AXA Reports 2004 IFRS Results

AXA Reports 2004 IFRS Results Principles and Results Are In Line With Our January Indications PARIS, June 21 /PRNewswire-FirstCall/ -- AXA reported today its 2004 results under International Financial Reporting Standards ("IFRS") principles. These results are audited and have been prepared in accordance with the IFRS and IFRIC(2) interpretations issued and effective or early adopted as of June 2005. AXA has applied the amendment to IAS 39 regarding the fair value option issued by the IASB(3) on June 16, 2005 and the amendment to IAS 19 regarding employee benefits approved by the ARC(4). Both amendments are expected to be formally endorsed by the European Commission in the second half of 2005. The IFRS standards and IFRIC interpretations that will be applicable at December 31, 2005, including those that will be applicable on an optional basis, are not known with certainty at this time. Highlights In Euro million, except when otherwise noted IFRS FGAAP IFRS 2004 2004 impacts Shareholders' equity, group share @ Dec. 31, 2004 (billion) 28.5 26.2 9% Shareholders' equity, group share @ Jan. 1, 2004 (billion) 22.5 23.4 -4% Underlying earnings 2 640 2 723 -3% per diluted share 1.42 1.43 -1% Adjusted earnings 3 344 2 901 15% per diluted share 1.78 1.52 17% Net income 3 738 2 519 48% per diluted share 1.99 1.32 51% IFRS Impacts on Shareholders' Equity The IFRS impact on the shareholders' equity as of January 1, 2004 is a decrease of Euro 0.9 billion or 4%, within our flat to -5% range announced at the January 6, 2005 IFRS presentation. As of December 31, 2004, the IFRS impact on the shareholders' equity is an increase of Euro 2.4 billion or 9%. In Euro billion @ Jan. 1, @ Dec. 31, 2004 2004 Shareholders' equity - FGAAP 23.4 26.2 Invested Assets & scope of consolidation 2.5 4.7 Share-based compensation & employee benefits -2.0 -2.2 Business combination -1.3 -0.8 Compound financial instruments (convertibles) & TSS reclassification 0.1 0.8 Other impacts -0.3 -0.2 Derivatives & hedging 0.2 0.5 P&C and Int'l equalization reserves 0.3 0.3 DAC & equivalent -0.1 -0.1 Treasury shares -0.5 -0.4 Others -0.1 -0.4 Shareholders' equity - IFRS 22.5 28.5 Main differences between FGAAP and IFRS shareholders' equity as of December 31, 2004 are: -- Invested assets and scope of consolidation: The recording of invested assets (excluding real estate and loans) at fair value and the extension of the scope of consolidation result in a positive impact of Euro 4.7 billion. -- Share-based compensation and employee benefits: Past deficit and on- going actuarial gains and losses on employee benefits are incorporated in the IFRS shareholders' equity, with a negative impact of Euro 2.2 billion. -- Business combination: Goodwill is booked in the local currency of the acquired entity under IFRS, and therefore is subject to exchange rate fluctuations. This is partly offset by no 2004 goodwill amortization, resulting in a net negative impact of Euro 0.8 billion. -- Compound financial instruments and TSS reclassification: For compound financial instruments (convertibles), the equity component (value of the option granted to convert the debt instrument into an equity instrument of the Company) is reported in shareholders' equity under IFRS. In addition, the "Titres Super Subordonnes" (TSS, which are undated deeply subordinated notes) issued in 2H04 are reclassified in shareholders' equity as they do meet the IFRS definition of equity. These two elements result in a positive impact of Euro 0.8 billion. IFRS Impacts on 2004 Earnings In Euro million IFRS FGAAP IFRS 2004 2004 impacts Underlying earnings 2 640 2 723 -83 Net capital gains & losses attributable to shareholders 704 178 526 Adjusted earnings 3 344 2 901 443 Goodwill and related intangibles -42 -649 607 Exceptional operations 10 267 -258 Profit or loss on financial assets (under fair value option) & derivatives 427 427 Net income 3 738 2 519 1 219 2004 underlying earnings amount to Euro 2,640 million under IFRS compared to Euro 2,723 million in FGAAP. FY2004 - In Euro million Asset TOTAL L&S P&C Int'l Mgt OFS Hldgs Underlying earnings - FGAAP 2 723 1 603 1 063 155 316 26 -439 Scope of consolidation -88 -59 -15 -5 -11 3 -- Share-based compensation -65 -3 -4 -- -2 -- -56 Employee benefits 