  Years ended December 31,   Gross insurance  
          2003   2002   liabilities at  
  2004   FAS 131   As   FAS 131   As   December 31, 2004  
          basis (b)   published   basis (b)   published        
                                      
France 27%   4,895   4,640   4,640   4,383   4,383   9,735    
                                      
Germany 16%   2,796   2,847   2,847   2,843   2,843   5,544    
                                      
United Kingdom                              
(& Ireland) (a) (b) 25%   4,469   4,222   3,664   4,438   2,749   6,547    
                                      
Belgium 8%   1,430   1,405   1,405   1,395   1,395   4,992    
                                      
Southern Europe (a) 16%   2,901   2,577     2,418     4,668    
                                      
Others 8%   1,361   1,408   4,543   1,606   4,577   2,434    
                                      
TOTAL 100%   17,852   17,098   17,098   17,082   15,948   33,921    
                                      
Represented by:                              
                                      
Gross written premiums   17,810   17,063   17,063   17,044   15,936      
                                      
Other revenues   42   35   35   38   12      
                                      
(a)   Starting January 1st, 2004, (i) Italy, Spain and Portugal activities (previously reported under “Other countries”) are now reported as one geographical region named “Southern Europe” and (ii) UK Property & Casualty segment is now presented including Ireland, which was previously reported under “Other countries”.
(b)   Since 2003, UK Health business has been transferred from Life & Savings segments to Property & Casualty segment. Consequently FY 2002 has been adjusted including UK Health business.

For the ten-year loss development of the Property & Casualty claims reserves, see “Property & Casualty Claims Reserves” included at the end of this section of the Annual Report.

Market

During 2004, the Property & Casualty market continued to grow, driven by an increase in the number of contracts underwritten. Premium rates also continued to increase albeit at a lower rate than in 2003 in an increasing competitive environment.

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 France IARD, AVANSSUR (ex Direct Assurance IARD), Natio Assurance and AXA Protection Juridique,
United Kingdom & Ireland: AXA Insurance UK and AXA Insurance Limited,
Germany: AXA Versicherung AG,
Belgium: AXA Belgium SA,
Southern Europe:  
Italy: AXA Assicurazioni,
Spain: AXA Aurora Iberica and Hilo Direct Seguros y Reasuguros,
Portugal: AXA Portugal Companhia de Seguros.

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Commentary on the 2004 market conditions in the geographical markets in which AXA operates is provided in “Item 5 – Operating and Financial Review and Prospects – Market Conditions in 2004”.

The table below presents the Property & Casualty markets in which AXA operates ranked by worldwide gross premiums in 2003, along with AXA’s ranking (by market share).

PROPERTY & CASUALTY                  
                       
  Country Statistics (a)   AXA (b)  
   Countries                  
  Ranking   % premiums written   Ranking   Market share
                       
Germany 3     7%   7   5% (c)  
                       
United Kingdom 4     7%   5   5% (d)  
                       
France 5     5%   1   14%  
                       
Belgium 14     1%   1   17%  
                       
Southern Europe (e)     6%      
                       
(a)   Source: Swiss Re, Sigma report 2004 “World insurance in 2003”.
(b)   In general, based on 2003 market data for each specific country or an estimate for 2004.
(c)   Based on 2003 gross Property & Casualty premiums written in Germany, AXA is ranked as follows (group ranking without International Insurance): third in liability insurance (7.1% market share), fifth in homeowners’ insurance (4.8% market share), sixth in automobile insurance (4.1% market share).
(d)   The UK, excluding Ireland product lines are ranked second with 11% share of UK SME business.
(e)   Southern Europe: In 2004, ranking and market share AXA are respectively: third in Spain with 5%, second in Portugal with 8.3% and ninth in Italy with 3%.

In addition to the principal markets discussed above, AXA offers personal and commercial Property & Casualty insurance products in the following countries: Netherlands, Luxembourg, Switzerland, Canada, Morocco, Turkey, Japan, Singapore, and Hong Kong, as well as other countries in the Middle East and Africa. The products offered in these markets are offered through various distribution channels, including brokers and direct sales force.

Competition

The nature and level of competition varies among the countries in which AXA operates. Overall, the Property & Casualty insurance industry in each of AXA’s principal markets is highly competitive, and tends to be cyclical with surplus underwriting capacity leading to lower premium rates. The principal competitive factors are as follows:

  • price,
  • quality of service,
  • distribution network,
  • brand recognition,
  • changes in regulations, which may affect premium rates charged or claims settlement costs paid, and
  • ratings for financial strength and claims-paying ability.

In France, Germany and Belgium, markets are fragmented. In the United Kingdom, industry-wide consolidation across the sector has affected both major insurance companies and brokers, resulting in increased concentration among the top players in recent years. In Ireland, new players have entered in the Irish market recently, resulting in increased competition.

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Products

AXA’s Property & Casualty insurance operations offer a broad range of products including automobile, homeowners / household, property and general liability insurance for both personal and commercial customers, the latter specifically focusing on small to medium-sized companies, and permanent health insurance.

The table below sets forth gross written premiums and gross insurance reserves by major product for the periods and as at the dates indicated.

PROPERTY & CASUALTY INSURANCE SEGMENT       (in euro millions, except percentages)
                            
  Gross written premiums   Insurance  
  Years ended December 31,   Reserves  
  2004   2003   2002   December 31, 2004  
                            
Personal line                      
                            
Motor (Automobile) 33%   5,889   5,550   5,686   10,390    
                            
Homeowners/household 15%   2,626   2,205   2,273   2,324    
                            
Other (a) 13%   2,359   2,083   1,548   4,698    
                            
Comercial line                      
                            
Motor (Automobile) 7%   1,244   1,258   1,252   2,068    
                            
Property damage 11%   2,031   2,265   2,078   2,244    
                            
Liability 7%   1,320   1,242   1,111   5,004    
                            
Other (a) 11%   2,008   1,666   1,179   5,408    
                            
Other 2%   333   794   808   1,785    
                            
TOTAL 100%   17,810   17,063   15,936   33,921    
                            

(a) Since January 1, 2003, UK Health business is presented under lines “Other” (1,036 million gross revenues in 2003).

Distribution

AXA distributes its Property & Casualty insurance products through a number of channels that vary from country to country, including exclusive agents, independent brokers, salaried sales forces, direct marketing (mail, telephone, or internet sales) and specialized networks (corporate partnerships and bank networks). In Europe, the same distribution channels are used by both AXA’s Life & Savings operations and Property & Casualty operations. The split by distribution channels used by AXA’s Property & Casualty operations, based on gross written premiums for the year ended December 31, 2004 is presented below.

BASED ON GROSS WRITTEN PREMIUMS IN 2004

  General agents
and sale force
  Intermediaries,
independent advisers
& brokers
  Direct sales
and marketing
  Other networks,
including corporate
partnerships
and bank networks
 
         
         
         
                             
France 70%     25%     4%     1%    
                             
Germany 46%     41%     4%     9%    
                             
United Kingdom (& Ireland) (a)     58%     26%     16%    
                             
Belgium     75%     1%     24%    
                             
Southern Europe (b) 65%     26%     5%     4%    
                             
(a)   Including health. On a comparable basis, in 2003, the distribution channels were respectively 0%, 56%, 28% and 15%.
(b)   In 2003, the distribution channels in Southern Europe were respectively 64%, 20%, 5% and 11%.

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Ceded Reinsurance

AXA’s Property & Casualty insurance operations use various types of reinsurance, primarily to limit their maximum exposure to catastrophic events, environmental pollution risks and certain other types of risks. A growing portion of AXA’s Property & Casualty insurance exposures are ceded internally to AXA Cessions, which organizes external reinsurance programs. Total gross premiums ceded by AXA’s Property & Casualty operations to third party reinsurers in 2004 was €952 million (2003: €1,043 million).

International insurance segment

AXA’s International Insurance segment is primarily comprised by AXA RE for the reinsurance activities and AXA Corporate Solutions Assurance for large risks insurance activities.

The business operations of these International Insurance activities are described below.

AXA RE is a reinsurer focused principally on property and catastrophe business as well as some other attractive third-party niches. Such business is underwritten in Paris, Canada, Miami (for South American business) and Singapore.

In addition, (i) AXA Corporate Solutions Assurance provides global Property & Casualty insurance business for large corporate clients in Europe, as well as in the marine and aviation coverage for all clients on a worldwide basis, (ii) AXA Cessions is an intra-group reinsurance company to which certain companies within the AXA Group cede internally some of their exposure (AXA Cessions analyses, structures and places reinsurance programs for such risks with third-party reinsurers and also provides advice in risk management and purchases of reinsurance cover to AXA group subsidiaries), (iii) AXA Assistance provides assistance services including medical aid for travelers and automobile-related road assistance mainly to insurance companies, credit card companies, tour operators and automobile manufacturers, and (iv) AXA Liabilities Managers manages the internal Property & Casualty run-off portfolios held by AXA RE, AXA Belgium, and AXA UK or in stand-alone run-off companies of the “Other transnational activities” segment (inclusive of the Property & Casualty entities formerly managed by AXA RE in the United States) and (v) US Life reinsurance activities which are now in run-off.

The International Insurance segment accounted for €3.4 billion, or 5% of AXA’s consolidated gross premiums and financial services revenues for the year ended December 31, 2004 (2003: €4.0 billion or 6%, respectively).

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The table below summarizes AXA’s consolidated gross premiums and financial services revenues and gross insurance liabilities (gross of reinsurance) for the International Insurance Segment, for the periods and at the dates indicated.

