UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2006
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ________________
Commission File No. 1-11166
AXA Financial, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 13-3623351
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(State or other jurisdiction of (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
Not applicable
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(Former name, former address, and former fiscal year if
changed since last report.)
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 whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of November 10, 2006, 436,192,949 shares of the registrant's Common Stock
were outstanding.
REDUCED DISCLOSURE FORMAT:
Registrant meets the conditions set forth in General Instruction H(1)(a) and (b)
of Form 10-Q and is therefore filing this form with the Reduced Disclosure
Format.
Page 1 of 35
AXA FINANCIAL, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2006
TABLE OF CONTENTS
Page
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PART I FINANCIAL INFORMATION
Item 1: Financial Statements
o Consolidated Balance Sheets, September 30, 2006 and
December 31, 2005...................................... 4
o Consolidated Statements of Earnings, Three Months and
Nine Months Ended September 30, 2006 and 2005.......... 5
o Consolidated Statements of Shareholder's Equity,
Nine Months Ended September 30, 2006 and 2005.......... 6
o Consolidated Statements of Cash Flows, Nine Months
Ended September 30, 2006 and 2005...................... 7
o Notes to Consolidated Financial Statements............... 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations ("Management Narrative")....... 28
Item 3: Quantitative and Qualitative Disclosures About Market Risk*... 33
Item 4: Controls and Procedures....................................... 33
PART II OTHER INFORMATION
Item 1: Legal Proceedings............................................. 34
Item 1A: Risk Factors.................................................. 34
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds... 34
Item 3: Defaults Upon Senior Securities............................... 34
Item 4: Submission of Matters to a Vote of Security Holders........... 34
Item 5: Other Information............................................. 34
Item 6: Exhibits...................................................... 34
SIGNATURES ............................................................. 35
*Omitted pursuant to General Instruction H to Form 10-Q.
2
FORWARD-LOOKING STATEMENTS
Some of the statements made in this report, including statements made in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", may constitute forward-looking statements. Forward-looking
statements include, among other things, discussions concerning potential
exposure of AXA Financial, Inc. and its subsidiaries to market risks and the
impact of new accounting pronouncements, as well as statements expressing
management's expectations, beliefs, estimates, forecasts, projections and
assumptions, as indicated by words such as "believes," "estimates," "intends,"
"anticipates," "plans," "expects," "projects," "should," "probably," "risk,"
"target," "goals," "objectives," or similar expressions. AXA Financial, Inc.
claims the protection afforded by the safe harbor for forward-looking statements
contained in Section 21E of the Securities Exchange Act of 1934, and assumes no
duty to update any forward-looking statement. Forward-looking statements are
based on management's expectations and beliefs concerning future developments
and their potential effects and are subject to risks and uncertainties.
Forward-looking statements are not a guarantee of future performance. Actual
results could differ materially from those anticipated by forward-looking
statements due to a number of important factors, including those discussed under
"Risk Factors" in Part I, Item 1A of AXA Financial, Inc.'s Annual Report on Form
10-K for the year ended December 31, 2005 and elsewhere in this report.
3
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AXA FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
ASSETS
Investments:
Fixed maturities available for sale, at estimated fair value.............. $ 38,331.0 $ 38,902.8
Mortgage loans on real estate............................................. 4,624.4 4,702.5
Equity real estate, held for the production of income..................... 576.8 632.2
Policy loans.............................................................. 5,012.1 4,946.5
Other equity investments.................................................. 2,017.2 1,620.6
Other invested assets..................................................... 1,227.0 1,203.7
----------------- -----------------
Total investments..................................................... 51,788.5 52,008.3
Cash and cash equivalents................................................... 1,954.7 1,905.6
Cash and securities segregated, at estimated fair value..................... 1,378.8 1,720.8
Broker-dealer related receivables........................................... 3,487.8 2,929.1
Deferred policy acquisition costs........................................... 8,338.8 7,781.9
Goodwill and other intangible assets, net................................... 4,962.8 4,993.7
Value of business acquired.................................................. 711.2 780.4
Amounts due from reinsurers................................................. 3,302.4 3,277.2
Loans to affiliates......................................................... 400.0 400.0
Other assets................................................................ 4,132.3 4,084.9
Separate Accounts' assets................................................... 81,926.6 74,458.8
----------------- -----------------
TOTAL ASSETS................................................................ $ 162,383.9 $ 154,340.7
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 30,395.4 $ 30,817.4
Future policy benefits and other policyholders liabilities.................. 22,676.3 22,677.2
Broker-dealer related payables.............................................. 1,275.0 1,233.1
Customers related payables.................................................. 3,133.8 2,924.3
Short-term and long-term debt............................................... 2,039.2 2,569.9
Loans from affiliates....................................................... 1,590.0 1,580.0
Income taxes payable........................................................ 2,224.8 2,220.9
Other liabilities........................................................... 5,048.3 4,873.8
Separate Accounts' liabilities.............................................. 81,926.6 74,458.8
Minority interest in equity of consolidated subsidiaries.................... 1,527.6 1,467.8
Minority interest subject to redemption rights.............................. 275.0 271.6
----------------- -----------------
Total liabilities..................................................... 152,112.0 145,094.8
----------------- -----------------
Commitments and contingent liabilities (Note 10)
SHAREHOLDER'S EQUITY
Common stock, $.01 par value, 500 million shares authorized,
436.2 million shares issued and outstanding............................... 3.9 3.9
Capital in excess of par value.............................................. 1,051.3 1,047.8
Retained earnings........................................................... 9,310.0 8,213.5
Accumulated other comprehensive income...................................... 181.4 345.5
Treasury shares, at cost.................................................... (274.7) (364.8)
----------------- -----------------
Total shareholder's equity............................................ 10,271.9 9,245.9
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 162,383.9 $ 154,340.7
================= =================
See Notes to Consolidated Financial Statements.
4
AXA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- ---------------------------------
2006 2005 2006 2005
--------------- --------------- --------------- ---------------
(In Millions)
REVENUES
Universal life and investment-type
product policy fee income............................... $ 627.3 $ 540.8 $ 1,808.3 $ 1,536.6
Premiums.................................................. 376.7 408.8 1,155.1 1,216.0
Net investment income..................................... 754.2 770.1 2,389.9 2,395.3
Investment (losses) gains, net............................ (13.6) 4.3 40.1 62.0
Commissions, fees and other income........................ 1,143.2 929.7 3,380.4 2,870.8
--------------- --------------- --------------- ---------------
Total revenues...................................... 2,887.8 2,653.7 8,773.8 8,080.7
--------------- --------------- --------------- ---------------
BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits................................... 743.2 661.5 2,194.9 2,109.3
Interest credited to policyholders' account balances...... 320.6 314.5 904.1 917.0
Compensation and benefits................................. 653.7 609.5 1,868.6 1,700.7
Commissions............................................... 315.6 288.3 957.5 824.7
Distribution plan payments................................ 71.5 62.1 215.3 224.9
Amortization of deferred sales commissions................ 21.7 32.1 71.7 103.1
Interest expense.......................................... 62.9 65.8 198.3 192.8
Amortization of deferred policy acquisition costs
and value of business acquired.......................... 260.2 121.4 656.9 462.0
Capitalization of deferred policy acquisition costs....... (358.9) (356.6) (1,063.3) (992.4)
Rent expense.............................................. 63.0 54.2 180.4 168.8
Amortization of other intangible assets................... 19.1 9.7 37.6 29.5
Other operating costs and expenses........................ 307.0 256.2 932.5 809.3
--------------- -------------- --------------- ---------------
Total benefits and other deductions................. 2,479.6 2,118.7 7,154.5 6,549.7
--------------- --------------- --------------- ---------------
Earnings from continuing operations before
income taxes and minority interest...................... 408.2 535.0 1,619.3 1,531.0
Income taxes.............................................. (14.7) (152.5) (389.1) (438.6)
Minority interest in net income of
consolidated subsidiaries............................... (99.3) (83.0) (290.3) (224.5)
--------------- --------------- --------------- ---------------
Earnings from continuing operations ...................... 294.2 299.5 939.9 867.9
Earnings from discontinued operations, net of
income taxes........................................... 30.7 15.2 35.4 20.9
Gains (loss) on disposal of discontinued operations,
net of income taxes.................................... 117.1 (99.5) 121.2 (99.5)
--------------- --------------- --------------- ---------------
Net Earnings.............................................. $ 442.0 $ 215.2 $ 1,096.5 $ 789.3
=============== =============== =============== ===============
See Notes to Consolidated Financial Statements.
5
AXA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
----------------- -----------------
(IN MILLIONS)
SHAREHOLDER'S EQUITY
Common stock, at par value, beginning of year and end of period............. $ 3.9 $ 3.9
----------------- -----------------
Capital in excess of par value, beginning of year........................... 1,047.8 1,073.5
Other changes in additional capital in excess of par value.................. 3.5 (13.6)
----------------- -----------------
Capital in excess of par value, end of period............................... 1,051.3 1,059.9
----------------- -----------------
Retained earnings, beginning of year........................................ 8,213.5 7,139.7
Net earnings................................................................ 1,096.5 789.3
----------------- -----------------
Retained earnings, end of period............................................ 9,310.0 7,929.0
----------------- -----------------
Accumulated other comprehensive income, beginning of year................... 345.5 866.1
Other comprehensive loss.................................................... (164.1) (360.6)
----------------- -----------------
Accumulated other comprehensive income, end of period....................... 181.4 505.5
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Treasury shares at cost, beginning of year.................................. (364.8) (19.4)
Changes in treasury shares.................................................. 90.1 (102.0)
----------------- -----------------
Treasury shares at cost, end of period...................................... (274.7) (121.4)
----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD................................... $ 10,271.9 $ 9,376.9
================= =================
See Notes to Consolidated Financial Statements.
