SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 27, 2003
Date of earliest event reported: February 27, 2003
AXA FINANCIAL, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-11166 13-3623351
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
1290 Avenue of the Americas
New York, New York 10104
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(Address of principal executive offices) (Zip Code)
(212) 554-1234
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(Registrant's telephone number, including area code)
None
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(Former name or address, if changed since last report)
ITEM 5. OTHER EVENTS
Today, February 27, 2003, AXA, the Registrant's parent, issued a press release,
announcing its consolidated 2002 results of operations prepared in accordance
with generally accepted accounting principles in France ("French GAAP").
Included within AXA's consolidated 2002 results of operations are the results of
operations of the Registrant and its consolidated subsidiaries, presented in
accordance with French GAAP. Set forth below is a reconciliation of the
Registrant's contribution to AXA's consolidated French GAAP Underlying Earnings
(French GAAP net income excluding amortization of goodwill, net capital gains
(losses), exceptional operations and the impacts of the September 11 terrorism
attack) to the Registrant's consolidated Net Earnings prepared in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP").
AXA FINANCIAL, INC.
RECONCILIATION OF THE CONTRIBUTION TO AXA FRENCH GAAP UNDERLYING EARNINGS
TO AXA FINANCIAL'S US GAAP NET INCOME
(in millions)
FULL YEAR
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2002 2001
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CONTRIBUTION TO AXA FRENCH GAAP UNDERLYING EARNINGS PER AXA PRESS RELEASE - IN EUROS
US Life & Savings 680 617
Alliance Capital 194 274
AXA Financial Holding Company (78) (82)
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TOTAL CONTRIBUTION TO AXA FRENCH GAAP UNDERLYING EARNINGS 796 809
Total after-tax capital losses, net (166) (84)
Total after-tax impacts of Sept. 11 terrorism attacks 0 (16)
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TOTAL CONTRIBUTION TO AXA FRENCH GAAP ADJUSTED EARNINGS: IN EUROS 630 709
Average exchange rate: US$ 1.00 = 1.06 1.12
IN US $ $ 596 $ 634
Reconciling Items:
(A) GMIB/DB reserves 25 -
(B) Investment income & capital gains (70) (95)
(C) Employee stock based compensation (7) 33
(D) Accrual for employee continuity/severance agreements 0 (29)
(E) Amortization of goodwill & intangible assets (14) (124)
Other (2) 6
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CONSOLIDATED US GAAP NET EARNINGS $ 528 $ 425
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Notes:
(A) Reflects the accounting for reinsurance contracts ceding variable
annuity guaranteed minimum income benefit ("GMIB") risks as
derivative contracts at fair value under US GAAP vs.ceded
reinsurance reserves under French GAAP.
(B) Primarily reflects accounting for certain equity investments on
the equity method of accounting under US GAAP vs. historical cost
less valuation allowances under French GAAP.
(C) Primarily reflects variable plan accounting of Stock Appreciation
Rights under US GAAP vs. fixed plan accrual accounting under
French GAAP.
(D) Reflects the capitalization of certain costs under French GAAP as
part of the purchase price in connection with the acquisition of
the minority interest of AXA Financial.
(E) Persuant to SFAS No. 142, goodwill is no longer being amortized
under US GAAP effective January 1, 2002.
In addition, the Registrant is also filing herewith, as Exhibit 99.1, its
audited consolidated financial statements as of December 31, 2002 and 2001 and
for each of the three years in the period ended December 31, 2002 in accordance
with U.S. GAAP.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
18. Preferability Letter from PricewaterhouseCoopers regarding the adoption
of a preferable accounting principle.
99.1 Audited consolidated financial statements as of December 31, 2002 and
2001 and for each of the three years in the period ended December 31, 2002 in
accordance with U.S. GAAP.
ITEM 9. REGULATION FD DISCLOSURE
The information provided in connection with Item 9 of this report is being
furnished pursuant to Regulation FD of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). In accordance with General Instruction B of Form
8-K, the information provided in connection with Item 9 of this report shall not
be deemed to be "filed" for purposes of Section 18 of the Exchange Act or
otherwise subject to the liabilities of that section or Sections 11 and 12(a)
(2) of the Securities Act of 1933, as amended (the "Securities Act"), nor shall
it be deemed incorporated by reference in any filing under the Securities Act.
The furnishing of the information set forth in connection with Item 9 of this
report is not intended to, and does not, constitute a determination or admission
as to the materiality or completeness of such information that is required to be
disclosed solely by Regulation FD.