INTERNATIONAL INSURANCE SEGMENT      
(in euro millions, except percentages)
 
                     
  Gross premiums and financial services segment   Gross insurance  
  Years ended December 31,   liabilities at  
  2004   2003   2002   December 31, 2004  
                            
AXA RE (a) 31%   1,056   1,913   3,472   3,564    
                            
AXA Corporate Solutions Assurance 45%   1,506   1,550   1,762   4,431    
                            
AXA Cessions 3%   94   87   100   125    
                            
AXA Assistance 14%   475   408   397   192    
                            
Other international activities (a) 7%   240   14   30   2,040    
                            
TOTAL 100%   3,371   3,972   5,762   10,351    
                            
Represented by:                      
                            
Gross written premiums   3,356   3,956   5,740      
                            
Other revenues   15   16   22      
                            
(a)   In 2004, some AXA RE US entities were transferred from the AXA RE segment to Other International Activities.

For the ten-year loss development of AXA’s International Insurance claims reserves, see “Property & Casualty Claims Reserves” included elsewhere in this section of the Annual Report.

Market and competition

On the reinsurance market, after the very low claims experience in 2002 and 2003, prices were almost stable in major lines of business and the capacity was relatively abundant. Competition among reinsurers is mainly coming from the Bermudian companies whose part in the world reinsurance market has become preponderant. The bulk of AXA RE’s portfolio (property, marine and aviation) showed stable premium rates. The rest of the portfolio (motor and casualty) benefited from additional premium rate increases.

On the large risks insurance market, further rate increases and restructuring of large corporate insurance programs were conducted, especially in liability, and to a lesser extent in marine. On the other hand, the property and aviation market softened, in the context of a favorable claims experience.

Products

AXA RE – Reinsurance Activity. AXA RE’s main reinsurance products are treaties (about 90% in both proportional and non proportional reinsurance) related to catastrophe covers all around the world but especially in the U.S. (essentially wind, flood and earthquake covers). In addition, AXA RE offers the following reinsurance products on a very selective basis: other property damage, third-party liability, motor, marine, credit, life and health insurance.

AXA Corporate Solutions Assurance – Large Risk Insurance Activity. AXA Corporate Solutions Assurance products offer cover property damage, third-party liability, marine, aviation and transport, construction risk, financial risk, and directors and officers liability. AXA Corporate Solutions Assurance also offers loss-prevention and risk management services.

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The table below presents the International Insurance segment’s gross written premiums and gross insurance liabilities by major products for the periods and as at the dates indicated.

INTERNATIONAL INSURANCE         (in euro millions, except percentages)  
                       
  Gross written premiums   Gross insurance  
  Years ended December 31,   liabilities at  
  2004   2003   2002   December 31, 2004  
                            
Property damage 43%   1,450   1,746   2,852   2,978    
                            
Automobile, Marine, Aviation 20%   680   705   1,235   2,624    
                            
Casualty / Civil Liability 18%   604   608   689   3,437    
                            
Assistance 14%   475   408   397   192    
                            
Other 4%   148   489   566   1,120    
                            
TOTAL 100%   3,356   3,956   5,740   10,351    
                            
                       
                       
Distribution                      

AXA RE and AXA Corporate Solutions Assurance distribute their products principally through insurance and reinsurance brokers.

AXA Assistance distributes its products through general agents, independent advisers and brokers or direct sales/ marketing; but also through AXA France distribution network which offers in its Property & Casualty insurance products, assistance services.

Ceded Reinsurance and Retrocessions

AXA RE and AXA Corporate Solutions Assurance review their exposures to ensure that the risks underwritten are diversified geographically and by line of business in order to avoid risk of concentration.

Premiums retroceded by AXA RE to external reinsurers in 2004 are split between (i) ceded €59 million premiums related to specific and proportional retrocessions (deemed to protect specific lines of business), and (ii) ceded € 230 million related to covers (deemed to cover the whole portfolio against major events).

In 2004, AXA Corporate Solutions Assurance ceded €588 million premiums (2003: €664 million) to third-party reinsurers.

Also, in 2004, approximately €631 million, or 79% of total reinsurance ceded to third parties, were placed externally by AXA Cessions on behalf of AXA’s insurance subsidiaries (2003: €671 million or 54%).

Asset management segment

During 2004, the AXA’s Asset Management segment benefited from the continued increase in equity markets (+9% for the S&P 500 American equity index) combined with the good performance of fixed-income assets. Continuing a trend started in 2003, investors are attracted by the prospects of higher returns following years of declining equity markets, but with an increased demand for advice and alternative investments.

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Asset Management is important to AXA, from both a strategic and profitability perspective. The development of Asset Management activities is a key part of AXA’s strategy, which seeks to capitalize on existing strengths and to expand its client base. This strategy is based on the belief that its Asset Management expertise will enable AXA to benefit in the future from the expected growth in savings-related products in the markets in which it operates. The Asset Management segment accounted for €3.1 billion, of AXA’s consolidated gross premiums and financial services for the year ended December 31, 2004 (2003: €2.9 billion).

AXA’s principal Asset Management companies are Alliance Capital Management (“Alliance Capital”) and AXA Investment Managers (“AXA IM”). The Asset Management companies manage assets on behalf of retail investors, private clients and institutional clients as well as on behalf of subsidiaries of AXA.

AXA has Asset Management specialist teams in each of its major markets: Western Europe, the United States and the Asia/Pacific region.

The table below sets forth the total assets managed by the companies comprising AXA’s Asset Management segment, including assets managed on behalf of third parties, and the fees earned by such companies on these assets as at the dates and for the periods indicated.

ASSETS MANAGEMENT SEGMENT         (in euro millions)  
                
  2004   2003   2002  
                
Assets under management by AXA at December 31, (a)            
                
Managed on behalf of third parties 445,318   391,690   372,931  
                
Assets backing contracts with financial risk borne by policyholders 66,138   65,158   58,887  
                
Other invested assets 229,331   211,562   204,857  
                
TOTAL 740,788   668,410   636,674  
                
Commissions and fees earned for the years ended December 31,            
                
Alliance Capital (b) 2,421   2,416   2,903  
                
AXA Investment Managers (b) 944   783   820  
                
SUB-TOTAL 3,364   3,199   3,724  
                
Intercompany eliminations (277)   (277)   (313)  
           
CONTRIBUTION TO AXA’s CONSOLIDATED GROSS PREMIUMS            
AND FINANCIAL SERVICES REVENUES 3,087   2,922   3,411  
                
(a) Based on estimated fair value at the dates indicated. Assets under management presented in this table are based on asset management companies only; AXA Group (including insurance companies) assets under management amounted to respectively 869 billion, 775 billion and 742 billion as of December 31, 2004, 2003 and 2002.
(b)    Alliance Capital operations are mainly located in the U.S., while AXA Investment Managers operations are mainly based in Europe, although it is present in most countries where the Group operates.

Market and Competition

The Asset Management industry remains highly fragmented, with no single competitor, or any small group of competitors, dominating the worldwide market. AXA’s asset management operations are subject to substantial competition in all aspects of its business due, in part, to the relatively low barriers to entry. Asset Management companies compete on the range of investment products offered, the investment performance of such products and the quality of services provided to clients, and prices.

46

 

Alliance Capital

Alliance Capital, through its parent company Alliance Holding, is a listed subsidiary of AXA Financial and is a leading global investment management firm in the U.S. Alliance Capital provides diversified investment management and related services to individual investors, private clients and to a variety of institutional clients, including AXA Financial and its insurance company subsidiaries (collectively Alliance Capital’s largest client) as well as unaffiliated entities such as corporate and public employee pension funds, endowment funds, and U.S. and foreign governments.

Alliance Capital provides diversified asset management and related services globally to a broad range of clients including:

  • management of assets backing contracts with financial risk borne by policyholders (unit-linked), hedge funds and other investment vehicles for private clients (such as, high net worth individuals, trusts and estates, charitable foundations),
  • management of mutual funds sponsored by Alliance Capital, its subsidiaries and affiliates for individual investors,
  • management of investments on behalf of institutional investors, and
  • investment research and advisory services for institutional investors.

As at December 31, 2004, Alliance Capital had €395 billion of assets under management, including €352 billion of assets managed on behalf of third party clients (2003: €376 billion and €327 billion, respectively). Excluding exchange rates impact, assets under management in Alliance Capital increased by 13% to €427 billion at December 31, 2004 (in 2003, the increase at constant exchange rate was +23%).

AXA Investment Managers: AXA IM

AXA IM is one of the largest Asset Management companies based in Europe. AXA IM’s clients include both (i) institutional investors and (ii) individual investors. AXA IM provides diversified Asset Management and related services globally to mutual funds which are distributed through AXA’s distribution networks, AXA IM’s own sales team and external distributors, and AXA’s insurance subsidiaries in respect of their insurance-related invested assets and assets backing contracts with financial risk borne by policyholders (unit-linked).

In 2004, AXA IM began outsourcing its middle-office activities to State Street Corporation (effective December 2004 in France and Germany and March 2005 in the U.K.).

As at December 31, 2004, AXA IM had €345 billion of assets under management, including €93 billion of assets managed on behalf of third party clients (2003: €292 billion, €64 billion respectively).

Other financial services segment

The operations in the Other Financial Services segment are conducted primarily in Belgium and in France. For the year ended December 31, 2004 and 2003, the Other Financial Services segment accounted for €0.8 billion or 1% of AXA’s consolidated gross premiums and financial services revenues.

The segment operations principally include:

AXA Bank Belgium. A subsidiary of AXA Belgium that offers a comprehensive range of financial services to individuals and small businesses. It has a network of a thousand of independent bank agents that support the sale of products offered by AXA Belgium and AXA IM.

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AXA Banque and AXA Banque Financement. Based in Paris, AXA Banque delivers banking services dedicated to AXA. Its main activities include cash and securities flows management and bank account services to AXA’s existing clients and distribution networks, as well as to direct clients. In 2002, AXA Banque merged with Banque Directe, purchased the same year from BNP Paribas. Banque Directe was a provider of online banking services and complements AXA’s existing financial offering in France. AXA Banque Financement provides short-term loans to customers of AXA’s French insurance operations.