6
AXA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
2006 2005
----------------- -----------------
(IN MILLIONS)
Net earnings................................................................ $ 1,096.5 $ 789.3
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Interest credited to policyholders' account balances.................... 904.1 917.0
Universal life and investment-type product policy fee income............ (1,808.3) (1,536.6)
Net change in broker-dealer customer related receivables/payables....... (341.0) (648.5)
Investment gains, net................................................... (40.1) (62.0)
Change in segregated cash and securities, net........................... 342.0 43.4
Change in deferred policy acquisition costs............................. (406.4) (530.4)
Change in future policy benefits........................................ (32.0) 59.7
Change in income tax payable............................................ 112.5 378.6
Change in accounts payable and accrued expenses......................... 405.9 344.4
Change in fair value of guaranteed minimum income benefit
reinsurance contracts................................................ (38.3) (45.3)
Minority interest in net income of consolidated subsidiaries............ 290.3 224.5
Other, net.............................................................. 106.5 127.0
----------------- -----------------
Net cash provided by operating activities................................... 591.7 61.1
----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................................. 3,266.3 3,317.7
Sales of investments ..................................................... 1,865.2 1,898.5
Purchases of investments ................................................. (5,158.2) (5,784.0)
Change in short-term investments.......................................... 15.0 (298.0)
Other, net................................................................ (124.8) (31.3)
----------------- -----------------
Net cash used in investing activities....................................... (136.5) (897.1)
----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits................................................................ 3,322.5 3,331.7
Withdrawals and transfers to Separate Accounts.......................... (2,999.7) (2,372.9)
Repayments of long-term debt ............................................. (700.0) -
Net increase in short-term financings .................................... 144.9 6.2
Increase in loans from affiliates ........................................ 10.0 -
Decrease in loans from affiliates ........................................ - (88.9)
Purchase of treasury shares .............................................. (4.3) (116.0)
Other, net................................................................ (179.5) (196.1)
----------------- -----------------
Net cash (used in) provided by financing activities......................... (406.1) 564.0
----------------- -----------------
Change in cash and cash equivalents......................................... 49.1 (272.0)
Cash and cash equivalents, beginning of year................................ 1,905.6 2,626.8
----------------- -----------------
Cash and Cash Equivalents, End of Period.................................... $ 1,954.7 $ 2,354.8
================= =================
Supplemental cash flow information
Interest Paid............................................................. $ 172.3 $ 158.0
================= =================
Income Taxes Paid ........................................................ $ 223.5 $ 139.0
================= =================
See Notes to Consolidated Financial Statements.
7
AXA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The preparation of the accompanying unaudited consolidated financial
statements in conformity with GAAP requires management to make estimates
and assumptions (including normal, recurring accruals) that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The accompanying
unaudited interim consolidated financial statements reflect, in the
opinion of management, all adjustments necessary to state fairly the
consolidated financial position of AXA Financial, Inc. and its
consolidated results of operations and cash flows for the periods
presented. All significant intercompany transactions and balances have
been eliminated in consolidation. These statements should be read in
conjunction with the audited consolidated financial statements of AXA
Financial Group for the year ended December 31, 2005. The results of
operations for the nine months ended September 30, 2006 are not
necessarily indicative of the results to be expected for the full year.
The terms "third quarter 2006" and "third quarter 2005" refer to the three
months ended September 30, 2006 and 2005, respectively. The terms "first
nine months of 2006" and "first nine months of 2005" refer to the nine
months ended September 30, 2006 and 2005, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform those periods to the current presentation.
2) ACCOUNTING CHANGE AND NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2006, AXA Financial Group adopted SFAS No. 123(R). To effect
its adoption, AXA Financial Group elected the "modified prospective
method" of transition. Under this method, prior-period results were not
restated. Prior to the adoption of SFAS 123(R), AXA Financial Group had
elected to continue to account for stock-based compensation in accordance
with APB No. 25, and, as a result, the recognition of stock-based
compensation expense generally was limited to amounts attributed to awards
of restricted shares and various cash-settled programs such as stock
appreciation rights. SFAS No. 123(R) requires the cost of all share-based
payments to employees to be recognized in the financial statements based
on their fair values, resulting in compensation expense for certain types
of AXA Financial Group's equity-classified award programs for which no
cost previously would have been charged to net earnings under APB No. 25,
most notably for employee options to purchase AXA American Depository
Receipts ("ADRs") and AXA ordinary shares and for employee stock purchase
plans. As a result of adopting SFAS No. 123(R) on January 1, 2006,
consolidated earnings from continuing operations before income taxes and
minority interest for third quarter 2006 and consolidated net earnings for
third quarter 2006 were $11.0 million and $7.4 million lower,
respectively, and consolidated earnings from continuing operations before
income taxes and minority interest and consolidated net earnings for first
nine months of 2006 were $31.9 million and $21.4 million lower,
respectively, than if these plans had continued to be accounted for under
APB No. 25.
Under the modified prospective method, AXA Financial Group applied the
measurement, recognition, and attribution requirements of SFAS No. 123(R)
to stock-based compensation awards granted, modified, repurchased or
cancelled on or after January 1, 2006. In addition, beginning in first
quarter 2006, costs associated with unvested portions of outstanding
employee stock option awards at January 1, 2006 that prior to adoption of
SFAS 123(R) would have been reflected by AXA Financial Group only in pro
forma disclosures, were recognized in the consolidated statement of
earnings over the awards' remaining future service-vesting periods.
Liability-classified awards outstanding at January 1, 2006, such as
performance units and stock appreciation rights, were remeasured to fair
value. The remeasurement resulted in no adjustment to their intrinsic
value basis, including the cumulative effect of differences between actual
and expected forfeitures, primarily due to the de minimis time remaining
to expected settlement of these awards.
Effective with its adoption of SFAS No. 123(R), AXA Financial Group
elected the "short-cut" transition alternative provided by FSP No.
123(R)-3 for approximating the historical pool of windfall tax benefits
8
available in shareholder's equity at January 1, 2006. This historical pool
represents the cumulative tax benefits of tax deductions for employee
share-based payments in excess of compensation costs recognized under
GAAP, either in the financial statements or in the pro forma disclosures.
In the event that a shortfall of tax benefits occurs during a reporting
period (i.e. tax deductions are less than the related cumulative
compensation expense), the historical pool will be reduced by the amount
of the shortfall. If the shortfall exceeds the amount of the historical
pool, there will be a negative impact on the results of operations. In
third quarter and the first nine months of 2006, additional windfall tax
benefits resulted from employee exercises of stock option awards.
New Accounting Pronouncements
-----------------------------
On September 29, 2006, the FASB issued SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans",
requiring sponsors to recognize the funded status of these benefit plans
as an asset or liability in the balance sheet and to recognize changes in
that funded status as a component of other comprehensive income. These
requirements represent a significant change to previous accounting
guidance that generally delayed recognition, in the balance sheet, of
certain changes in plan assets and benefit obligations and only required
disclosure, in the notes to the financial statements, of the complete
funded status of the plans. SFAS No. 158 does not change the determination
of net periodic benefit cost or its presentation in the statement of
earnings and, similarly, requires continued application of existing
guidance in measuring plan assets and benefit obligations, except to
impose a measurement date coincident with the employer's fiscal year-end
reporting. AXA Financial Group will be required to initially recognize the
funded status of its defined benefit pension and other postretirement
plans as of the end of the calendar year 2006 and to reflect the impact as
an adjustment of the ending balance of accumulated comprehensive income.
SFAS No. 158 does not permit retrospective application but addresses the
resulting comparability issue by instead requiring disclosure, in the
notes to the financial statements in the year of adoption, of the
incremental effect on individual line items in the year-end statement of
financial position. Based on preliminary analysis of the funded status of
defined benefit pension and other postretirement plans and amounts
reported in the balance sheet at December 31, 2005, management estimates
that adoption of SFAS No. 158 will reduce total assets by approximately
$890 million, principally due to the elimination of prepaid pension cost,
and increase total benefit liabilities by approximately $328 million. The
aggregate impact of these amounts, totaling approximately $1.2 billion,
would reduce consolidated shareholders' equity by approximately $789
million, net of tax and minority interest, and be reflected as a charge to
accumulated other comprehensive income. Management is continuing to assess
the impact of adoption as actual amounts to be recognized at December 31,
2006 will reflect the funded status of the plans as of that date.
On September 15, 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements". SFAS No. 157 establishes a single authoritative definition
of fair value, sets out a framework for measuring fair value, and requires
additional disclosures about fair value measurements. It applies only to
fair value measurements that are already required or permitted by other
accounting standards, except for measurements of share-based payments and
measurements that are similar to, but not intended to be, fair value. SFAS
No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, with earlier application encouraged.
Management is currently assessing the potential impacts of adoption of
SFAS No. 157.
On July 13, 2006, the FASB issued FIN 48, "Accounting for Uncertainty in
Income Taxes," to clarify the criteria used to recognize and measure the
economic benefits associated with tax positions taken or expected to be
taken in a tax return. Under FIN 48, a tax benefit is recognized only if
it is "more likely than not" to be sustained assuming examination by the
taxing authority, based on the technical merits of the position. Tax
positions meeting the recognition criteria are required to be measured at
the largest amount of tax benefit that is more than 50 percent likely of
being realized upon ultimate settlement and, accordingly, requires
consideration of the amounts and probabilities of potential settlement
outcomes. FIN 48 also addresses subsequent derecognition of tax positions,
changes in the measurement of recognized tax positions, accrual and
classification of interest and penalties, and accounting in interim
periods. FIN 48 is effective for fiscal years beginning after December 15,
2006, thereby requiring application of its provisions, including the
threshold criteria for recognition, to all tax positions of AXA Financial
Group as at January 1, 2007. The cumulative effect of applying FIN 48, if
any, is to be reported as an adjustment to the opening balance of retained
earnings. In addition, annual disclosures with respect to income taxes
have been expanded by FIN 48 and require inclusion of a tabular
reconciliation of the total amounts of unrecognized tax benefits at the
beginning and end of the reporting period. Management is currently
assessing the potential impacts of adoption of FIN 48.