57 30 25 1 -1 1 1 P&C and Int'l equaliz. reserves 12 -- 34 -21 -- -- -- Others -- -8 1 9 -2 -7 7 Underlying earnings - IFRS 2 640 1 564 1 104 139 299 22 -488 The Euro 83 million decrease in underlying earnings between FGAAP and IFRS is mainly due to the newly consolidated entities (mostly real estate companies) for which IFRS captures earnings on the underlying securities when FGAAP reflected the dividends distributed, leading to some timing differences in the emergence of earnings. The share-based compensation expense of Euro 65 million reflects the facts that (1) the fair value at grant date of equity-settled instruments is accrued over the vesting period and (2) the fair value of the discount on Shareplan offered to employees is expensed. Regarding employee benefits, as past actuarial gains and losses are recognized in the Opening Balance Sheet under IFRS, they no longer need to be amortized in earnings. 2004 adjusted earnings amount to Euro 3,344 million under IFRS compared to Euro 2,901 million in FGAAP. In Euro million FY2004 Adjusted earnings - FGAAP 2 901 IFRS impact on underlying earnings -83 Reversal of FGAAP impairments 291 Increased realized capital gains 235 Adjusted earnings - IFRS 3 344 The Euro 443 million increase in adjusted earnings between FGAAP and IFRS results from the reversal of impairment allowances recorded under FGAAP (+Euro 291 million), as they have been passed through IFRS Opening Balance Sheet, and increased realized gains (Euro +235 million), in line with lower carrying values under IFRS, which more than offset the Euro 83 million decrease of the underlying earnings. 2004 net income amounts to Euro 3,738 million under IFRS compared to Euro 2,519 million in FGAAP. In Euro million FY2004 Net income - FGAAP 2 519 IFRS impact on adjusted earnings 443 Goodwill & related intangibles 607 Exceptional operations -258 Assets under fair value option 173 Derivatives 254 Net income - IFRS 3 738 The Euro 1,219 million increase in net income between FGAAP and IFRS mainly results from the adjusted earnings increase, the absence of goodwill amortization under IFRS, and the change in fair value of assets designated at fair value through P&L (fair value option) and of derivatives. The Euro 254 million impact from change in fair value of derivatives mainly comes from AXA SA: -- interest rate hedging strategies considered as speculative under IFRS; and -- hedging of underlying earnings foreign exchange exposure (Euro 73 million) Exceptional operations decrease by Euro 258 million under IFRS compared to FGAAP as: -- The FGAAP Euro 112 million positive impact related to rights exercised by former Sanford Bernstein shareholders to sell Alliance Capital units to AXA Financial is eliminated under IFRS, as the provision offsetting the 2000 dilution gain related to the acquisition of Sanford Bernstein was recognized in the 2004 Opening Balance Sheet. -- In the context of an acquisition, IFRS does not allow the booking in the Purchase GAAP balance sheet of restructuring costs which were not strictly defined by the acquired company at the date of acquisition. As a result, MONY restructuring provisions amounting to Euro 146 million are reflected in IFRS 2004 net income. IFRS Impacts on Other Key indicators -- Dividend: AXA's dividend policy is unchanged: dividend is expected to represent 40% to 50% of IFRS adjusted earnings starting year-end 2005. -- Combined Ratio: Under IFRS, our 2004 P&C combined ratio stands at 98.5%. 2004 P&C Combined Ratio - FGAAP 99.3% Equalization reserve -0.3% Employee benefits -0.1% Interests credited to P&C annuity reserves -0.4% 2004 P&C Combined Ratio - IFRS 98.5% The first two impacts, equalization reserves and employee benefits, are the mere reflection of IFRS. The third impact consists in the reclassification from technical result to investment expenses of interests credited on P&C technical reserves relating to annuities, consistent with market practices. This impacts mainly Workers' Compensation in Belgium. -- Gearing: IFRS gearing as of December 31, 2004 is 42% compared to 39% under FGAAP. At December 31, 2004 (Euro billion) IFRS Total Financing debt on the balance sheet 11.0 Reversal of mark-to-market of interest rate derivatives not eligible for hedge accounting* 0.6 Total Financing