Insurance-related invested assets

The assets underlying AXA’s insurance operations (included within the three segments: the Life & Savings segment, the Property & Casualty segment and the International Insurance segment) are managed principally by AXA’s Asset Management entities : Alliance Capital and AXA Investment Managers. These assets consist of (i) general account assets whereby the insurer generally bears the investment risk and reward, and (ii) assets with financial risk carried by policyholders (unit-linked), whereby the investment risk and reward is principally transferred to the policyholders.

The discussion below concerns the general account investment assets of AXA’s insurance operations, which are referred to in this Annual Report as “insurance-related invested assets”.

The general account liabilities of AXA’s Life & Savings operations can be divided into two primary types, participating and non-participating. For participating products, the investment results of the underlying assets determine, to a large extent, the return to the policyholder that is either reflected as an increase in future policy benefits or paid out in cash in the year the bonus is credited to the policyholder. The insurer’s profits on such business are earned from investment management, net of policyholders’ participation, mortality and other charges. For non-participating or interest-sensitive products, the insurer’s profits are earned from a positive spread between the investment return, the crediting or reserve interest rate, and mortality.

Although all the general account assets of each insurer support all of that insurer’s liabilities, the insurers have developed asset-liability management techniques with separate investment objectives for specific classes of product liabilities.

At December 31, 2004, based on total invested assets1, the net book value of the insurance-related invested assets relating to the general account Life & Savings operations primarily consisted of fixed maturity investments, 72% of which were invested in equity holdings in fixed maturity-based mutual funds, and 10% of which were invested in equity investments (69% and 14% in 2003). At such date, the insurance-related invested assets relating to the Property & Casualty operations primarily consisted of fixed maturity investments, 61% of which were invested in equity holdings in fixed maturity-based mutual funds, and 20% of which were invested in equity investments (56% and 23% in 2003).

The following table presents AXA’s consolidated insurance-related invested assets, by insurance segment at December 31, 2004 :

(1.)   Based on net carrying value and excluding assets backing UK “With-profit” contracts, assets backing, assets with financial risk carried by policyholders contracts (unit-linked contracts) and investments in affiliated companies (Equity Method).

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INSURANCE - RELATED INVESTED ASSETS       (in euro mllions, except percentages)  
                       
  At December 31, 2004  
  Life & Savings   Property & Casualty   International Insurance   Total   % of total  
                                  
  Net carrying   Market   Net carrying   Market   Net carrying   Market   Net carrying   Market   Net carrying   Market  
  value (a)   value   value (a)   value   value (a)   value   value (a)   value   value (a)   value  
                                                  
Fixed maturities                                        
                                                  
(a) Held to maturity                                        
      and available for sale 116,256   126,559   18,030   19,352   5,348   5,571   139,635   151,482   56%   57%  
                                                  
– French government 20,698   23,799   2,348   2,664   467   512   23,514   26,975   9%   10%  
                                                  
– Foreign government 34,756   38,073   8,758   9,386   2,503   2,600   46,017   50,060   18%   19%  
                                                  
– Local governments 6,663   7,062   1,336   1,414   27   27   8,026   8,503   3%   3%  
                                                  
– Government controlled                                        
   corporations 6,761   7,390   1,625   1,689   589   623   8,976   9,703   4%   4%  
                                                  
– Non-government                                        
   controlled corporations 39,991   42,489   2,962   3,161   1,478   1,518   44,432   47,167   18%   18%  
                                                  
– Mortgage-backed                                        
   securities 5,978   6,207   540   572   181   185   6,700   6,964   3%   3%  
                                                  
– Other 1,388   1,518   460   467   103   105   1,950   2,091   1%   1%  
                                                  
Intercompany transactions                                        
not required by issuers 21   19   0   (0)   (0)   0   21   19   0%   0%  
                                                  
(b) Allocated to UK With-                                        
Profit business-trading (b) 15,736   15,736                   15,736   15,736   6%   6%  
                                                  
(c) Trading securities (c) 2,588   2,588   0   0   0   0   2,588   2,588   1%   1%  
                                                  
Total fixed maturities 134,580   144,883   18,030   19,352   5,348   5,571   157,959   169,806   63%   63%  
                                                  
Equity investments, including                                        
holdings in mutual funds                                        
                                                  
Available-for-sale 46,097   48,223   10,151   10,562   1,416   1,491   57,664   60,276   23%   22%  
                                                  
Allocated to UK With-Profit                                        
business-trading (b) 9,383   9,383                   9,383   9,383   4%   4%  
                                                  
Trading securities (c) 1,960   1,960                   1,960   1,960   1%   1%  
                                                  
Total equity investments,                                        
including holdings                                        
in mutual funds 57,441   59,566   10,151   10,562   1,416   1,491   69,008   71,619   28%   27%  
                                                  
Of which equity holdings                                        
in fixed maturity-based                                        
mutual funds 28,391   29,178   4,134   4,241   412   422   32,937   33,841   14%   14%  
                                                  
Investment in participating                                        
interests 1,048   1,668   1,192   1,541   51   78   2,292   3,286   1%   1%  
                                                  
TOTAL (b) (d) 193,069   206,117   29,374   31,455   6,815   7,140   229,258   244,712   92%   91%  
                                                  
Real Estate 9,290   11,052   2,274   2,814   138   221   11,702   14,087   5%   5%  
                                                  
Of which allocated                                        
to UK With-Profit                                        
business-trading (b) 3,080   3,080                   3,080   3,080   1%   1%  
                                                  
Mortgages, policy and                                        
other loans 17,134   17,663   988   1,012   34   34   18,156   18,709   7%   7%  
                                                  
Of which allocated                                        
to UK With-Profit                                        
business-trading (b) 35   35                   35   35   0%   0%  
                                                  
Cash and cash equivalents 13,067   13,067   3,560   3,560   2,040   2,040   18,666   18,666   7%   7%  
                                                  
INVESTED ASSETS 232,560   247,899   36,196   38,841   9,027   9,435   277,783   296,175          
                                                  
Of which allocated                                        
to UK With-Profit                                        
business-trading (b) 28,234   28,234                   28,234   28,234   11%   11%  
                                                  
INVESTED ASSETS EXCLUDING                                      
UK WITH-PROFIT 204,325   219,665   36,196   38,841   9,027   9,435   249,548   267,940   100%   100%  
                                                   
(a)   Amounts are net of valuation allowances. For details on valuation allowances see note 6 to AXA’s consolidated financial statements.
(b)   These amounts exclude assets with financial risk borne by the policyholders (unit-linked) and investments in affiliated companies accounted for under the equity method. Assets allocated to UK With-Profit business are carried at estimated fair value in the consolidated balance sheet.
(c)   Trading securities are carried at estimated fair value and represent assets that support insurance liabilities, in which the value of such liabilities is determined in part in reference to the market value of such assets.
(d)   Refer to note 2 to AXA’s consolidated financial statements included in this annual report that set out the investment valuation methodology.

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For additional information on the type of assets in which AXA invests and the related net investment results for each of the three years ended December 31, 2004, see notes 6, 7, 8 and 20 to the consolidated financial statements included in Item 18 of this Annual Report.

AXA did not have directly any equity and/or fixed maturity investment with respect to insurance-related invested assets in any one issuer other than the French government that was in aggregate €2,616 million or 10% or more of AXA’s total shareholders’ equity at December 31, 2004.

AXA’s fixed maturity and equity investments are predominantly publicly traded. In respect of these investments, 90% (compared to 84% in 2003, or 85% including Southern Europe and Ireland) of the fixed maturity investments and 93% (compared to 90% published in 2003) of the equity investments are held by AXA’s principal insurance operations in France, the United States, the United Kingdom (including Ireland), Germany, Belgium, Japan and Southern Europe.

More specifically, the insurance-related invested assets backing the insurance liabilities in these operations were predominantly holdings in domestic investments, or in the local currency of the liabilities.

In respect of AXA’s consolidated holdings in fixed maturity and equity securities, the breakdown of these investment holdings by industry sector and as at the dates indicated:

 
At December 31,
 
   Industry Sector Beakdown        
  2004   2003  
           
   Financial Services 21%   21%  
           
   Manufacturing / Pharmaceuticals 6%   6%  
           
   Utilities 3%   4%  
           
   Technology & Telecommunications 3%   3%  
           
   Government institutions 38%   36%  
           
   Other Direct holdings 16%   19%  
           
   Investment in mutual funds 14%   11%  
           
   Total 100%   100%  
           

Overall, the fixed maturity and equity investments together with real estate, mortgages and loans are concentrated in the local markets in which AXA’s principal subsidiaries operate.

Derivatives. AXA uses derivative instruments to minimize adverse fluctuations in equity prices, interest rates, foreign exchange rates. The basis for which AXA manages these risks, the sensitivities associated with managing these types of risks, and the potential impact on the AXA consolidated financial results are set out in further detail in “Item 11 – Quantitative and Qualitative Disclosures About Market Risk” and in note 25 to the consolidated financial statements included in Item 18 of this Annual Report.

Net investment return on insurance-related assets. The net investment return on insurance-related assets by major operating entity are presented within the segment information provided in “Item 5 – Operating and Financial Review and Prospects” and note 20 to AXA’s consolidated financial statements included in Item 18 of this Annual Report.

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Property & Casualty claims reserves

Establishment of claims reserves

AXA is required by applicable insurance laws and regulations, and generally accepted accounting principles to establish reserves for outstanding claims (claims which have not yet been settled) and associated claims expenses that arise from its Property & Casualty and international insurance operations. AXA establishes its gross insurance liabilities, or claims reserves, by product, type of insurance coverage and year, and charges them to income as incurred.

Claims reserves (also referred to as “loss reserves”) fall into two categories namely:

  • reserves for reported claims and claims expenses. These reserves are for outstanding claims which have not yet been settled and are based on undiscounted estimates of the future claims payments that will be made in respect of the reported claims, including the expenses relating to the settlement of such claims; and
  • reserves for incurred but not yet reported (“IBNR”) claims and claims expenses. IBNR reserves are established on an undiscounted basis, to recognize the estimated cost of losses that have occurred but have not yet been notified to AXA. These reserves, like the reserves for reported claims and claims expenses, are established to recognize the estimated costs, including the expenses associated with claims settlement, necessary to bring claims to final settlement.