9
3) INVESTMENTS
For the third quarter and first nine months of 2006 and of 2005,
investment income is shown net of investment expenses of $88.9 million,
$259.0 million, $49.9 million and $177.3 million, respectively.
As of September 30, 2006 and December 31, 2005, respectively, fixed
maturities classified as available for sale had amortized costs of
$37,890.8 million and $37,993.2 million. Also at September 30, 2006 and
December 31, 2005, respectively, Other equity investments included the
General Account's investments in Separate Accounts and other trading
securities having carrying values of $676.3 million and $402.7 million and
costs of $654.9 million and $386.5 million and other equity securities
with carrying values of $125.1 million and $90.8 million and costs of
$118.7 million and $88.0 million.
In the third quarter and the first nine months of 2006 and of 2005,
respectively, net unrealized and realized holding gains on trading account
equity securities of $21.4 million, $34.3 million, $3.8 million and $3.5
million, respectively were included in net investment income in the
consolidated statements of earnings.
For the first nine months of 2006 and 2005, proceeds received on sales of
fixed maturities classified as available for sale amounted to $1,469.1
million and $1,764.3 million, respectively. Gross gains of $43.2 million
and $37.9 million and gross losses of $31.1 million and $15.9 million were
realized on these sales for the first nine months of 2006 and of 2005,
respectively. Unrealized net investment gains related to fixed maturities
classified as available for sale decreased by $470.0 million during the
first nine months of 2006, resulting in a net unrealized gain balance of
$439.7 million at September 30, 2006.
Investment valuation allowances for mortgage loans and changes thereto
follow:
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
2006 2005
--------------- ---------------
(IN MILLIONS)
Balances, beginning of year.............................................. $ 13.4 $ 11.8
Additions charged to income.............................................. 0.2 .7
Deductions for writedowns and asset dispositions......................... (0.5) (3.5)
--------------- ---------------
Balances, End of Period.................................................. $ 13.1 $ 9.0
=============== ===============
Impaired mortgage loans along with the related investment valuation
allowances for losses follow:
SEPTEMBER 30, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
Impaired mortgage loans with investment valuation allowances............ $ 92.2 $ 93.0
Impaired mortgage loans without investment valuation allowances......... 7.2 13.4
----------------- -----------------
Recorded investment in impaired mortgage loans.......................... 99.4 106.4
Investment valuation allowances......................................... (13.1) (13.4)
----------------- -----------------
Net Impaired Mortgage Loans............................................. $ 86.3 $ 93.0
================= =================
During the first nine months of 2006 and 2005, respectively, AXA Financial
Group's average recorded investment in impaired mortgage loans was $101.5
million and $105.6 million. Interest income recognized on these impaired
mortgage loans totaled $4.6 million and $8.5 million for the first nine
months of 2006 and 2005, respectively.
Mortgage loans on real estate are placed on nonaccrual status once
management believes the collection of accrued interest is doubtful. Once
mortgage loans on real estate are classified as nonaccrual loans, interest
income is recognized under the cash basis of accounting and the resumption
of the interest accrual would commence only after all past due interest
has been collected or the mortgage loan on real estate has been
restructured to the point that the collection of interest is considered
likely. At September 30, 2006 and
10
December 31, 2005, respectively, the carrying values of mortgage loans on
real estate that had been classified as nonaccrual loans were $69.2
million and $74.8 million.
4) CLOSED BLOCKS
The excess of Closed Block liabilities over Closed Block assets (adjusted
to exclude the impact of related amounts in Accumulated other
comprehensive income) represents the expected maximum future post-tax
earnings from the Closed Block that would be recognized in income from
continuing operations over the period the policies and contracts in the
Closed Block remain in force. As of January 1, 2001, AXA Financial Group
had developed an actuarial calculation of the expected timing of AXA
Equitable's Closed Block's earnings. Further, in connection with the
acquisition of MONY, AXA Financial Group has developed an actuarial
calculation of the expected timing of MONY Life Closed Block earnings as
of July 1, 2004.
If the actual cumulative earnings from the Closed Block are greater than
the expected cumulative earnings, only the expected earnings will be
recognized in net income. Actual cumulative earnings in excess of expected
cumulative earnings at any point in time are recorded as a policyholder
dividend obligation because they will ultimately be paid to Closed Block
policyholders as an additional policyholder dividend unless offset by
future performance that is less favorable than originally expected. If a
policyholder dividend obligation has been previously established and the
actual Closed Block earnings in a subsequent period are less than the
expected earnings for that period, the policyholder dividend obligation
would be reduced (but not below zero). If, over the period the policies
and contracts in the Closed Block remain in force, the actual cumulative
earnings of the Closed Block are less than the expected cumulative
earnings, only actual earnings would be recognized in income from
continuing operations. If the Closed Block has insufficient funds to make
guaranteed policy benefit payments, such payments will be made from assets
outside the Closed Block.
Many expenses related to Closed Block operations, including amortization
of DAC and VOBA, are charged to operations outside of the Closed Block;
accordingly, net revenues of the Closed Block do not represent the actual
profitability of the Closed Block operations. Operating costs and expenses
outside of the Closed Block are, therefore, disproportionate to the
business outside of the Closed Block.
The operations of the AXA Equitable and MONY Life Closed Blocks are
managed separately.
11
AXA Equitable Closed Block
--------------------------
Summarized financial information for the AXA Equitable Closed Block is as
follows:
SEPTEMBER 30, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
CLOSED BLOCK LIABILITIES:
Future policy benefits, policyholders' account balances and other.... $ 8,773.1 $ 8,866.1
Policyholder dividend obligation..................................... 1.0 73.7
Other liabilities.................................................... 28.4 28.6
----------------- -----------------
Total Closed Block liabilities....................................... 8,802.5 8,968.4
----------------- -----------------
ASSETS DESIGNATED TO THE CLOSED BLOCK:
Fixed maturities, available for sale, at estimated fair value
(amortized cost of $5,913.3 and $5,761.5).......................... 5,974.3 5,908.7
Mortgage loans on real estate........................................ 825.3 930.3
Policy loans......................................................... 1,243.6 1,284.4
Cash and other invested assets....................................... 26.7 56.2
Other assets......................................................... 281.9 304.4
----------------- -----------------
Total assets designated to the Closed Block.......................... 8,351.8 8,484.0
----------------- -----------------
Excess of Closed Block liabilities over assets designated to the
Closed Block...................................................... 450.7 484.4
Amounts included in accumulated other comprehensive income:
Net unrealized investment gains, net of deferred income
tax expense of $21.0 and $25.7 and policyholder
dividend obligation of $1.0 and $73.7........................... 39.0 47.8
----------------- -----------------
Maximum Future Earnings To Be Recognized From Closed Block
Assets and Liabilities............................................ $ 489.7 $ 532.2
================= =================
AXA Equitable's Closed Block revenues and expenses were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2006 2005 2006 2005
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
REVENUES:
Premiums and other income............... $ 99.4 $ 104.0 $ 318.6 $ 334.2
Investment income (net of investment
expenses of $0, $0, $.1 and $0)...... 129.8 130.2 387.0 394.9
Investment gains (losses), net.......... 2.0 (8.5) (.1) 3.2
--------------- ---------------- --------------- ---------------
Total revenues.......................... 231.2 225.7 705.5 732.3
--------------- ---------------- --------------- ---------------
BENEFITS AND
OTHER DEDUCTIONS:
Policyholders' benefits and dividends... 200.4 202.7 637.2 629.1
Other operating costs and expenses...... .4 .6 2.2 2.4
--------------- ---------------- --------------- ---------------
Total benefits and other deductions..... 200.8 203.3 639.4 631.5
--------------- ---------------- --------------- ---------------
Net revenues before income taxes........ 30.4 22.4 66.1 100.8
Income tax expense...................... (11.1) (7.8) (23.6) (35.2)
--------------- ---------------- --------------- ---------------
Net Revenues............................ $ 19.3 $ 14.6 $ 42.5 $ 65.6
=============== ================ =============== ===============
12
Reconciliation of the AXA Equitable policyholder dividend obligation is as
follows:
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------
2006 2005
---------------- ----------------
(IN MILLIONS)
Balances, beginning of year............................................. $ 73.7 $ 264.3
Unrealized investment losses............................................ (72.7) (140.2)
---------------- ----------------
Balances, End of Period................................................. $ 1.0 $ 124.1
================ ================
MONY LIFE CLOSED BLOCK
----------------------
Summarized financial information for the MONY Life Closed Block follows:
SEPTEMBER 30, December 31,
2006 2005
----------------- -------------------
(IN MILLIONS)
CLOSED BLOCK LIABILITIES
Future policy benefits, policyholders' account balances and other...... $ 7,223.1 $ 7,332.4
Policyholder dividend obligation....................................... 119.1 142.5
Other liabilities...................................................... 43.9 31.0
----------------- -------------------
Total Closed Block liabilities......................................... 7,386.1 7,505.9
----------------- -------------------
ASSETS DESIGNATED TO THE CLOSED BLOCK
Fixed maturities available for sale, at fair value
(amortized cost $4,260.6 and $4,399.0).............................. 4,220.0 4,397.8
Mortgage loans on real estate.......................................... 602.3 560.1
Policy loans........................................................... 987.6 1,003.7
Cash and other invested assets......................................... 170.2 135.8
Other assets........................................................... 334.7 295.1
----------------- -------------------
Total assets designated to the Closed Block............................ 6,314.8 6,392.5
----------------- -------------------
Excess of Closed Block liabilities over assets designated