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At a meeting held with security analysts on February 27, 2003, Vice Chairman and
Chief Financial Officer of the Registrant, Stanley B. Tulin, discussed the
impacts under French GAAP of a 10% market value decline in Separate Account
balances and the replacement of the reversion to the mean approach with a 9%
annual gross long-term assumption, respectively, on the Registrant's Deferred
Policy Acquisition Costs ("DAC") and reserves for the guaranteed minimum death
benefit ("GMDB") and the guaranteed minimum income benefit ("GMIB") features
provided in certain variable annuities.
The accounting for DAC is discussed in Note 2 to the Registrant's December 31,
2002 Consolidated Financial Statements attached as Exhibit 99.1 to this Form
8-K. Under both French GAAP and U.S. GAAP, at December 31, 2002, an assumed
immediate 10% market value decline in Separate Account balances would result in
an increase in DAC amortization of approximately $22 million. Under both French
GAAP and U.S. GAAP, at December 31, 2002, had the assumption for projected
future Separate Account performance not incorporated a reversion to the mean
approach, but instead utilized a 9% annual gross long-term return estimate, DAC
amortization would have increased by approximately $92 million.
With respect to the GMDB and GMIB reserves, the approximate impacts under French
GAAP that were discussed are presented in the table below, along with the
comparative approximate impacts on the U.S. GAAP results (in millions):
INCREASE (DECREASE) IN NET RESERVES(1)
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FRENCH GAAP U.S. GAAP
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10% Market Decline $19 $(36)
Eliminate Reversion to the Mean 57 78
The U.S. GAAP accounting for GMDB and GMIB reserves and related reinsurance is
discussed in Notes 2, 9 and 14 to the Registrant's December 31, 2002
Consolidated Financial Statements attached as Exhibit 99.1 to this Form 8-K.
Gross reserves for GMDB and GMIB obligations are calculated on the basis of
actuarial assumptions related to projected benefits and related contract charges
over the lives of the contracts, using a method consistent with that contained
in a proposed Statement of Position issued by the American Institute of
Certified Public Accountants entitled "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate
Accounts." Reinsurance recoverable balances related to ceded GMDB exposure are
calculated using methodologies and assumptions that are consistent with those
used to calculate the direct GMDB liability. However, the reinsurance contracts
ceding GMIB exposure are considered derivatives under Statement of Financial
Accounting Standards No. 133, and, therefore, are required to be reported in the
balance sheet at their fair value. As a result, the accounting that is required
for the GMIB gross reserves is inconsistent with the accounting required for the
related reinsurance asset under U.S. GAAP. This inconsistency does not exist in
French GAAP, which does not treat the reinsurance contracts as derivatives, and
instead allows calculation of reinsurance recoverable balances using
methodologies and assumptions consistent with those used to calculate the direct
GMIB liability.
The decrease in net reserves estimated to result under U.S. GAAP, as compared to
an increase in the net reserves under French GAAP, from an immediate 10% market
value decline at December 31, 2002 is due to the greater sensitivity of the fair
value of the GMIB reinsurance derivative asset to changes in market performance,
compared to the impact of those changes on the related reserve liability.
The difference between the U.S. GAAP and French GAAP impacts of the elimination
of the reversion to the mean approach is due to differences in the methods of
calculation of the French GAAP GMIB reinsurance recoverable asset and the U.S.
GAAP GMIB reinsurance derivative asset, including the fact that reversion to the
mean is not used as an assumption in determining the fair value of the U.S. GAAP
GMIB reinsurance derivative asset. Therefore, there is no impact under U.S. GAAP
on the GMIB reinsurance derivative asset as a result of elimination of the
reversion to the mean approach.
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(1) For U.S. GAAP, GMDB reserves net of related reinsurance recoverable and
GMIB reserves net of the related reinsurance derivative asset.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AXA FINANCIAL, INC.
Date: February 27, 2003 By: /s/ Alvin H. Fenichel
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Name: Alvin H. Fenichel
Title: Senior Vice President and Controller
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EXHIBIT INDEX
Exhibit Exhibit
Number Description
18. Preferability Letter from PricewaterhouseCoopers regarding the adoption
of a preferable accounting principle.
99.1 Audited consolidated financial statements as of December 31, 2002 and
2001 and for each of the three years in the period ended December 31, 2002 in
accordance with U.S. GAAP.
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