The process of estimating the original gross claims reserve is based on information available at the time the reserve was originally established. However, claims reserves are subject to change due to the number of variables that affect the ultimate cost of claims, such as: (i) development in claims (frequency, severity and pattern of claims) between the amount estimated and actual experience, (ii) change arising from the occurrence of large natural catastrophes late in the financial year for which limited information may be available at year end (iii) judicial trends, regulatory changes, and (iv) inflation and foreign currency fluctuations.

As a result, actual losses may deviate from the original gross reserves established. Consequently, the reserve may be re-estimated on the basis of information available. Any adjustment resulting from a change in claims reserves is recorded in the financial statements of the relevant period.

AXA continually reviews the adequacy of established claims reserves, including claims development, and actual claims experience compared to initial assumptions used to estimate initial gross claims reserve. Based on current information available in the preparation of the consolidated financial statements included elsewhere in this Annual Report, AXA believes that these provisions are sufficient.

Estimation of claims reserves involves numerous subjective judgements and assumptions and consequently the sufficiency of claims reserves cannot be assumed. See “Item 3 – Risk Factors”.

The information within this section sets forth separately (i) AXA’s Property & Casualty insurance operations representing the Property & Casualty Segment operations and AXA Corporate Solutions Assurance from the International Insurance segment, and (ii) AXA RE business from the International Insurance segment.

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In accordance with prior years’ presentation, AXA RE’s information is provided separately because:
(i)AXA RE’s business consists of insurance assumed from other insurers,
(ii)AXA RE’s programs are monitored separately within the reinsurance operations, and the type of insurance and the nature of the risks and exposures covered are different compared to the direct insurance coverage provided by AXA’s Property & Casualty insurance operations and AXA Corporate Solutions Assurance,
(iii)A portion of AXA RE’s business is ceded to other reinsurers through retrocession programs which are monitored separately within the reinsurance operations, and
(iv)The claims are accounted for on an underwriting year basis rather than on an accident year basis covering a 12-month period.

The monitoring of the activity on an underwriting year basis is in fact the most usual practice among reinsurers, and is the most appropriate to reinsurance treaties which in general cover the risks underwritten by the ceding company during a given year, whereas the claims attached to this underwriting may occur either during this year or during the following one. In AXA RE’s loss reserve development table, the fact that claims may occur subsequently to the first closing of the underwriting year explains that the reserves re-estimated one year later (and in general also several years later) are always higher than the initial net claims reserves. In the financial statements this claims charge related to claims occurring subsequently to the first closing of the underwriting year they are attached to is covered by the premium items which are mentioned on the line “Premium adjustment”.

Property & Casualty Reserves not included in Loss Development Tables

AXA does not discount its reserves for claims and claims expenses except for disability claims for which a final settlement has been agreed upon and payments are fixed over a period of time. The disability claims reserves have not been included in the Loss Reserve Development Table, since these are similar to structured settlements.

AXA’s French Property & Casualty operations underwrite construction coverage with a ten-year contract term. In accordance with the French regulations, a specific provision is added to the claims reserves based on methodology established by the French government. This reserve is in addition to each single notified claim. The construction reserves and catastrophe equalization reserves were excluded from the Loss Reserve Development table because such reserves do not provide any indication as to how claims have been reserved (initially) and the outcome upon settlement of such claims in future periods based on the underwriting and associated reserving methodologies adopted by AXA.

In addition, local regulations require certain AXA Property & Casualty operations to establish equalization reserves specific to catastrophe risks, see “Additional Factors which may affect AXA’s Business – Regulation” for further details.

The Property & Casualty loss reserves that were excluded from the Loss Reserve Development Table amounted to €4.8 billion and represented 12.8% of total gross Property & Casualty insurance liabilities at December 31, 2004 (2003: 14.4%). For further information, refer to the “Reconciliation of Loss Reserves to Consolidated Financial Statements” table following the Loss Reserve Development tables.

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Loss Reserve Development

The loss reserve development table presents the claims reserve development for calendar years 1994 through 2004, as determined in accordance with French GAAP. The first row captioned “gross reserves for unpaid claims and claims expenses” represents the original gross claims reserve liability reported at the balance sheet date for the year indicated. The third row captioned “paid (cumulative)” represents the cumulative amounts paid as of the end of each year with respect to the original gross claims reserve liability reported. The fourth row captioned “Reserve re-estimated” represents the previously recorded liability as adjusted (re-estimated) based on claims experience as of the end of each year. Estimates are adjusted, as more information on unsettled claims becomes known from time to time to unsettled claims. For example, the gross claims reserve as at December 31, 1996 was originally €5,847 million and increased by €12,943 million to €18,790 million primarily due to the UAP acquisition in 1997. By the end of 2004, aggregate amounts paid were €12,143 million and the original gross claims reserve had been re-estimated to be €16,272 million at December 31, 2004. The “cumulative redundancy (deficiency)” for each year represents the aggregate amount by which the original gross claims reserve liability as of that year-end has changed in subsequent periods.

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LOSS RESERVE DEVELOPMENT TABLE: PROPERTY & CASUALTY INCLUDING
INTERNATIONAL INSURANCE OPERATIONS (except for AXA RE)
  (in euro millions except percentages)  
                                                    
  At December 31,  
                                                    
  1994   1995   1996   1997 (b)   1998   1999 (c)   2000   2001   2002   2003   2004 (d)  
                                                     
Gross reserves for unpaid claims and                                            
claims expenses developed initially (d) 5,595   5,712   5,847   20,371   20,941   26,656   26,916   28,636   28,465   27,825   29,128  
                                                     
Gross reserves for unpaid claims and                                            
claims expenses developed in 2004                                            
(adjusted for subsequent acquisitions) (d) 14,995   14,682   18,790   21,769   22,481   24,892   25,765   27,225   27,872   28,237   29,128  
                                                     
Paid (cumulative) at:                                            
                                                     
One year later 1,419   1,305   1,388   4,737   4,745   7,727   6,807   6,715   6,371   6,075      
                                                     
Two years later 2,044   1,684   5,759   6,632   6,818   11,184   10,302   9,900   9,554          
                                                     
Three years later 2,368   6,898   7,327   8,087   9,361   13,474   12,378   12,440              
                                                     
Four years later 7,082   8,123   8,351   10,338   10,632   14,798   14,220                  
                                                     
Five years later 8,089   8,917   10,619   11,218   11,384   16,239                      
                                                     
Six years later 8,591   9,075   11,187   11,512   12,435                          
                                                     
Seven years later 8,799   9,615   11,387   12,508                              
                                                     
Eight years later 9,079   9,660   12,143                                  
                                                     
Nine years later 9,079   10,114                                      
                                                     
Ten years later 9,446                                          
                                                     
Reserve re-estimated at:                                            
                                                     
One year later 5,303   5,607   5,537   19,425   19,040   23,041   27,069   27,425   26,856   27,527      
                                                     
Two years later 5,177   5,477   13,881   17,510   19,407   26,294   25,919   25,718   26,219          
                                                     
Three years later 5,278   13,376   13,864   17,971   22,048   25,542   24,864   25,610              
                                                     
Four years later 12,353   13,303   14,214   20,162   21,485   24,409   24,665                  
                                                     
Five years later 12,160   13,730   16,742   19,873   20,804   24,304                      
                                                     
Six years later 12,490   13,472   16,439   19,052   20,820                          
                                                     
Seven years later 12,323   13,273   16,024   19,293                              
                                                     
Eight years later 12,166   12,905   16,272                                  
                                                     
Nine years later 11,835   13,028                                      
                                                     
Ten years later 11,969                                          
                                                     
Cumulative redundancy (deficiency)                                            
from the initial gross reserves in excess                                            
of re-estimated gross reserves:                                            
                                                     
Amount (a) 3,026   1,654   2,518   2,476   1,661   588   1,101   1,616   1,653   710   na  
                                                     
Percent (a) 20.2%   11.3%   13.4%   11.4%   7.4%   2.4%   4.3%   5.9%   5.9%   2.5%   na  
                                                     
(a)   It is not appropriate to extrapolate future redundancies or future deficiencies based on the loss reserve development presented in the table as conditions and trends that have affected the development of the liability in prior periods may not necessarily occur in the future periods.
(b)   AXA acquired Compagnie UAP (“UAP”) on January 1, 1997. The operations of AXA and UAP were integrated in 1998. At the date of acquisition, UAP had net reserves of euro 13.7 billion. The outstanding claims reserves and claim expenses of UAP’s Property & Casualty operations are included in the year end reserves as at December 31, 1997 and thereafter. Cumulative payments and reserve development for the 1998 year and thereafter include the development of the integrated Property & Casualty liabilities of AXA, including UAP, as loss development data specific to UAP is not available and there is no reasonable basis of allocating cumulative payments and reserves re-estimated between AXA and UAP post-acquisition.
(c)   AXA acquired GRE in May 1999. The operations of GRE have been integrated within AXA. At time of acquisition the gross reserves totalled euro 5.6 billion.
(d)   In 2004, the companies AXA Corporate Solution Insurance US, AXA RE Property & Casualty Insurance company and AXA RE Property & Casualty Reinsurance company were transferred from AXA RE to the Other transnational activities.The reserves of AXA Corporate Solution Insurance US were presented on an occuring year basis and included in Property & Casualty loss reserve developement table. The reserves of AXA RE Property & Casualty Insurance company and AXA RE Reinsurance company were presented on an underwriting year basis and included in AXA RE loss reserve development table.

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The majority of the business of the Property & Casualty insurance operations is short tail and, therefore, losses develop and are paid relatively quickly. In 2004, approximately 40% of the claims reserves were paid in the year that the claim event occurred (2003: 39%).