to the Closed Block................................................. 1,071.3 1,113.4
Amounts included in accumulated other comprehensive income:
Net unrealized investment losses, net of deferred income
tax benefit of $0 and $0 and policyholder
dividend obligation of $(40.6) and $(1.2)........................ - -
----------------- -------------------
Maximum Future Earnings To Be Recognized From Closed Block
Assets and Liabilities.............................................. $ 1,071.3 $ 1,113.4
================= ===================
13
MONY Life Closed Block revenues and expenses follow:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2006 2005 2006 2005
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
REVENUES:
Premiums and other income............... $ 84.3 $ 95.7 $ 261.7 $ 294.7
Investment income (net of
investment expenses of $1.7,
$1.6, $4.5 and $4.3)................. 89.5 83.3 256.8 250.9
Investment losses, net.................. (3.8) (1.6) (1.9) (2.8)
--------------- ---------------- --------------- ---------------
Total revenues.......................... 170.0 177.4 516.6 542.8
--------------- ---------------- --------------- ---------------
BENEFITS AND
OTHER DEDUCTIONS:
Policyholders' benefits and dividends... 147.8 154.6 449.8 475.2
Other operating costs and expenses...... .6 1.4 2.1 2.6
--------------- ---------------- --------------- ---------------
Total benefits and other deductions..... 148.4 156.0 451.9 477.8
--------------- ---------------- --------------- ---------------
Net revenues before income taxes........ 21.6 21.4 64.7 65.0
Income tax expense...................... (7.5) (7.5) (22.6) (22.7)
--------------- ---------------- --------------- ---------------
Net Revenues............................ $ 14.1 $ 13.9 $ 42.1 $ 42.3
=============== ================ =============== ===============
Reconciliation of the MONY Life policyholder dividend obligation follows:
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------
2006 2005
------------------ -----------------
(IN MILLIONS)
Balance, beginning of year........................................ $ 142.5 $ 250.8
Applicable to net revenues........................................ 16.0 (6.7)
Unrealized investment losses, net................................. (39.4) (69.0)
------------------ ------------------
Balance, End of Period............................................ $ 119.1 $ 175.1
================== ==================
5) DISCONTINUED OPERATIONS
Discontinued operations include Wind-up Annuities, equity real estate
held-for-sale, Advest and the discontinued Investment Banking and
Brokerage segment. In the first nine months of 2006, three real estate
properties with a total book value of $159.8 million that had been
previously reported in equity real estate were reclassified as real estate
held-for-sale. Prior periods have been restated to reflect these
properties as discontinued operations. In third quarter 2006, one of the
held-for-sale properties was sold resulting in a gain of $97.3 million
($63.2 million post-tax). In the first nine months of 2006, a pre-tax gain
on the disposal of discontinued operations of $6.3 million ($4.1 million
post-tax) resulted from the settlement of contingencies related to the
2005 sale of Advest. In third quarter 2005, AXA Financial recorded a
provision for deferred income taxes of $99.5 million required as a result
of the fourth quarter disposition of Advest. In third quarter 2006, AXA
Financial recorded a $53.9 million gain on disposal of the discontinued
Investment Banking and Brokerage segment related to the settlement of an
IRS audit of the 2000 tax year. The following table reconciles the
earnings (losses) from discontinued operations, net of income taxes and
the gains (losses) on disposal of discontinued operations, net of income
taxes to the amounts reflected in the consolidated statements of earnings
for the third quarter and first nine months of 2006 and 2005:
14
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2006 2005 2006 2005
--------------- --------------- ---------------- ---------------
(IN MILLIONS)
Wind-up Annuities.............................. $ 28.4 $ 15.2 $ 28.4 $ 15.2
Real estate held-for-sale...................... 2.3 (.1) 7.0 5.5
Advest......................................... - .1 - .2
--------------- --------------- ---------------- ---------------
Earnings from Discontinued Operations,
Net of Income Taxes......................... $ 30.7 $ 15.2 $ 35.4 $ 20.9
=============== =============== ================ ===============
Real estate held-for-sale...................... $ 63.2 $ - $ 63.2 $ -
Discontinued Investment Banking and
Brokerage segment.......................... 53.9 - 53.9 -
Advest......................................... - (99.5) 4.1 (99.5)
--------------- --------------- ---------------- ---------------
Gains (Loss) on Disposal of Discontinued
Operations, Net of Income Taxes............ $ 117.1 $ (99.5) $ 121.2 $ (99.5)
=============== =============== ================ ===============
Summarized financial information for Wind-up Annuities follows:
SEPTEMBER 30, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
BALANCE SHEETS
Fixed maturities, available for sale, at estimated fair value
(amortized cost of $762.6 and $796.8).............................. $ 776.7 $ 823.5
Equity real estate................................................... 165.3 197.5
Mortgage loans on real estate........................................ 6.0 6.7
Other invested assets................................................ 2.8 3.2
----------------- -----------------
Total investments.................................................. 950.8 1,030.9
Cash and cash equivalents............................................ 3.0 -
Other assets......................................................... 13.6 13.6
----------------- -----------------
Total Assets......................................................... $ 967.4 $ 1,044.5
================= =================
Policyholders liabilities ........................................... $ 795.5 $ 817.2
Allowance for future losses.......................................... 8.3 60.1
Other liabilities.................................................... 163.6 167.2
----------------- -----------------
Total Liabilities.................................................... $ 967.4 $ 1,044.5
================= =================
15
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
2006 2005 2006 2005
--------------- -------------- --------------- ---------------
(IN MILLIONS)
STATEMENTS OF EARNINGS
Investment income (net of investment
expenses of $4.9, $3.9, $14.0 and $13.4)..... $ 16.1 $ 19.3 $ 52.2 $ 53.1
Investment gains (losses), net................. 0.2 (.1) 5.4 (.3)
-------------- --------------- --------------- ------------
Total revenues................................. 16.3 19.2 57.6 52.8
--------------- -------------- ------------ ---------------
Benefits and other deductions.................. 22.2 22.6 62.0 65.3
Losses charged to the
allowance for future losses................. (5.9) (3.4) (4.4) (12.5)
--------------- -------------- --------------- ---------------
Pre-tax results from operations................ - - - -
Pre-tax earnings from releasing the
allowance for future losses................. 34.9 23.2 34.9 23.2
Income tax expense............................. (6.5) (8.0) (6.5) (8.0)
--------------- -------------- --------------- ---------------
Income from Wind-up Annuities.................. $ 28.4 $ 15.2 $ 28.4 $ 15.2
=============== ============== =============== ===============
AXA Financial Group's quarterly process for evaluating the allowance for
future losses applies the current period's results of Wind-up Annuities
against the allowance, re-estimates future losses, and adjusts the
allowance, if appropriate. These updated assumptions and estimates
resulted in a release of the allowance in each of the periods presented
above.
Management believes the allowance for future losses at September 30, 2006
is adequate to provide for all future losses; however, the determination
of the allowance involves numerous estimates and subjective judgments
regarding the expected performance of invested assets held by Wind-up
Annuities. There can be no assurance the losses provided for will not
differ from the losses ultimately realized. To the extent actual results
or future projections of Wind-up Annuities differ from management's
current estimates and assumptions underlying the allowance for future
losses, the difference would be reflected in the consolidated statements
of earnings in Wind-up Annuities. In particular, to the extent income,
sales proceeds and holding periods for equity real estate differ from
management's previous assumptions, periodic adjustments to the loss
allowance are likely to result.
Income tax expense for Wind-up Annuities in third quarter 2006 included a
$5.8 million tax benefit in connection with the settlement of an IRS audit
of the 1997-2001 tax years.
6) GMDB, GMIB AND NO LAPSE GUARANTEE FEATURES
A) Variable Annuity Contracts - GMDB and GMIB
------------------------------------------
AXA Equitable, MONY Life and MLOA issue certain variable annuity contracts
with GMDB and GMIB features that guarantee one of the following:
o Return of Premium: the benefit is the greater of current account
value or premiums paid (adjusted for withdrawals);
o Ratchet: the benefit is the greatest of current account value,
premiums paid (adjusted for withdrawals), or the highest
account value on any anniversary up to contractually specified ages
(adjusted for withdrawals);
o Roll-Up: the benefit is the greater of current account value or
premiums paid (adjusted for withdrawals) accumulated at
contractually specified interest rates up to specified ages; or
o Combo: the benefit is the greater of the ratchet benefit or the
roll-up benefit.
16
The following table summarizes the GMDB and GMIB liabilities, before
reinsurance ceded, reflected in the General Account in future policy
benefits and other policyholders liabilities:
GMDB GMIB TOTAL
---------------- ----------------- -----------------
(IN MILLIONS)
Balance at December 31, 2005....................... $ 115.8 $ 173.8 $ 289.6
Paid guarantee benefits.......................... (28.2) (2.9) (31.1)
Other changes in reserve......................... 61.5 37.9 99.4
---------------- ----------------- -----------------
Balance at September 30, 2006...................... $ 149.1 $ 208.8 $ 357.9
================ ================= =================
Balance at December 31, 2004....................... $ 68.5 $ 117.7 $ 186.2
Paid guarantee benefits......................... (33.5) (2.1) (35.6)
Other changes in reserve........................ 61.1 55.7 116.8
---------------- ----------------- -----------------
Balance at September 30, 2005..................... $ 96.1 $ 171.3 $ 267.4
================ ================= =================
Related GMDB reinsurance ceded amounts were:
GMDB
--------------------
(In Millions)
Balance at December 31, 2005....................... $ 22.9
Paid guarantee benefits ceded.................... (7.9)
Other changes in reserve......................... 9.1
--------------------
Balance at September 30, 2006...................... $ 24.1
====================
Balance at December 31, 2004....................... $ 9.3
Paid guarantee benefits ceded.................... (15.2)
Other changes in reserve......................... 24.7
--------------------
Balance at September 30, 2005...................... $ 18.8
====================
The GMIB reinsurance contracts are considered derivatives and are reported
at fair value.