debt used for gearing ratio (A) 11.6 Cash available at AXA SA level (B) 1.1 Total net debt (A) - (B) 10.5 Shareholders' equity & minority interests 31.0 Less: change in fair value recorded in SH equity -5.8 Shareholders' equity & minority interests for gearing** 25.3 Total net debt/ Shareholders' equity & minority interests** 42% * In the IFRS balance sheet, the financing debt includes the mark-to- market of interest rate derivatives. For interest rate derivatives not eligible for hedge accounting, the mark-to-market is reversed as the related debt instruments are not marked-to-market. ** IFRS Shareholders' equity is adjusted to exclude changes in FV flowing through shareholders' equity. Information about the IFRS Conference Call Members of AXA's senior management will discuss these preliminary 2004 IFRS results today, June 21, 2005, during a conference call starting at 2 pm Paris time (1 pm London time, 8 am New York time). The investor material is available at http://www.axa.com/. The conference call access numbers are: Europe: + 44 (0) 207 162 0180 US: + 1 334 323 6203 Replay will be available at http://www.axa.com/ starting June 22, 2005. About AXA AXA Group is a worldwide leader in financial protection. AXA's operations are diverse geographically, with major operations in Western Europe, North America and the Asia/Pacific area. AXA had Euro 869 billion in assets under management as of December 31, 2004. For full year 2004, IFRS revenues amounted to Euro 67 billion and IFRS underlying earnings amounted to Euro 2,640 million. The AXA ordinary share is listed and trades under the symbol AXA on the Paris Stock Exchange. The AXA American Depository Share is also listed on the NYSE under the ticker symbol AXA. This press release and the presentation are available on AXA Group web site: http://www.axa.com/ AXA Investor Relations: AXA Media Relations: Matthieu Andre: +33.1.40.75.46.85 Christophe Dufraux:+33.1.40.75.46.74 Caroline Portel:+33.1.40.75.49.84 Clara Rodrigo: +33.1.40.75.47.22 Sophie Bourlanges:+33.1.40.75.56.07 Rebecca Le Rouzic: +33.1.40.75.97.35 Kevin Molloy: +1.212.314.28.93 Mary Taylor: +1.212.314.58.45 IMPORTANT LEGAL INFORMATION AND CAUTIONARY STATEMENTS CONCERNING FORWARD- LOOKING STATEMENTS Certain statements contained herein are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results and AXA's plans and objectives to differ materially from those expressed or implied in the forward looking statements (or from past results). These risks and uncertainties include, without limitation, the risk of future catastrophic events including possible future terrorist related incidents, economic and market developments, regulatory actions and developments, litigations and other proceedings. Please refer to AXA's Annual Report on Form 20-F for the year ended December 31, 2003 and AXA's Document de Reference for the year ended December 31, 2004, for a description of certain important factors, risks and uncertainties that may affect AXA's business. AXA undertakes no obligation to publicly update or revise any of these forward- looking statements, whether to reflect new information, future events or circumstances or otherwise. Appendix 1: Full Year 2004 Earnings by Country - IFRS versus FGAAP FY 2004 Underlying earnings Adjusted earnings Net income IFRS FGAAP Var. IFRS FGAAP Var. IFRS FGAAP Var. Euro million Life & Savings 1,564 1,603 -38 1,908 1,727 182 1,826 1,390 436 France 350 372 -23 455 425 30 534 422 112 US 664 643 21 713 674 39 577 525 52 UK 86 108 -22 -2 109 -110 -27 19 -47 Japan 145 163 -18 292 199 93 274 148 126 Germany 14 9 4 3 -38 41 -3 -50 47 Belgium 74 85 -11 173 104 69 191 95 96 Southern Europe 41 41 0 48 45 3 50 44 7 Other Countries 190 181 9 226 209 18 230 187 44 of which Australia/New Zealand 50 52 -2 52 50 2 50 41 10 of which Hong-Kong 60 60 0 66 74 -8 66 60 6 Property & Casualty 1,104 1,063 41 1,375 1,035 340 1,439 907 532 France 304 308 -4 381 304 77 407 297 111 Germany 120 118 2 124 71 53 163 60 103 Belgium 159 146 14 215 142 73 228 125 104 UK & Ireland 302 278 25 359 274 85 372 244 128 Southern Europe 114 114 1 177 145 31 185 141 44 Others countries 103 99 4 119 98 21 83 41 43 International Insurance 139 155 -16 226 238 -11 244 227 18 AXA RE 96 108 -13 111 142 -30 126 131 -5 AXA CS Assurance 50 54 -4 