Note 15 “Insurance Liabilities” to the consolidated financial statements includes: (i) a reconciliation of beginning to ending gross outstanding claims reserves including claim expenses for each of the three years ended December 31, 2004 and (ii) the effect on income relating to changes in claims reserves for each of the three years ended December 31, 2004 under the caption “increase (decrease) in provision attributable to prior years”.

In respect of the direct insurance business in 2004, there were no notable changes in the claims payment patterns, and no significant changes in assumptions during the current year. In 2004, the company AXA Corporate Solution Insurance US was transferred from the reinsurance business to transnational insurance activities. See “Item 5 –Operating and Financial Review and Prospects” for further information.

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LOSS RESERVE DEVELOPMENT TABLE: AXA RE                  
(in euro millions except percentages)
                     
  At December 31,  
                                                             
    1994   1995   1996   1997   1998   1999 (c)   2000   2001   2002   2003   2004 (d)  
                                                        
Gross reserves for claims expenses                                              
in Balance Sheet developed initially (a)   1,496   2,451   2,646   2,880   3,060   3,396   3,455   5,868   4,778   4,200   3,314  
                                                        
Gross reserves for claims expenses                                              
in Balance Sheet developed in 2004 (e)   1,496   2,451   2,646   2,880   3,060   3,396   3,453   5,868   4,778   3,742   3,314  
                                                        
Initial retroceded reserves   (201)   (262)   (196)   (285)   (416)   (430)   (393)   (1,652)   (1,020)   (853)      
                                                        
Retroceded reserves in 2004 (e)   (201)   (262)   (196)   (285)   (416)   (430)   (393)   (1,652)   (1,020)   (490)   (410)  
                                                        
Initial net claims reserves in excess                                              
of (less than) re-estimated net                                              
claims reserves:   1,295   2,189   2,450   2,595   2,644   2,966   3,060   4,216   3,758   3,252   2,904  
                                                        
Paid (cumulative) at:                                              
                                                        
One year later   374   602   615   583   956   1,165   1,218   1,987   1,441   950      
                                                        
Two years later   566   1,008   965   1,094   1,594   1,893   1,860   3,198   2,113          
                                                        
Three years later   737   1,221   1,230   1,430   2,000   2,265   2,449   3,603              
                                                        
Four years later   849   1,410   1,427   1,685   2,232   2,779   2,549                  
                                                        
Five years later   935   1,548   1,586   1,815   2,677   2,726                      
                                                        
Six years later   1,037   1,677   1,689   2,101   2,566                          
                                                        
Seven years later   1,106   1,759   1,953   1,971                              
                                                        
Eight years later   1,156   2,000   1,813                                  
                                                        
Nine years later   1,288   1,856                                      
                                                        
Ten years later   1,203                                          
                                                        
Reserve re-estimated at:                                              
                                                        
One year later   1,558   2,811   2,970   2,945   3,743   3,969   4,199   5,922   5,012   3,438      
                                                        
Two years later   1,549   2,917   2,829   3,159   3,817   4,105   4,061   6,183   4,163          
                                                        
Three years later   1,675   2,774   2,891   3,168   3,772   3,955   4,034   5,314              
                                                        
Four years later   1,643   2,818   2,844   3,045   3,643   4,027   3,817                  
                                                        
Five years later   1,653   2,755   2,754   2,941   3,722   3,755                      
                                                        
Six years later   1,681   2,678   2,612   2,964   3,444                          
                                                        
Seven years later   1,622   2,558   2,692   2,724                              
                                                        
Eight years later   1,552   2,653   2,468                                  
                                                        
Nine years later   1,688   2,452                                      
                                                        
Ten years later   1,503                                          
                                                        
Cumulative redundancy (deficiency)                                              
from the initial gross claims reserves                                              
in excess of (less than) re-estimated                                              
gross claims reserves   (7)   (1)   178   156   (384)   (359)   (364)   554   615   304      
                                       
Re-estimated retroceded reserves   126   229   229   335   488   412   367   1,095   703   295      
                                                        
Premium adjustment (b)   268   525   569   634   719   1,023   1,266   1,367   1,260   536      
                                                        
Re-estimated net claims reserves:   1,109   1,698   1,670   1,755   2,237   2,320   2,184   2,852   2,200   2,607      
                                                        
Initial net claims reserves in excess                                              
of (less than) re-estimated net                                              
claims reserves:                                              
                                                        
Amount (a)   186   491   780   840   407   646   876   1,364   1,558   645   na  
                                                        
Percent of original net reserve (a)   14.4%   22.4%   31.8%   32.4%   15.4%   21.8%   28.6%   32.4%   41.5%   19.8%   na  
                                                        
(a)   The loss reserve development table is presented on an underwriting year basis for AXA RE business. Accordingly reserves re-estimated and the excess of re-estimated reserves in excess of the original reserves include reserves for losses occurring up to twelve months subsequent to the original year-end. It is not appropriate to extrapolate future redundancies or future deficiencies based on the loss reserve development presented in the table as conditions and trends that have affected the development of the liability in prior periods may not necessarily occur in the future periods.
(b)   Represents premium earned subsequent to the accounting year end and premium reinstatements / experience-rated premiums received and accrued from the ceding insurers as assumed losses were incurred.
(c)   Includes the claims reserves of Abeille Re acquired in 1995.
(d)   In 2001, the claims reserve of AXA RE were adversely affected by the September 11th attacks.
(e)   In 2004, the companies AXA Corporate Solution Insurance US, AXA RE Property & Casualty Insurance company and AXA RE Property & Casualty Reinsurance company were transferred from AXA RE to the Other transnational activities.
The reserves of AXA Corporate Solution Insurance US were presented on an occuring year basis and included in Property & Casualty loss reserve developement table.
The reserves of AXA RE Property & Casualty Insurance company and AXA RE Reinsurance company were presented on an underwriting year basis and included in AXA RE loss reserve development table.

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Reconciliation of Loss Reserves Developed to Consolidated Financial Statements

The following table reconciles the gross insurance liabilities, e.g., the gross claims reserves including claim expenses, in the Loss Development Tables presented above to that presented in the AXA’s consolidated financial statements in accordance with French GAAP as at the dates indicated (refer to note 15 “Insurance Liabilities” to the consolidated financial statements included in Item 18 of this Annual Report).

  (in euro millions)  
           
  At December 31,  
  2004   2003  
           
Total gross claims reserves developed:        
           
Property & Casualty (including AXA Corporate Solutions Assurance) (a) 29,128   27,825  
           
AXA RE (b) 3,314   4,200  
           
Total gross claims and other reserves developed 32,442   32,025  
           
Gross claims and other reserves not developed:        
           
Catastrophe equalization reserves 407   397  
           
Other reserves (a) 4,350   4,991  
           
Total gross claims and other reserves excluding Life & Savings 37,199   37,413  
           
Claims reserves for Life & Savings Segment 7,871   7,624  
           
Total gross claims and other reserves 45,070   45,037  
           
(a)   Total gross claims and other reserves developed are presented on the loss reserve development basis: the reserves of AXA Corporate Solution Insurance US are included in Property & Casualty and International Insurance loss reserve. The reserves of AXA RE Property & Casualty Insurance company and AXA RE Reinsurance company (460 million) were included in AXA RE.
(b)   Of which Future policy benefits or disability claims (€1,950 million), construction reserves (1,056 million) and reserves on acceptations (975 million).

Environmental, Asbestos and Other Exposures

AXA regularly review environmental, asbestos and other related exposures to ensure that loss provisions are adequate. Further details are provided in note 15 “Insurance Liabilities” to the consolidated financial statements included in Item 18 of this Annual Report.

Additional factors which may affect AXA’s business

For information relating to certain additional matters that may affect AXA’s business, see “Item 3 – Key Information –Risk factors” and “Item 8 – Legal Proceedings” included elsewhere in this Annual Report.

Regulation

AXA’s principal operations are located in Western Europe, North America and the Asia-Pacific region, and to a lesser extent, in Africa and the Middle East. In these jurisdictions, AXA is generally subject to comprehensive regulation and supervision, particularly with respect to its insurance and investment management operations.

Insurance Operations

While the extent and nature of regulation varies from country to country, most jurisdictions in which AXA’s insurance subsidiaries operate have laws and regulations governing standards of solvency, levels of reserves, permitted types and concentrations of investments, business conduct to be maintained by insurance companies

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as well as agent licensing, approval of policy forms and, for certain lines of insurance, approval or filing of rates. In certain jurisdictions, regulations limit sales commissions and certain other marketing expenses that may be incurred by the insurer. In general, insurers are required to file detailed annual financial statements with their supervisory agencies in each of the jurisdictions in which they do business. Such agencies may conduct regular examinations of the insurers’ operations and accounts and make requests for particular information from the insurer. Certain jurisdictions also require registration and periodic reporting by holding companies that control a licensed insurer. This holding company legislation typically requires periodic disclosure concerning the corporation that controls the licensed insurer and other affiliated companies, including prior approval of transactions between the insurer and other affiliates such as inter-corporate transfers of assets and payment of dividends by the controlled insurer. In general, these regulatory schemes are designed to protect the interests of policyholders rather than security holders.

Europe

The regulatory systems governing insurers in France, Germany, the United Kingdom (“UK”), Belgium and other European jurisdictions where AXA does business are comprehensive and generally are designed to protect the interests of policyholders rather than those of security holders. In Europe, AXA operates in most major markets through free-standing subsidiaries which are subject to a regulatory scheme based on the European Union (“EU”) insurance directives on life insurance and insurance other than life insurance. These directives were implemented in France, Germany, the UK and certain other jurisdictions through legislation that became effective in July 1994 and are founded on the “home country control” principle according to which the ongoing regulation of insurance companies, including their non-home country insurance operations (whether direct or through branches), is the responsibility of the home country insurance regulatory authority. The home country insurance regulator monitors compliance with applicable regulations including regulations governing solvency, actuarial reserves and investment of assets. Selling activities of non-home country insurance operations, however, are generally regulated by the regulator in the country in which the sale of the insurance product takes place. As a result of the implementation of these directives, an insurance company that has been licensed to conduct insurance business in one jurisdiction of the EU may do business directly or through branches in all other jurisdictions of the EU without being subject to licensing requirements under the laws of the other jurisdictions.