The September 30, 2006 values for those variable annuity contracts
in-force on such date with GMDB and GMIB features are presented in the
following table. For contracts with the GMDB feature, the net amount at
risk in the event of death is the amount by which the GMDB benefits exceed
related account values. For contracts with the GMIB feature, the net
amount at risk in the event of annuitization is the amount by which the
present value of the GMIB benefits exceeds related account values, taking
into account the relationship between current annuity purchase rates and
the GMIB guaranteed annuity purchase rates. Since variable annuity
contracts with GMDB guarantees may also offer GMIB guarantees in the same
contract, the GMDB and GMIB amounts listed are not mutually exclusive:
17
RETURN
OF
PREMIUM RATCHET ROLL-UP COMBO TOTAL
-------------- -------------- ------------- ------------- ---------------
(DOLLARS IN MILLIONS)
GMDB:
----
Account values invested in:
General Account............. $ 11,674 $ 761 $ 321 $ 725 $ 13,481
Separate Accounts........... $ 24,423 $ 8,971 $ 7,379 $ 20,558 $ 61,331
Net amount at risk, gross...... $ 445 $ 561 $ 1,684 $ 192 $ 2,882
Net amount at risk, net of
amounts reinsured........... $ 444 $ 393 $ 1,031 $ 150 $ 2,018
Average attained age of
contractholders............. 49.9 61.1 64.1 61.1 52.8
Percentage of contractholders
over age 70................. 13.3% 20.8% 32.9% 21.0% 15.9%
Range of contractually
specified interest rates.... N/A N/A 3%-6% 3%-6%
GMIB:
----
Account values invested in:
General Account............. N/A N/A $ 122 $ 932 $ 1,054
Separate Accounts........... N/A N/A $ 5,291 $ 28,015 $ 33,306
Net amount at risk, gross...... N/A N/A $ 310 $ - $ 310
Net amount at risk, net of
amount reinsured............ N/A N/A $ 79 $ - $ 79
Weighted average years
remaining until
annuitization............... N/A N/A 3.1 8.8 7.3
Range of contractually
specified interest rates ... N/A N/A 3%-6% 3%-6%
B) Separate Account Investments by Investment Category Underlying GMDB and
GMIB Features
-----------------------------------------------------------------------
The total account values of variable annuity contracts with GMDB and GMIB
features include amounts allocated to the guaranteed interest option
which is part of the General Account and variable investment options
which invest through Separate Accounts in variable insurance trusts. The
following table presents the aggregate fair value of assets, by major
investment category, held by Separate Accounts that support variable
annuity contracts with GMDB and GMIB benefits and guarantees. The
investment performance of the assets impacts the related account values
and, consequently, the net amount of risk associated with the GMDB and
GMIB benefits and guarantees. Since variable annuity contracts with GMDB
benefits and guarantees may also offer GMIB benefits and guarantees in
each contract, the GMDB and GMIB amounts listed are not mutually
exclusive:
18
INVESTMENT IN VARIABLE INSURANCE TRUST MUTUAL FUNDS
SEPTEMBER 30, December 31,
2006 2005
---------------- ------------------
(IN MILLIONS)
GMDB:
----
Equity............................................................... $ 41,524 $ 38,207
Fixed income......................................................... 4,744 4,817
Balanced............................................................. 12,966 9,193
Other................................................................ 2,097 1,919
---------------- ------------------
Total.............................................................. $ 61,331 $ 54,136
================ ==================
GMIB:
----
Equity............................................................... $ 20,604 $ 17,668
Fixed income......................................................... 2,716 2,642
Balanced............................................................. 9,036 5,852
Other................................................................ 950 685
---------------- ------------------
Total.............................................................. $ 33,306 $ 26,847
================ ==================
C) Hedging Programs for GMDB and GMIB Features
-------------------------------------------
In 2003, AXA Equitable initiated a program intended to hedge certain
risks associated with the GMDB feature of the Accumulator(R) series of
variable annuity products sold beginning in April 2002. In 2004, the
program was expanded to include hedging for certain risks associated with
the GMIB feature of the Accumulator(R) series of variable annuity
products sold beginning in 2004. AXA Equitable's hedging activities
mitigate the risks associated with movements in equity and fixed income
markets but do not eliminate all of the risks associated with the
GMDB/GMIB features. This program currently utilizes exchange-traded
futures contracts that are dynamically managed in an effort to reduce the
economic impact of unfavorable changes in GMDB and GMIB exposures
attributable to movements in the equity and fixed income markets. At
September 30, 2006, the total account value and net amount at risk of the
hedged Accumulator(R) series of variable annuity contracts were $37,212
million and $176 million, respectively, with the GMDB feature and $21,085
million and zero, respectively, with the GMIB feature.
Although these programs are designed to provide some economic protection
against the impact adverse market conditions may have with respect to
GMDB and GMIB guarantees, they do not qualify for hedge accounting
treatment under SFAS No. 133. Therefore, SFAS No. 133 requires gains or
losses on the futures contracts used in these programs, including current
period changes in fair value, to be recognized in investment income in
the period in which they occur, and may contribute to earnings
volatility.
D) Variable and Interest-Sensitive Life Insurance Policies - No Lapse
------------------------------------------------------------------
Guarantee
---------
The no lapse guarantee feature contained in variable and
interest-sensitive life insurance policies keeps them in force in
situations where the policy value is not sufficient to cover monthly
charges when due. The no lapse guarantee remains in effect so long as the
policy meets a contractually specified premium funding test and certain
other requirements.
The following table summarizes the no lapse guarantee liabilities
reflected in the General Account in future policy benefits and other
policyholders liabilities, and related reinsurance ceded:
19
DIRECT REINSURANCE
LIABILITY CEDED NET
----------------- ----------------- -----------------
(IN MILLIONS)
Balance at December 31, 2005....................... $ 35.0 $ - $ 35.0
Other changes in reserve......................... 22.3 - 22.3
----------------- ----------------- -----------------
Balance at September 30, 2006...................... $ 57.3 $ $ 57.3
================= ================= =================
Balance at December 31, 2004....................... $ 21.0 $ - $ 21.0
Other changes in reserve......................... 11.9 - 11.9
----------------- ----------------- -----------------
Balance at September 30, 2005...................... $ 32.9 $ - $ 32.9
================= ================= =================
7) EMPLOYEE BENEFIT PLANS
Components of net periodic pension expense for the qualified and
non-qualified plans follow:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2006 2005 2006 2005
--------------- --------------- --------------- ---------------
(IN MILLIONS)
Service cost.................................... $ 14.1 $ 13.6 $ 42.8 $ 41.2
Interest cost on projected benefit obligation... 43.5 43.7 130.8 131.3
Expected return on assets....................... (54.3) (51.3) (163.1) (153.8)
Net amortization and deferrals.................. 25.1 22.7 75.4 68.3
--------------- --------------- --------------- ---------------
Net Periodic Pension Expense.................... $ 28.4 $ 28.7 $ 85.9 $ 87.0
=============== =============== =============== ===============
Components of net postretirement benefits expense (credit) costs follow:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- --------------------------------
2006 2005 2006 2005
---------------- --------------- --------------- ---------------
(IN MILLIONS)
Service cost.................................... $ 1.6 $ 2.0 $ 4.9 $ 6.0
Interest cost on accumulated postretirement
benefit obligation .......................... 8.9 9.7 26.7 29.0
Net amortization and deferrals.................. 2.6 2.0 6.7 6.2
Curtailment gain................................ - - (45.4) -
Plan recalculation adjustment (1) ............. - 30.8 - 30.8
Other .......................................... - - (12.9) -
--------------- --------------- --------------- ---------------
Net Periodic Postretirement Benefits
Expense (Credit) ............................ $ 13.1 $ 44.5 $ (20.0) $ 72.0
=============== =============== =============== ===============
(1) Includes an adjustment in third quarter 2005 of the survivor income
benefits liability related to prior periods.
On March 16, 2006, AXA Financial announced that, effective December 31,
2006, active participants no longer will earn additional age and/or
service credits toward the cost sharing rules for retiree health coverage.
New hires on or after March 16, 2006 will not be eligible for any company
subsidy towards retiree health coverage. As a result, AXA Financial
recognized a one-time curtailment gain of $45.4 million in first quarter
2006 and a reduction in the aggregate accumulated postretirement benefits
obligation of its retiree medical plans of approximately $13.4 million.
This reduction resulted from remeasurement of the benefits obligations
coincident with the announcement of the changes in benefits entitlements
and is accounted for prospectively as unrecognized prior service cost in a
manner similar to a plan amendment. In second quarter 2006, AXA Financial
recognized a $12.9 million reduction in the net liability for retiree life
insurance for claim payments not previously reflected. There was no change
in the projected benefit obligation.