96 84 12 97 84 13 Others -6 -7 0 19 11 8 20 11 10 Asset Management 299 316 -17 301 318 -17 304 265 39 Alliance Capital 205 207 -2 208 210 -2 207 170 37 AXA Investments Managers 94 108 -15 94 108 -15 97 95 2 Other financial services 22 26 -4 22 26 -4 13 22 -10 Holdings -488 -439 -49 -489 -442 -48 -88 -292 204 TOTAL 2,640 2,723 -83 3,344 2,901 443 3,738 2,519 1,219 Appendix 2: Half Year 2004 Earnings by Country - IFRS versus FGAAP 1H04 Underlying earnings Adjusted earnings Net income IFRS FGAAP Var. IFRS FGAAP Var. IFRS FGAAP Var. Euro million Life & Savings 816 848 -32 984 906 78 975 739 236 France 219 240 -21 266 272 -5 254 270 -16 US 317 309 8 344 330 14 352 262 89 UK 38 53 -15 -27 56 -82 -27 10 -38 Japan 80 79 1 199 126 72 209 101 107 Germany 0 2 -1 -25 -56 32 -33 -65 33 Belgium 41 48 -8 95 64 31 88 59 29 Southern Europe 23 23 0 29 26 3 29 26 4 Other Countries 98 94 4 102 88 14 102 75 27 of which Australia/New Zealand 29 26 3 25 23 3 25 18 7 of which Hong-Kong 39 39 0 44 41 3 44 35 10 Property & Casualty 578 562 16 699 620 78 677 536 141 France 164 170 -6 179 190 -11 180 187 -7 Germany 68 67 1 50 63 -14 62 57 5 Belgium 92 86 5 113 96 17 112 87 25 UK & Ireland 145 130 15 182 130 52 182 109 73 Southern Europe 67 66 1 109 84 25 110 82 28 Others countries 43 43 0 66 56 10 32 14 17 International Insurance 138 141 -4 159 165 -6 156 156 0 AXA RE 88 86 1 107 97 9 103 89 14 AXA CS Assurance 26 32 -5 21 37 -16 21 37 -15 Others 24 23 1 31 31 0 33 31 2 Asset Management 123 136 -13 125 137 -12 127 121 6 Alliance Capital 86 85 0 87 87 0 87 75 12 AXA Investments Managers 38 51 -13 38 50 -12 39 45 -6 Other financial services 8 4 4 8 4 4 1 2 -1 Holdings -265 -256 -8 -314 -243 -71 -202 -110 -92 TOTAL 1,399 1,436 -37 1,661 1,590 71 1,733 1,444 289 Appendix 3: Simplified Balance Sheet as of December 31, 2004 - IFRS versus FGAAP At December 31, 2004 (Euro billion) IFRS FGAAP Goodwill 11.9 12.4 VBI 3.2 3.0 DAC & equivalent* 13.0 12.0 Other intangibles 0.6 0.6 Invested assets 405.7 381.9 Other assets 70.1 71.1 ASSETS 504.5 481.0 * Life DAC, net of URR, tax, PB and MI = Euro 4.9 bn IFRS FGAAP Shareholders' equity, group share 28.5 26.2 Minority interests (MI) 2.5 2.2 SHAREHOLDERS' EQUITY & MI 31.0 28.4 Technical reserves 394.5 386.2 Provisions for risks & charges 7.7 4.4 Financing debt 11.0 12.2 Other liabilities 60.2 49.8 LIABILITIES & SH EQUITY 504.5 481.0 Appendix 4: Reconciliation FGAAP to IFRS of December 31, 2004 Assets and Liabilities & Shareholders' equity - Main Impacts At December 31, 2004 (Euro billion) ASSETS - FGAAP 481 Intangible gross-up 3 Minority interests & scope 5 Mark-to-market 17 Shadow DAC & VBI -1 Pension benefits asset gross-up 2 VBI & goodwill other adjustments -1 ASSETS - IFRS 505 At December 31, 2004 (Euro billion) LIABILITIES & SH EQUITY - FGAAP 481 Shareholders' equity increase 2 Intangible gross-up 3 Minority interests & scope 5 Mark-to-market (PB + DTL) 11 Pension benefits 4 TSS reclassification -1 LIABILITIES & SH EQUITY - IFRS 505 (1) Underlying earnings are adjusted earnings, excluding net capital gains attributable to shareholders. Adjusted earnings represent net income before the impact of exceptional operations, goodwill and related intangibles amortization/impairments, and profit or loss on financial assets under the fair value option and derivatives. Adjusted and underlying earnings are non-GAAP measures and as such are not audited, and they may not be comparable to similarly titled measures reported by other companies. Management uses these non-GAAP measures as key indicators of performance in assessing AXA's various businesses and believes that the presentation of these measures provides useful and important information to shareholders and investors as measures of AXA's financial performance. (2) International Financial Reporting Interpretation Committee. (3) International Accounting Standards Board. (4) Accounting Regulatory Committee. DATASOURCE: AXA Group CONTACT: Investors: Matthieu Andre, +33-1-40-75-46-85, Caroline Portel, +33-1-40-75-49-84, Sophie Bourlanges, +33-1-40-75-56-07, or Kevin Molloy, +1-212-314-2893; or Media: Christophe Dufraux, +33-1-40-75-46-74, Clara Rodrigo, +33-1-40-75-47-22, Rebecca Le Rouzic, +33-1-40-75-97-35, or Mary Taylor, +1-212-314-5845, all of AXA Web site: http://www.axa.com/