The EU has also adopted various directives concerning solvency margin requirements for insurers and insurance groups. A 1998 EU directive, implemented into French law in 2002, requires insurance groups to calculate a consolidated solvency margin. AXA must establish appropriate internal controls to ensure solvency sufficient to cover all of the Group’s insurance liabilities, inform the French insurance regulatory authorities annually of certain intra-group transactions, and calculate on a consolidated basis the capital needed to meet the respective solvency requirements of the Group’s insurance subsidiaries. Similar group solvency requirements are required to be fulfilled by intermediate holding companies that own Group insurance subsidiaries in different EU jurisdictions. In addition, a 2002 EU directive relating to the regulation and supervision of financial conglomerates was implemented into French law in 2005. This legislation provides for the assessment of a financial conglomerate’s capital requirements at the consolidated group level, the supervision of risk concentration and intra-group transactions, and the prevention of double-leveraging of the capital of a holding parent company, i.e. once at the holding parent level and a second time at the subsidiary level (“double gearing”). Although the AXA Group is not currently deemed a financial conglomerate within the meaning of this legislation by the French insurance regulator, there can be no

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assurances that it will not become (or be deemed) a financial conglomerate in the future. Also, due to the lack of uniform interpretation of this legislation by local insurance regulators throughout the various EU jurisdictions, there can be no assurances that certain regional subsidiaries of the AXA Group may be deemed a financial conglomerate by local regulators and therefore be subject to this law. The EU is currently considering the adoption of a new directive aiming at applying the “home country control” principle to European reinsurance companies and unifying the regulatory regimes applicable to reinsurance companies throughout the EU.

In addition to other applicable regulatory requirements, in France, Germany, the UK, and certain other European jurisdictions, property and casualty insurers are required to maintain equalization reserves to protect against the impact of large claims and catastrophes. The basis on which these equalization reserves are established is set out in the local country regulations based on pre-established formulas applicable to certain lines of business and may be capped at a maximum level.

In addition to the foregoing, there have been various regulatory initiatives within the member states of the European Union relating to, among other subjects, the assessment of capital adequacy, more stringent capital requirements on insurers, the requirement to have appropriate systems and controls to manage the business and prudential regulation. Each of these regulations may have a potential impact on the AXA’s subsidiaries doing business in the jurisdiction where such regulation is enacted.

Various AXA subsidiaries have been subject to regulatory investigations and sanctions from time to time in the various European jurisdictions in which they operate. For a description of certain of these investigations, see “Item 18 – Financial Statements; Note 28 – Litigation.”

United States

In the United States, regulation of the insurance business remains principally at the state level, with AXA’s insurance operations being subject to regulation and supervision by all the various states and territories. Within the United States, the method of regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an insurance commissioner. While regulation varies by jurisdiction, most jurisdictions have comprehensive laws and regulations governing approval of policy forms and rates, the standards of solvency that must be met and maintained (including risk based capital measurements), the establishment of reserves, the licensing of insurers and their agents, sales practices by agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, and the form and content of reports of financial condition and results of operations to be filed.

Certain of AXA’s U.S. insurance, broker-dealer, investment adviser and investment management subsidiaries, including AXA Equitable Life Insurance Company ("AXA Equitable"), and certain policies and contracts offered by them are subject to regulation under the Federal securities laws administered by the SEC and under certain state securities laws. The SEC conducts regular examinations of the operations of these companies, and from time to time makes requests for particular information from them. The SEC, other governmental regulatory authorities, including state insurance and securities regulators, and the National Association of Securities Dealers (“NASD”) may institute administrative or judicial proceedings which may result in censure, fines, the issuance of cease-and-

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desist orders, the suspension or expulsion of a broker-dealer or member, its officers or employees or other similar sanctions. AXA Financial’s broker-dealer subsidairies and its other subsidiaries have provided information and documents to the SEC, NASD and other regulators on a wide range of issues, including supervisory issues, market timing, late trading, valuation, suitability, replacements and exchanges of variable life insurance and annuities, collusive bidding and other inappropriate solicitation activities, “revenue sharing” and directed brokerage arrangements, investment company directed brokerage arrangements, fund portfolio brokerage commissions, mutual fund sales and marketing and “networking arrangements”. Fines and other sanctions could result from pending regulatory matters.

Several U.S states, including New York, regulate transactions between an insurer and its affiliates under insurance holding company acts. These acts contain certain reporting requirements and restrictions on provision of services and on transactions, such as asset transfers, loans and shareholder dividend payments by insurers. State insurance regulators also have the discretionary authority to limit or prohibit new issuances of business to policyholders within their jurisdiction when, in their judgment, such regulators determine that the issuing insurer is not maintaining adequate statutory surplus or capital. Life insurers in the United States are also subject to risk-based capital (“RBC”) guidelines which provide a method of measuring the adjusted capital (statutory capital and surplus plus asset valuation allowance and other adjustments) that a life insurance company should have for regulatory purposes taking into account the risk characteristics of the company’s investments and products. AXA Equitable and AXA’s other U.S. life insurance subsidiaries expect that the statutory surplus will continue to be in excess of the minimum RBC levels required to avoid regulatory action.

In addition, a number of states in the U.S., including New York, California and Florida, have enacted legislation requiring disclosure of extensive information concerning Holocaust era insurance policies sold in Europe prior to and during the Second World War. While these statutes vary and certain of them provide exemption for companies such as AXA that participate in the International Commission on Holocaust Era Insurance Claims, the ultimate sanction under certain of these statutes for failure to disclose the required information is revocation of an insurer’s license to engage in the insurance business in the concerned state. 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. Any failure to comply with these laws could result in state regulatory authorities seeking to take enforcement actions against AXA and its U.S. affiliates, including AXA Equitable Life Insurance Company. Litigation challenging the validity of the California legislation concluded on June 23, 2003, when the U.S. Supreme Court struck down California Holocaust law, on the grounds that the law violates the U.S. Constitution because it interferes with President’s conduct of U.S. foreign policy. Since that decision, various federal legislative initiatives similar to the Californian legislation have been introduced in the U.S. Congress. To date, none of these initiatives have been enacted. Management cannot predict with certainty, however, whether such federal legislative initiatives may be adopted in the future or whether U.S. insurance regulatory authorities may undertake new legislative, regulatory or related initiatives in connection with these matters. For additional information on these matters, see Note 28 “Litigation” in AXA’s consolidated financial statements included in Item 18 of this Annual Report.

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U.S. federal and state privacy laws and regulations impose restrictions on the use and disclosure of customer information by financial institutions. Legislation imposing additional restrictions on the use and disclosure of customer information is currently pending in the U.S. Congress and in a number of state legislatures. These laws, regulations and legislation, if enacted, could impact AXA’s ability to market its products or otherwise limit the nature or scope of AXA’s insurance and financial services operations in the U.S.

Although the U.S. Federal government generally does not directly regulate the insurance business, many federal tax laws affect the business in a variety of ways. There are a number of existing, newly enacted or recently proposed legislative initiatives, including Federal tax initiatives that may significantly affect AXA’s U.S. life insurance subsidiaries, such as the 2001 legislation providing several years of lower rates for estate, gift and generation skipping taxes (“GST”) and a one year of estate and GST repeal (in 2010) before a return to 2001 rates for the year 2011, or the 2003 reductions in income tax rates on long-term capital gains and qualifying corporate dividends. Recently, legislation has been proposed regarding accelerating and making permanent the repeal of the estate and generation skipping taxes. If enacted, this legislation would have an adverse impact on sales and surrenders of life insurance in connection with estate planning. Other provisions of recently enacted and proposed legislation and U.S. Treasury regulations relate to the business use of life insurance, split-dollar arrangements, creation of new tax favored savings accounts and modifications to nonqualified deferred compensation plan and qualified plan rules. These provisions could adversely affect the sale of life insurance to businesses, as well as the attractiveness of qualified plan arrangements, cash value life insurance and annuities. The U.S. Congress may also consider proposals such as Social Security reform or comprehensive overhaul of the Federal tax law, which, if enacted, could adversely impact the attractiveness of cash value life insurance, annuities and tax qualified retirement products. Management cannot predict what other proposals may be made, what legislation, if any, may be introduced or enacted or what the effect of any such legislation might be.

Various AXA subsidiaries have been subject to regulatory investigations and sanctions from time to time in the various U.S. jurisdictions in which they operate. For a description of certain of these investigations, see “Item 18 –Financial Statements; Note 28 – Litigation.” Following investigations by state attorney generals, state insurance commissioners of collusive bidding and revenue sharing practices and practices associated with replacements and exchanges of life insurance and annuities, legislatures have adopted or are considering adopting legislations and it is likely that there will be further initiatives in the future.

Asia-Pacific and Other Jurisdictions

The other jurisdictions in which AXA operates, including those in the Asia-Pacific region, also have comprehensive regulatory schemes and AXA must satisfy the local regulatory requirements in each of these jurisdictions. In general, insurance licenses issued by local authorities are subject to revocation and/or modification by those authorities. Consequently, AXA’s insurance subsidiaries could be prevented from conducting business in certain of the jurisdictions in which they currently operate should they not meet such local regulatory requirements. In addition to licensing requirements, AXA’s insurance operations in these jurisdictions are also generally regulated with respect to currency, policy terms and language, amount and types of security deposits, amount and type of reserves, amount and type of local investment and the share of profits to be paid to policyholders on participating policies. In certain jurisdictions, regulations governing constitution of technical reserves and similar regulations may prevent payment of dividends to shareholders and/or repatriation of assets.

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Asset Management

Alliance Capital and AXA Investment Managers are subject to extensive regulation in the various jurisdictions in which they operate. These regulations are generally designed to safeguard client assets and insure adequacy of disclosure concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity and qualifications of the investment manager. These regulations also generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser, censures and fines.