20
Components of net postemployment benefits (credit) expense follow:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
2006 2005 2006 2005
--------------- --------------- --------------- ---------------
(IN MILLIONS)
Service cost................................ $ 1.5 $ 2.0 $ 4.5 $ 5.0
Interest cost projected benefit obligation.. .3 .5 1.0 1.5
Net amortization and deferrals ............. (3.0) - (9.1) -
------------ --------------- --------------- --------------
Net Periodic Postemployment Benefits
(Credit) Expense ........................ $ (1.2) $ 2.5 $ (3.6) $ 6.5
=============== =============== =============== ===============
8) CAPITAL STOCK AND OTHER SHARE - BASED PROGRAMS
For third quarter and the first nine months of 2006, AXA Financial Group
recognized $10.7 million and $30.9 million, respectively, of compensation
costs under SFAS No. 123(R) for employee stock options, including $6.2
million and $21.1 million, respectively, resulting from unvested awards at
January 1, 2006. A summary of the activity in the AXA, AXA Financial and
AllianceBernstein option plans follows, including the award made on March
31, 2006 of 3.8 million nonstatutory stock options to purchase AXA
ordinary shares. The cost of that award is attributed over the shorter of
the employees' four year service-vesting term or to the date at which
retirement eligibility is achieved and subsequent service no longer is
required for continued vesting of the award. Information about options
outstanding and exercisable at September 30, 2006 also is presented in the
table below. The number of AXA ADRs authorized to be issued pursuant to
option grants and, as further described below, restricted stock grants
under the Stock Incentive Plan was approximately 124.5 million less the
number of shares issued pursuant to option grants under The AXA Financial,
Inc. 1991 Stock Incentive Plan (the predecessor plan to the Stock
Incentive Plan).
Options Outstanding
-------------------------------------------------------------------------------------------------------
AXA Ordinary Shares AXA ADRs Alliance Bernstein Holding Units
---------------------------------- -------------------------------- ----------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
Outstanding Exercise Outstanding Exercise Outstanding Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
---------------- ----------------- --------------- --------------- ---------------- ---------------
Options outstanding at
December 31, 2005... 3.5 (euro) 20.87 38.6 $ 24.06 7.5 $ 40.45
Options granted(1)..... 3.8 (euro) 29.22 .7 23.26 - (3) $ 65.02
Options exercised...... - - (6.0) $ 20.26 (1.6) $ 38.54
Options forfeited...... (.2) (euro) 23.70 (3.0) $ 33.83 (.1) $ 38.28
Options expired........ - - - - - -
---------------- --------------- --------------
Options Outstanding at
September 30, 2006.. 7.1 (euro) 25.23 30.3 $ 23.29 5.8 $ 41.05
================ ================= =============== =============== ============== ================
Aggregate Intrinsic
Value(2)............ (euro) 16.5 $ 412.9 $ 161.3
================= =============== ================
Weighted Average
Remaining
Contractual Term
(in years).......... 9.00 4.49 4.45
================ =============== ==============
Options Exercisable at
September 30, 2006.. - 23.7 $ 23.69 4.8 $ 41.56
================ =============== =============== ============== ================
Aggregate Intrinsic
Value(2)............ - $ 313.1 $ 131.4
================= =============== ================
Weighted Average
Remaining
Contractual Term
(in years).......... - 3.56 4.28
================ =============== ==============
21
(1) Approximately 2.6 million of the 3.8 million AXA ordinary share
options granted on March 31, 2006 have a four year graded vesting
schedule, with one-third vesting on each of the second, third and
fourth anniversaries of the grant date. The remaining approximately
1.2 million options have a 4-year cliff-vesting term. All of the
options granted on March 31, 2006 have a 10-year contractual term.
(2) Intrinsic value, presented in millions, is calculated as the excess
of the closing market price on September 30, 2006 of the respective
underlying shares over the strike prices of the option awards.
(3) AllianceBernstein grants totaled 9,712 units in the first nine
months of 2006.
Cash proceeds received from employee exercises of options to purchase AXA
ADRs in third quarter and the first nine months of 2006 were $28.4 million
and $121.4 million, respectively. The intrinsic value related to employee
exercises of options to purchase AXA ADRs during third quarter and the
first nine months of 2006 and of 2005 were $18.2 million, $90.2 million,
$14.2 million and $46.6 million, respectively, resulting in amounts
currently deductible for tax purposes of $6.3 million, $30.6 million, $4.7
million and $15.4 million, respectively, for the periods then ended. Under
SFAS No. 123(R), $4.8 million and $23.1 million windfall tax benefits
resulted from employee stock option exercises during third quarter and the
first nine months of 2006, respectively.
At December 31, 2005, AXA Financial held 14.6 million AXA ADRs in treasury
at a weighted average cost of approximately $24.00 per ADR, of which
approximately 14.3 million were designated to fund future exercises of
outstanding employee stock options. These AXA ADRs were obtained primarily
by exercise of call options that had been purchased by AXA Financial in
fourth quarter 2004 to mitigate the U.S. dollar price and foreign exchange
risks associated with funding exercises of employee stock options.
Remaining outstanding and unexercised at September 30, 2006 are call
options to purchase 8.9 million AXA ADRs at strike prices ranging from
$30.41 to $32.37, each having a cap equal to approximately 150% of its
strike price, at which time the option automatically would be exercised.
These call options expire on November 23, 2009. During the first nine
months of 2006, AXA Financial utilized approximately 3.6 million AXA ADRs
from treasury to fund exercises of employee stock options. At September
30, 2006, AXA Financial held 11.4 million AXA ADRs in treasury, of which
approximately 11.1 million were designated to fund future exercises of
outstanding employee stock options and the remainder of approximately .3
million units were available for general corporate purposes, including
funding other stock-based compensation programs. Employee options awarded
by AXA Financial and outstanding at September 30, 2006 to purchase AXA
ordinary shares begin to become exercisable in March 2007 and their future
exercises are expected to be funded by newly issued AXA ordinary shares.
Prior to adoption of SFAS No. 123(R), AXA Financial Group had elected to
continue accounting for employee stock option awards under APB No. 25 and,
therefore, no compensation cost for these awards was recognized in the
consolidated statement of earnings in third quarter and the first nine
months of 2005. The following table illustrates the effect on net income
had compensation expense for employee stock option awards been measured
and recognized by AXA Financial Group under the fair-value-based method of
SFAS No. 123. These pro forma disclosures are not adjusted from amounts
previously reported and, therefore, retain the original grant-date fair
values of the underlying awards, continue to attribute cost over the
awards' service-vesting periods and do not include estimates of
pre-vesting forfeitures.
Three Months Nine Months
Ended Ended
September 30, September 30,
2005 2005
----------------- -----------------
(In Millions)
Net earnings as reported ........................................ $ 215.2 $ 789.3
Less: Total stock-based employee compensation expense
determined under fair value method, net of income tax benefit.. (5.7) (18.1)
------------------ ------------------
Pro Forma Net Earnings............................................ $ 209.5 $ 771.2
================== ==================
For the purpose of estimating the fair value of employee stock option
awards granted on or after January 1, 2006, AXA Financial Group continues
to apply the Black-Scholes-Merton formula and the same
22
methodologies for developing the input assumptions as previously had been
used to prepare the pro forma disclosures required by SFAS No. 123. Shown
below are the relevant input assumptions used to derive the fair values of
options awarded in the first nine months of 2006 and of 2005,
respectively. No grants of options to purchase AXA ADRs were made to
employees in the first nine months of 2006. For employee stock options
with graded vesting terms and service conditions granted on or after
January 1, 2006, AXA Financial Group elected under SFAS No. 123(R) to
retain its practice of valuing these as singular awards and to change to
the graded-vesting method of attribution, whereby the cost is recognized
separately over the requisite service period for each individual one-third
of the options vesting on the second, third and fourth anniversaries of
the grant date.
AllianceBernstein
AXA Ordinary Shares AXA ADRs Holding Units
-------------------------------- --------------- ---------------------
Nine months ended September 30, 2006 2005 2005 2006 2005
------------- -------------- -------------- ---------- ----------
Dividend yield...................... 3.48% 3.15% 3.01% 6.00% 6.20%
Expected volatility................. 28% 25% 25% 31% 31%
Risk-free interest rate............. 3.77% 3.09% 4.27% 4.90% 3.70%
Expected life in years.............. 5.0 5.0 5.0 6.5 3.0
Weighted average fair value per
option at grant date............. $ 7.45 $ 5.01 $ 5.65 $ 12.35 $ 7.04
As of September 30, 2006, approximately $42.8 million of unrecognized
compensation cost related to unvested employee stock option awards, net of
estimated pre-vesting forfeitures, is expected to be recognized by AXA
Financial Group over a weighted average period of 2.1 years.
Under the Stock Incentive Plan, AXA Financial grants restricted AXA ADRs
to employees of its subsidiaries. Generally, all outstanding restricted
AXA ADR grants have a 7-year vesting schedule with potential accelerated
vesting based on performance. Under the Equity Plan, AXA Financial grants
non-officer directors restricted AXA ADRs and unrestricted AXA ADRs
annually. Similarly, AllianceBernstein awards restricted AllianceBernstein
Holding units to independent directors of its General Partner. In
addition, under its Century Club Plan, awards of restricted
AllianceBernstein Holding units that vest ratably over three years are
made to eligible AllianceBernstein employees whose primary
responsibilities are to assist in the distribution of company-sponsored
mutual funds. For third quarter and first nine months of 2006 and of 2005,
AXA Financial Group recognized compensation cost of $.9 million and $6.6
million, respectively, under SFAS No. 123(R) and $2.4 million and $11.6
million, respectively, under APB No. 25 for awards outstanding under these
plans. Consistent with existing practice of AXA Financial Group prior to
adoption of SFAS No. 123(R), grant-date fair value continues to be
measured by the closing price of the shares awarded and the result
generally is attributed over the shorter of the performance period, the
requisite service period, or to the date at which retirement eligibility
is achieved and subsequent service no longer is required for continued
vesting of the award.
At September 30, 2006, approximately 60,978 restricted AllianceBernstein
Holding Units outstanding under the Century Club Plan remain unvested. As
of September 30, 2006, approximately $3.8 million of unrecognized
compensation cost related to these unvested awards, net of estimated
pre-vesting forfeitures, is expected to be recognized over a weighted
average period of 1.47 years. The following table summarizes unvested
restricted AXA ADR activity for the first nine months of 2006. Restricted
AXA ADRs vested in the first nine months of 2006 and 2005 had aggregate
vesting-date fair values of approximately $13.5 million and $19.2 million,
respectively. In the first nine months of 2005, 244,790 restricted AXA
ADRs were granted, having an aggregate grant-date fair value of $6.6
million.
23
WEIGHTED
SHARES OF AVERAGE
RESTRICTED GRANT DATE
STOCK FAIR VALUE
--------------- -----------------
Unvested as of December 31, 2005........................................ 867,387 $ 19.94
Granted................................................................. 78,865 $ 35.16
Vested.................................................................. 381,836 $ 16.98
Forfeited............................................................... 50,381
----------------
Unvested as of September 30, 2006....................................... 514,035 $ 23.91
================
On March 31, 2006, under the terms of the AXA Performance Unit Plan 2006,
the AXA Management Board awarded 722,854 unearned performance units to
employees of AXA Financial subsidiaries. During each year that the
performance unit awards are outstanding, a pro-rata portion of the units
may be earned based on criteria measuring the performance of AXA and AXA
Financial Group. The extent to which performance targets are met
determines the number of performance units earned, which may vary between
0% and 130% of the number of performance units at stake. Performance units
earned under the 2006 plan cliff-vest on the second anniversary of their
date of award. When fully-vested, the performance units earned will be
settled in cash, or in some cases, a combination of cash (70%) and stock
(30%), the latter equity portion having transfer restrictions for a
two-year period. For 2006 awards, the price used to value the performance
units at settlement will be the average opening price of the AXA ordinary
share for the last 20 trading days of the vesting period converted to U.S.
dollars using the Euro to U.S. dollar exchange rate on March 28, 2008.
For third quarter and the first nine months of 2006 and of 2005, AXA
Financial Group recognized compensation cost of $12.2 million and $25.8
million, respectively, under SFAS No. 123(R) and $2.0 million and $5.0
million, respectively, under APB No. 25 for performance units earned to
date. Substantially similar to existing practice of AXA Financial Group
prior to adoption of SFAS No. 123(R), the change in fair value of these
awards in the first nine months of 2006 was measured by the closing price
of the underlying AXA ordinary shares or AXA ADRs and adjustment was made
to reflect the impact of expected and actual pre-vesting forfeitures. In
addition, similar to adoption of SFAS No. 123(R) for employee stock option
awards, the cost of performance units awarded on or after January 1, 2006,
such as those granted on March 31, 2006, were attributed over the shorter
of the cliff-vesting period or to the date at which retirement eligibility
is achieved. The value of performance units earned and reported in Other
liabilities in the consolidated balance sheets at September 30, 2006 and
December 31, 2005 was $22.7 million and $9.1 million, respectively,
including incremental awards earned under the 2005 and 2004 plans from
having exceeded the targeted performance criteria established in those
years by 14.6% and 11.1%, respectively. Approximately 720,691 outstanding
performance units are at risk to achievement of 2006 performance criteria,
including approximately 50% of the award granted on March 31, 2006.
Following completion of the merger of AXA Merger Corp. with and into AXA
Financial in January 2001, certain employees exchanged fully vested
in-the-money AXA ADR options for tandem Stock Appreciation Rights/AXA ADR
non-statutory options ("tandem SARs/NSOs") of then-equivalent intrinsic
value. AXA Financial recorded compensation expense for these fully-vested
awards of $7.3 million, $8.5 million, $10.8 million and $11.6 million, for
third quarter and the first nine months of 2006 and of 2005, respectively,
reflecting the impact in those periods of the change in the market price
of the AXA ADR on the cash-settlement value of the SARs component of the
outstanding tandem SARs/NSOs. The value of these tandem SARs/NSOs at
September 30, 2006 and December 31, 2005 was $27.3 million and $57.5
million, respectively. At September 30, 2006, 1.7 million tandem SARs/NSOs
were outstanding, having weighted average remaining expected and
contractual terms of 1.21 and 2.42 years, respectively, and for which the
SARs component had maximum value of $27.3 million. During third quarter
and the first nine months of 2006 and of 2005, respectively, approximately
.1 million, 2.6 million, .2 million and .3 million, of these awards were
exercised at an aggregate cash-settlement value of $1.5 million, $38.8
million, $2.0 million and $2.8 million.
On March 31, 2006, 59,644 Stock Appreciation Rights with a 4-year
cliff-vesting schedule were granted to certain associates of AXA Financial
subsidiaries. These Stock Appreciation Rights entitle the holder to a cash
payment equal to any appreciation in the value of the AXA ordinary share
over 29.22 Euros as of the date of exercise. Similar to the SARs component
of the tandem SARs/NSOs, awards remaining unexercised at expiry of their
10-year contractual term will be automatically exercised on the expiration
date. At September 30, 2006, .2 million Stock Appreciation Rights were
outstanding, having weighted average remaining contractual term of 6.02
years. The accrued value of Stock Appreciation Rights at September 30,
2006 and December 31,
24
2005 was $2.4 million and $1.0 million, respectively, and recorded as
liabilities in the consolidated balance sheets. For third quarter and the
first nine months of 2006, AXA Financial Group recorded compensation
expense for Stock Appreciation Rights of $.7 million and $1.4 million,
respectively, under SFAS No. 123(R) reflecting the impact in those periods
of the changes in their fair values as determined by applying the Black
Scholes-Merton formula and assumptions used to price employee stock option
awards. For third quarter and the first nine months of 2005, AXA Financial
Group recorded compensation expense of $.1 million and $.3 million,
respectively, under APB No. 25 reflecting the impact in those periods of
the change in the market price of the underlying AXA ordinary share or AXA
ADR on the value of the outstanding Stock Appreciation Rights.
Under SFAS No. 123(R), AXA Financial Group recognized compensation expense
for payroll deductions authorized and applied in third quarter and the
first nine months of 2006 under the terms of the AXA Financial, Inc.
Qualified Stock Purchase Plan to purchase AXA ADRs of 37,160 and 150,800,
respectively, at an aggregate discount of $.4 million and $1.0 million,
respectively, representing a discount of 15% from the closing market value
of the AXA ADR at the purchase dates defined in the annual offering
document (generally the last trading day of each month). Prior to adoption
of SFAS No. 123(R), no compensation expense was recorded in connection
with this plan, including the aggregate discount of $.1 million and $.5
million, for third quarter and the first nine months of 2005,
respectively. Under the terms of the AXA Financial, Inc. Non-Qualified
Stock Purchase Plan, total AXA ADRs of 275,978 and $202,979 were purchased
during the first nine months of 2006 and of 2005, respectively, including
those purchased with employer matching contributions for which AXA
Financial Group recorded compensation expense of $.4 million, $1.2
million, $.4 million and $1.0 million in third quarter and the first nine
months of 2006 and of 2005, respectively.
9) INCOME TAXES
Income taxes for interim periods have been computed using an estimated
annual effective tax rate. This rate is revised, if necessary, at the end
of each successive interim period to reflect the current estimate of the
annual effective tax rate.
AXA Financial recognized a net tax benefit in third quarter 2006 of $163.5
million. This benefit was related to the settlement of an IRS audit of the
1997-2001 tax years, partially offset by additional tax reserves
established for subsequent tax periods. Of the net tax benefit of $163.5
million, $103.8 million related to the continuing operations, $53.9
million to the disposition of the discontinued Investment Banking and
Brokerage segment and $5.8 million to the discontinued Wind-up Annuities.
10) LITIGATION
There have been no new material legal proceedings and no material
developments in specific litigations previously reported in AXA Financial
Group's Notes to Consolidated Financial Statements for the year ended
December 31, 2005, except as described below:
In August 2006, the parties settled both the AMERICAN NATIONAL BANK action
and the related, previously disclosed DH2 action.
In HIRT, in September 2006, the district court granted summary judgment in
favor of the defendants. The court ruled that (a) the cash balance
provisions of the Equitable Plan do not violate the age discrimination
provisions of ERISA, (b) while the notice of plan changes provided to
participants in 1990 was not adequate, the notice of plan changes provided
to participants in 1992 satisfied the ERISA notice requirements regarding
delivery and content, and (c) the claims of the named plaintiffs are
barred by statute of limitations. In October 2006, plaintiffs filed a
notice of appeal.
In BERGER, in August 2006, the plaintiff's appeal was denied.
25
In WIGGENHORN, in June 2006, AXA Equitable's motion to dismiss the amended
complaint was granted. In June 2006, the plaintiff filed a notice of
appeal.
In STOCKLER, in March 2006, the case was dismissed by agreement of the
parties. In September 2006, the last remaining putative class action was
voluntarily dismissed without prejudice.
Alliance Litigation
-------------------
In the ENRON COMPLAINT, in April 2006, AllianceBernstein moved for summary
judgment dismissing the Enron Amended Consolidated Complaint as the
allegations therein pertain to AllianceBernstein. The motion is pending.
In July 2006, the court granted plaintiffs' amended motion for class
certification.
In ERB, in March 2006, the case was voluntarily dismissed with prejudice
pursuant to a settlement agreement.
In the MUTUAL FUND MDL, in April 2006, AllianceBernstein and attorneys
for the plaintiffs in the mutual fund shareholder claims, mutual fund
derivative claims, and ERISA claims entered into a confidential memorandum
of understanding containing their agreement to settle these claims. The
agreement will be documented by a stipulation of settlement and will be
submitted for court approval at a later date. The derivative claims
brought on behalf of AllianceBernstein Holding remain pending. Plaintiffs
seek an unspecified amount of damages.
In the WV SECURITIES COMMISSIONERS SUMMARY ORDER MATTER, in April 2006,
defendants' petition for Writ of Prohibition and Order Suspending
Proceedings was denied. In September 2006, AllianceBernstein moved to
dismiss the order.