Alliance Capital and certain of its subsidiaries as well as certain U.S. subsidiaries of AXA Investment Managers and AXA Equitable Life Insurance Company are investment advisers registered under the United States Investment Advisers Act of 1940 (the “Investment Advisers Act”). Each of Alliance’s U.S. mutual funds is registered with the SEC under the U.S. Investment Company Act of 1940 (the “Investment Company Act”) and the shares of most of these funds are qualified for sale in all states in the United States and the District of Columbia, except for U.S. funds offered only to residents of a particular state. Certain subsidiaries of Alliance Capital and AXA Equitable Life Insurance Company are also registered with the SEC as transfer agents and broker-dealers that are subject to minimum net capital requirements. Transactions between AXA Equitable and Alliance Capital are subject to applicable provisions of the New York Insurance Law and transactions between AXA Investment Managers and its insurance company clients are subject to various insurance law regulations of the various jurisdictions where these clients are domiciled. These regulations generally require diversification of invested assets, impose limitations on investments in certain asset classes and also generally require that the terms of transactions between the investment manager and its client be fair and equitable, that charges or fees for services performed be reasonable and that certain other standards be met. Fees must be determined either with reference to fees charged to unaffiliated clients for similar services or, in certain cases, which include ancillary service agreements, based on cost reimbursement. In addition, under the New York Insurance Law and regulations certain investment advisory agreements and ancillary administrative services agreements between AXA Equitable and Alliance Capital are subject to approval by the New York Superintendent of Insurance within a prescribed notice period.

Other

As a publicly-traded company listed both on Euronext Paris and the New York Stock Exchange, AXA is subject to numerous laws, rules and regulations governing a variety of matters. These include (i) timely and accurate disclosure of information to investors, (ii) presentation of financial information in accordance with both French GAAP and U.S. GAAP requirements, (iii) restrictions on presentations of non-GAAP measures in the U.S., auditor independence requirements (including prohibitions on auditors furnishing certain types of non-audit services), (iv) numerous corporate governance requirements (including independence requirements for audit committee members), (v) certification of certain public reports by AXA’s Chief Executive Officer and Chief Financial Officer, and (vi) requirements to evaluate, document, and report on AXA’s internal accounting and disclosure controls and procedures. The scope and impact of these requirements on the day-to-day operations of AXA has increased significantly over the past years with the adoption of the Sarbanes Oxley Act in the United States in 2002 and the adoption of similar legislation in other jurisdictions, including the Financial Security Law (la loi de securite

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financiere) in France in 2003. While the spirit of these laws is very similar, their technical requirements sometimes conflict. Management has devoted very substantial resources to insure compliance with both the letter and spirit of these laws over the last two years and anticipates that considerable resources will continue to be devoted to this area in the future.

A new ordinance was adopted in 2004 that modernizes many aspects of French securities laws, most significantly by simplifying the rules applicable to the issuance of new securities by listed companies and expanding the types of securities that can be issued by French companies.

Additional information on regulatory matters

A more detailed description of certain matters involving AXA Financial, Inc. and its subsidiaries (including AXA Equitable Life Insurance Company and Alliance Capital) is included in the Annual Reports on Form 10-K for the year ended December 31, 2004 and subsequent reports on Form 10-Q, respectively, of AXA Financial, Inc. (SEC file no. 1-11166), AXA Equitable Life Insurance Company (SEC file no. 0-25280) and Alliance Capital (SEC file no. 1-9818) filed with the SEC (collectively, the “Subsidiary SEC Reports”). The Subsidiary SEC Reports are publicly available and copies can be obtained through the SEC’s EDGAR system (www.sec.gov/edgar), at the SEC’s public reference rooms at 450 Fifth St., N.W., Washington, D.C. 20549 or at the SEC’s other public reference rooms in New York and Chicago, or on the websites of these subsidiaries.

Property

The Company’s headquarters are located in an office building located at 25 Avenue Matignon 75008 Paris, France, which is owned by an affiliate of the Company. In addition to its registered head office, the Company has staff in other locations around Paris including at 21 and 23 Avenue Matignon 75008 Paris, France. The Company also has major operating subsidiaries with headquarters located in other countries including France, the United States, the United Kingdom, Japan, Germany, Southern Europe, Belgium and Australia. The headquarters of these subsidiaries are held on either a leasehold or a freehold basis.

AXA also holds numerous investment properties in connection with its insurance and financial services operations.

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Item 5: Operating and Financial Review and Prospects

You should read the following discussion together with AXA’s audited consolidated financial statements and the related notes included in Item 18 of this Annual Report. The audited consolidated financial statements have been prepared in accordance with French GAAP, which principles are described in note 2 to the consolidated financial statements. French GAAP differs in certain material respects from U.S. GAAP. A summary of the material differences between French GAAP and U.S. GAAP relevant to AXA, and additional U.S. GAAP disclosures are provided in notes 33 and 34 to the consolidated financial statements.

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 forward-looking statements contained in this Annual Report.

This discussion and analysis also includes certain terms that are used by AXA in analyzing its business operations and, therefore, may not be comparable with terms used by other companies. These terms are defined in the glossary presented at the end of this section.

Overview

The Operating and Financial Review and Prospects item provides certain information on markets for the current year and a discussion and analysis of AXA’s operating performance for the years ended 2004, 2003, and 2002 as reported under French GAAP with certain additional U.S. GAAP commentary as set out below.

  • The information on the market conditions applicable to the current year focuses, mainly on the financial markets and insurance markets conditions for the main countries in which AXA operates.
  • In addition, main operating highlights of the year are specific to AXA, we provide a summary of the principal acquisitions and disposals and capital and financing operations that occurred during the year, as well as any important events subsequent to December 31, 2004.
  • An overview of critical accounting policies is provided setting out the accounting policies that use assumptions and estimates to prepare the consolidated financial statements.

The “consolidated operating results” section is based on French GAAP financial statements and is composed of two main parts: (i) Group gross consolidated revenues for the year ended December 31, 2004 compared to December 31, 2003, and for the year ended December 31, 2003 compared to December 31, 2002, for the Group and by operating segment; and (ii) Group consolidated results for the year ended December 31, 2004 compared to December 31, 2003, and for the year ended December 31, 2003 compared to December 31, 2002 for the Group

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and operating segment. In addition, specific commentary and analysis is provided for each operating segment i.e. Life & Savings, Property & Casualty, International Insurance, Asset Management and Other Financial Services, as well as Holdings Companies non-operating segment. In addition, for each insurance operating segment, general accounts investment results are provided for the principal accounts assets.

Additional information is provided in the “Liquidity and Capital Resources” section, describing AXA’s operations sources and uses of funds, solvency margin requirements, supplementary information on contractual obligations and specific information relating to off-balance sheet arrangements, and consolidated cash flow for the year ended December 31, 2004 compared to December 31, 2003, and for the year ended December 31, 2003 compared to December 31, 2002.

Information is also provided under “Other Matters” specific to (i) impairment of investments, and (ii) a reconciliation from French GAAP to U.S. GAAP.

Finally a glossary of certain technical terms is provided at the end of this section.

Insurance and Asset Management markets

Life & Savings

France. According to the Fédération Française des Sociétés d’Assurance (FFSA), the French Life & Savings market growth amounted to +9% at the end of full year 2003, driven by a 13% increase in general account premiums, partly offset by a 7% decrease on unit-linked contracts. In 2004, the increase in gross premium has been estimated to 13% due to a strong increase in gross premium on unit-linked contract estimated to +32% and an estimated increase of 9% in general account premiums. More than one million accounts of the new retirement “P.E.R.P.” (Plan d’Epargne Retraite Populaire) product have been opened corresponding to a gross premium of €340 million at the end of November.

United States. In 2004, U.S. investors responded favorably to a second year of positive returns in the U.S. equity markets with continued net inflows to long-term mutual funds and increased sales of equity linked insurance products. Short-term interest rates began to rise as the Federal Reserve tightened monetary policy through a series of increases in the federal funds target rate, while market determined long-term interest rates remained low. In the annuity market, industry sales of variable annuities were up 3%, driven by stronger equity markets and the popularity of guaranteed benefit riders. Industry fixed annuity sales decreased 2% as a result of low interest rates and heightened competition. In the life insurance market, variable life insurance sales declined with industry variable life sales down 5% from 2003. The variable life business generally lags the movement in the equity market. Sales of life insurance products with fixed returns, such as universal life, remained strong in 2004 with industry universal life sales up 14%1. Fixed whole life insurance sales decreased 1%, while term insurance sales increased 7% from 2003. Total long-term stock, bond and hybrid fund net inflows were $210 billion for 2004, compared with $216 billion for 2003, however, stock and hybrid fund net inflows increased 17% and 31%, respectively2.

(1)   Industry Sales Results are from LIMRA for the twelve months ended December 31, 2004 compared to the corresponding period of 2003.
(2)   Net long-term mutual funds statistics from Investment Company Institute December 31, 2004.

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United Kingdom. New annualized business (new regular premiums plus 10% of single premiums) was 3% higher in 2004 following a 12% fall in new business in 2003. The principal growth area was Group Pensions and Offshore Bonds, whilst volumes of single premium pension business declined. The growth in sales of investment products is, in part, a reflection of improved stock market performance which has seen some increase in investor confidence. In the second half of 2004 companies began the process of positioning themselves to exploit opportunities in the run up to Pensions Simplification A-Day in April 2006. The regulators announced the launch date for “Sandler products” (April 2005) which will include a medium term investment product and a pensions product. These products will have a 1.5% price cap for the first 10 years. Independent financial advisers continued to be the principal sales channel in 2004 accounting for around 70% of new business. The distribution landscape will change in 2005 with the introduction of depolarization and the creation of new categories of intermediary.

Japan. Some positive economic growth, prospects to an end to deflation, an increase in interest rates and a progressive rise in stock prices have all contributed to stability and contentment in the industry. Japan’s life insurance market experienced a premium income growth of 1.7%, reaching 25.96 trillion yen in the Japanese fiscal year 2003 and marking the first rise in total premiums in the past six years. This upswing is largely owed to the individual annuity business through bank channels, which has contributed to approximately over 3 trillion yen of inflow since the deregulation commenced in October 2002. Stability in the financial markets have generally improved the performance of many insurers as well as their solvency and credit standing, as markets were 50% higher than the previous year-end. However, a large part of the industry continues to face declines in policies in-force, mainly because of a weak new business environment for traditional products due to the fact that a growing number of policyholders have reduced death benefits to cut premiums in an effort to curb household spending and that surrender & lapse rates remain high.

Foreign insurers have gained market share, reaching 21%, up from 17% of the previous year in terms of premium income.

Australia/New Zealand. The savings related investment sector continued to be a growth area due to the ageing population and continued government support for self-funded retirement. The mutual funds and advice business also experienced significant growth across 2004 as driven by a return of investor confidence and the strong equity performance in the Australian market which led to growth in the retail market of 16%. At least 80% of the Australian retail wealth management inflows come through funds administration platforms. The Australian Life Insurance market has increased by 11%1.

Hong Kong. The economy continued to grow following the adverse market conditions experienced in early 2003, in particular the outbreak of SARS and depressed investment markets. The economy continued to benefit from increasing numbers of mainland Chinese visitors, which are predicted to increase from 12 million in 2004 to 20 million in 2005. The Life insurance market has showed strong growth, for the 9 months to September 2004, with the individual life new business annual premium equivalent up 28% compared to the same period in 2003 including strong growth from bank distribution. Following the weak investment markets in the first half of 2004 (the Hang Seng Index decreased by 2%), there was a strong recovery in the second half of 2004, with the Hang Seng Index increasing by 16%.

(1) Source: Plan for Life (retail FUA excl cash) Sept. 2004.

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Germany. The market experienced in 2004 a surge of the sales of new endowment policies, which will benefit from the old tax regime for regular premiums paid in subsequent years. Starting from 2005 new products will come on the life insurance market, which will be subject to the new tax act effective January 1, 2005. Under this new law, endowment policies will loose their exemption from taxation and unit-linked products will be less attractive to investors. On the other hand, special annuity products will benefit from advantageous tax treatment.

In 2004, according to initial estimates issued by the association of German insurers (GDV), new business from regular premiums grew by 41.4% to €11.4 billion, whereas single premiums decreased by 15.2% to €7.2 billion.

Ongoing difficulties of the public health insurance system contributed to the growth of private health insurance (by € 24.6 billion, +7.4% growth for 2004, according to a forecast by the GDV).

Belgium. After a 2003 high growth year, the collection of insurance and saving increased by about 4.5%. Growth should be restored on the unit-linked market after significant drop since 2001 while non unit-linked market should remain flat. Bank savings accounts increased by 12.3%.

Southern Europe. In 2004, the Spanish market grew by 5.2% in the first 9 months of the year. 2004 was impacted by the rising of housing prices that limited the capacity to save and by changes in the tax regulation which resulted in levelled tax advantages for mutual funds versus unit-linked policies. In Italy, agents primarily drove the growth (by +28%) mainly due to the success of both individual and group guaranteed unit-linked and traditional saving products. In Portugal, market increased by 14.4% in 2004, driven by Investment & Savings product non-unit linked (which grew by +14.5%1).

Property & Casualty

France. The French property and casualty market has experienced five consecutive years of growth since 1999. In 2004, the growth reduced slightly to an estimated 4%. The estimated growth amounted to +3% in motor (+5.3% in 2003), +6% in Household (+6.2% in 2003) and +3.5% in commercial property (+13.4% in 2003).

United Kingdom & Ireland. Underwriting conditions have generally been tougher during 2004, with rating increases harder to carry. Nevertheless, written premiums grew by 7% across the business. In commercial lines, rate increases continued to be harder to achieve, particularly for large cases and new business. Small and medium enterprises renewals held up well in 2004. Commercial Property & Casualty price increases were 7% over the year, with fleet prices stable. In personal lines, household and motor rates remained relatively flat. Across the year, most carriers continued to benefit from benign conditions in 2004 with no major weather events. In Ireland, competitiveness on the motor business has significantly increased and led to a fall in average premium.

Germany. In 2004, total business2 increased by 1.8% (€55.4 billion). The decrease in claims expenditures slowed down compared to 2003 (–1.4%). In motor, the largest Property and Casualty business, gross written premiums (covering 40% of total Property & Casualty) increased slightly by 0.5% to €22.4 billion. Claims paid for current year (all motor aggregated) decreased by 1.1%. Property is the second largest Property & Casualty business with

(1)   Source APS, provisional figures.
(2)   Source: association of German insurers (GDV): estimation.

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€9.8 billion gross written premiums (+2.0%). Claims expenditures relating to Property decreased again, although not as strongly as in 2003 (–2.4%). Gross written premiums in general liability lines increased by 3.5% to € 6.5 billion. In Accident, gross written premiums increased by 3.0% to €6.0 billion.

Southern Europe. In 2004, the Spanish market grew by 9.0% in the first nine months of the year amidst a stable economic environment. This growth was partly supported by record car sales, which rose substantially by 9.8%, thus helping the motor insurance sector to increase by 6.1%, despite aggressive market pricing initiated during the second half year 2002. First steps towards a “zero-tolerance” policy on the roads helped to reduce the number of road accidents by 11.8%. Multi-risk and health businesses increased respectively by 10.7% and 9.9%. In 2004, Italy, in a market that is still very traditional, oriented towards motor business (60% of the volumes). The implementation of the “patente a punti” (driving license with decremented points in case of driving offence) lead to a significant decrease in frequency (–2.2% on twelve months at the end of September1) and lower average costs. In this context, some companies started to review their premium rate downward (–1.6 pt on new business). In Portugal, market increased by 3.5% as compared to December 2003 driven by the 4% motor business growth2.

Belgium. Competition remained tough on the Belgian market, with an estimated growth of 4.6% in 2004. This significant increase, compared to an average annual growth of 3% for the last 10 years, is sustained by motor (+5.4%), which makes out 34% of total Property & Casualty, and household (+4.4%), as a result of rate increases. The workers’ compensation market showed only a slight growth of 0.2% in 2004 due to the shrinking employment market.

International Insurance

On the Reinsurance market, after the very low claims experience in 2002 and 2003, prices were almost stable in major lines of business and the capacity was relatively abundant. Competition amongst reinsurers is notably coming from the Bermudian companies whose part in the world reinsurance market has become preponderant. Property, marine and aviation showed stable or slightly decreasing rates and signings were often lower than expected especially in Europe. Motor and casualty benefited from additional rate increases.

On the Large Risks Insurance market, further rate increases and restructuring of large Corporate Insurance programs were conducted especially in liability and to a lesser extent in marine. On the other hand, property and aviation markets softened, in the context of a favorable claims experience.

In these activities, 2004 claims experience was characterized by a high level of major losses, notably as the United States were hit by 4 hurricanes. Other severe natural events also occurred in 2004 such as the Songda typhoon in Japan and the Asian tsunami on December 26, 2004.

Asset management

In 2004, the industry benefited from the continued growth of equity markets (+9% for the S&P 500 American equity index, +13% for the MSCI global equity index) combined to the good performance of fixed-income assets.

Continuing a trend started in 2003, investors are attracted by the prospects of higher returns following years of declining equity markets, but with an increased demand for advice and alternative investments.

(1)   Source “Focus” ANIA: RC Auto.
(2)   Source APS, provisional figures.

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Market conditions in 2004

Financial markets

In 2004 and for the second year in a row, the financial markets continued to grow, with the “MSCI World index1” posting a gain of 13% (compared with a gain of 30.3% in 2003).

This positive performance occurred against a backdrop of buoyant business conditions. Global economic growth was 4.4% for the United States, 3% for Japan, 1.8% for the Eurozone and 7.6% for emerging Asia.

This strong global expansion drove up commodity prices, particularly oil. Naturally, this brought inflation back, although moderately, above the thresholds of 3% in the United States and 2% in the Eurozone.

Stock Markets

Stocks markets were the best performers in 2004, posting a growth of 29.6% for the MSCI dollar for developed Asia ex-Japan and of 26% for the MSCI dollar for the emerging countries. In Europe, Stoxx 50 rose by 6.9%, FTSE by 7.5% and CAC 40 by 7.4%, while the US S&P 500 was up 9% and the Japanese Nikkei advanced by 7.6%.

Bond markets

In 2004, the bond markets behaved well in the context of sustained world growth, a falling dollar, and sharply rising oil prices.

Yields on U.S. 10-year treasuries remained broadly unchanged. On the contrary, in Europe, yields on 10-year maturities government bonds fell by 63 bp in the Eurozone and by 23 bp in the United Kingdom. In a context of improving balance sheet and default rate, high yield investments had a very good year as demonstrated by the five-year maturity high yields bonds which returned double digit global performance.

Exchange rates

In 2004, the Euro emphasized its appreciation against other currencies, especially against the US Dollar (+7.9%), the Yen (+3.3%). The Euro remained stable against the Sterling.

The year end and average exchange rates used in the preparation of AXA’s consolidated financial statements in euro are provided in Item 3 – Key Information – Exchange Rate Information. AXA provides on a regular basis certain period-to-period comparisons calculated on a constant exchange rate basis to eliminate the effects of changes in exchange rates between the euro and other currencies. In this context, AXA recalculated the financial information as follows: the data for the current year period were restated using the prevailing foreign currency exchange rate for the same period in the prior year.

(1)   Morgan Stanley Capital Index, a market capitalization index designed to measure global developed market equity performance.

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For information purposes and in respect of AXA’s principal non-Euro-based life insurance operations, an analysis is provided below to provide an indication of the impact of foreign currency fluctuations on premium growth.