In AUCOIN, in May 2006, the District Court denied plaintiffs' motion for
leave to file their amended complaint. In July 2006, plaintiffs filed a
notice of appeal.
Although the outcome of litigation generally cannot be predicted with
certainty, management believes that, except as otherwise noted in AXA
Financial Group's Notes to Consolidated Financial Statements for the year
ended December 31, 2005, the ultimate resolution of the litigations
described above involving AXA Financial and/or its subsidiaries should not
have a material adverse effect on the consolidated financial position of
AXA Financial Group. Except as previously noted, management cannot make an
estimate of loss, if any, or predict whether or not any of such other
litigations described above or in AXA Financial Group's Notes to
Consolidated Financial Statements for the year ended December 31, 2005
will have a material adverse effect on AXA Financial Group's consolidated
results of operations in any particular period.
In addition to the matters previously reported and those described above,
AXA Financial and its subsidiaries are involved in various legal actions
and proceedings in connection with their businesses. Some of the actions
and proceedings have been brought on behalf of various alleged classes of
claimants and certain of these claimants seek damages of unspecified
amounts. While the ultimate outcome of such matters cannot be predicted
with certainty, in the opinion of management no such matter is likely to
have a material adverse effect on AXA Financial Group's consolidated
financial position or results of operations. However, it should be noted
that the frequency of large damage awards, including large punitive damage
awards that bear little or no relation to actual economic damages incurred
by plaintiffs in some jurisdictions, continues to create the potential for
an unpredictable judgment in any given matter.
11) SEGMENT INFORMATION
The following tables reconcile segment revenues and earnings from
continuing operations before income taxes and minority interest to total
revenues and earnings as reported on the consolidated statements of
earnings and segment assets to total assets on the consolidated balance
sheets, respectively.
26
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ----------------------------------
2006 2005 2006 2005
--------------- --------------- --------------- ----------------
(IN MILLIONS)
SEGMENT REVENUES:
Financial Advisory/Insurance............ $ 1,970.8 $ 1,867.4 $ 6,020.3 $ 5,803.4
Investment Management (1)............... 939.0 811.5 2,820.0 2,343.4
Consolidation/elimination............... (22.0) (25.2) (66.5) (66.1)
--------------- --------------- --------------- ----------------
Total Revenues.......................... $ 2,887.8 $ 2,653.7 $ 8,773.8 $ 8,080.7
=============== =============== =============== ================
<FN>
(1) Net of interest expense incurred on securities borrowed.
</FN>
SEGMENT EARNINGS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST:
Financial Advisory/Insurance............ $ 155.8 $ 324.2 $ 856.2 $ 963.2
Investment Management................... 252.4 210.8 763.1 567.8
--------------- --------------- --------------- ----------------
Total Earnings from Continuing
Operations before Income Taxes
and Minority Interest............... $ 408.2 $ 535.0 $ 1,619.3 $ 1,531.0
=============== =============== =============== ================
SEPTEMBER 30, December 31,
2006 2005
---------------- ------------------
(IN MILLIONS)
SEGMENT ASSETS:
Financial Advisory/Insurance.............................................. $ 146,062.3 $ 138,474.4
Investment Management..................................................... 16,324.8 15,853.4
Consolidation/elimination ................................................ (3.2) 12.9
---------------- ------------------
Total Assets.............................................................. $ 162,383.9 $ 154,340.7
================ ==================
In first quarter 2006, AllianceBernstein issued units to its employees
under long-term incentive plans. As a result of this transaction, AXA
Financial Group recorded a non-cash $37.4 million realized gain. At
September 30, 2006 and December 31, 2005, AXA Financial Group's beneficial
ownership in AllianceBernstein was approximately 60.5% and 61.1%,
respectively.
12) COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- ------------------------------
2006 2005 2006 2005
--------------- ------------- -------------- --------------
(IN MILLIONS)
Net earnings..................................... $ 442.0 $ 215.2 $ 1,096.5 $ 789.3
--------------- ------------- -------------- --------------
Change in unrealized gains (losses),
net of reclassification adjustment............. 473.7 (371.3) (164.1) (360.6)
--------------- ------------- -------------- --------------
Other comprehensive income (loss)................ 473.7 (371.3) (164.1) (360.6)
--------------- ------------- -------------- --------------
Comprehensive Income (Loss)...................... $ 915.7 $ (156.1) $ 932.4 $ 428.7
=============== ============= ============== ==============
27
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is omitted pursuant to General Instruction
H of Form 10-Q. The management narrative for AXA Financial Group that follows
should be read in conjunction with the Consolidated Financial Statements and the
related Notes to Consolidated Financial Statements included elsewhere herein,
with the information provided under "Forward-Looking Statements" included
elsewhere herein and with the management narrative found in the Management's
Discussion and Analysis ("MD&A") and the "Risk Factors" sections included in AXA
Financial Inc.'s Annual Report on Form 10-K for the year ended December 31, 2005
("2005 Form 10-K").
CONSOLIDATED RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2005
Net earnings for AXA Financial Group were $1.10 billion for the first nine
months of 2006, an increase of $307.2 million over the first nine months of
2005. Net earnings for the first nine months of 2006 and 2005 included the
post-tax results from discontinued operations detailed in the following
schedule.
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
2006 2005
------------------- ------------------
Wind-up Annuities............................................. $ 28.4 $ 15.2
Real estate held-for-sale..................................... 7.0 5.5
Advest........................................................ - .2
------------------ ----------------
Earnings from Discontinued Operations,
Net of Income Taxes..................................... $ 35.4 $ 20.9
================== ================
Gains (loss) related to the sale of Advest.................... $ 4.1 $ (99.5)
Gain on sale of real estate held-for-sale..................... 63.2 -
Gain on disposition of discontinued Investment Banking and
Brokerage segment........................................... 53.9 -
------------------ ----------------
Gains (Losses) on Disposal of Discontinued Operations,
Net of Income Taxes..................................... $ 121.2 $ (99.5)
================== ================
Income taxes totaled $389.1 million in the first nine months of 2006 as compared
to the $438.6 million reported in the comparable 2005 period. AXA Financial
recognized a net tax benefit in third quarter 2006 of $163.5 million. This
benefit was related to the settlement of an IRS audit of the 1997-2001 tax
years, partially offset by additional tax reserves established for subsequent
tax periods. Of the net tax benefit of $163.5 million, $103.8 million related to
the continuing operations, $53.9 million to the disposition of the discontinued
Investment Banking and Brokerage segment and $5.8 million to the discontinued
Wind-up Annuities. Earnings from continuing operations were $939.9 million for
the first nine months of 2006, an increase of $72.0 million from the first nine
months of 2005.
Earnings from continuing operations before income taxes and minority interest
were $1.62 billion for the first nine months of 2006, an increase of $88.3
million from the year earlier period. There was a $107.0 million decrease in the
Financial Advisory/Insurance segment as lower investment results primarily due
to decreases in the fair value of derivatives and higher DAC amortization and
commission expense partially offset by higher policy fee income and lower
compensation and benefit costs in the first nine months of 2006. The Investment
Management segment's earnings were $763.1 million, $195.3 million higher than in
the first nine months of 2005, principally due to higher earnings at
AllianceBernstein. The Investment Management segment's earnings included $16.4
million and $16.1 million in gains and contingent payments in the 2006 and 2005
periods, respectively, related to AllianceBernstein's second quarter 2005
transfer of its cash management business and approximately $8.6 million of gains
on the sale of its rights to manage certain Indian mutual funds in third quarter
2005. In first quarter 2006, AXA Financial Group adopted the provisions of SFAS
No. 123(R) and, as a result, recognized $31.9 million ($21.4 million after-tax)
higher compensation cost during the first nine months of 2006 than would have
been recognized under APB No. 25.
28
In 2003, AXA Equitable initiated a program intended to hedge certain risks
associated with the GMDB feature of the Accumulator(R) series of variable
annuity products sold beginning in April 2002. In 2004, the program was expanded
to include hedging for certain risks associated with the GMIB feature of the
Accumulator(R) series of variable annuity products sold beginning in 2004. This
program currently utilizes exchange-traded futures contracts that are
dynamically managed in an effort to reduce the economic impact of unfavorable
changes in GMDB and GMIB exposures attributable to movements in the equity and
fixed income markets.
Although these programs are designed to provide some economic protection against
the impact adverse market conditions may have with respect to GMDB and GMIB
guarantees, they do not qualify for hedge accounting treatment under SFAS No.
133. Gains or losses on the futures contracts used in these programs, including
current period changes in fair value, are recognized in investment income in the
period in which they occur, and may contribute to earnings volatility. Unlike
the futures hedge contracts and the GMIB reinsurance contracts, GMDB/GMIB
reserve liabilities are not reported on a fair value basis. Instead, reserves
for GMDB/GMIB obligations are calculated on the basis of actuarial assumptions
related to projected benefits and related contract charges over the lives of the
contracts; they do not reflect the immediate impact of equity and interest rate
market fluctuations. In periods of rising equity and interest rate markets, the
fair value of the futures and GMIB reinsurance contracts will decline while the
GMDB/GMIB reserves will not reflect corresponding changes, resulting in a
decline in pre-tax earnings. Conversely, in periods of equity and interest rate
market declines, the fair value of the futures and GMIB reinsurance contracts
will increase while the GMDB/GMIB reserves will not reflect corresponding
changes, resulting in an increase in pre-tax earnings. Consequently, pre-tax
earnings from continuing operations in any particular period do not fully
reflect the economics of the GMDB/GMIB features and related futures hedge and
reinsurance risk management programs.
Revenues. In the first nine months of 2006, revenues increased $693.1 million to
$8.77 billion from the comparable prior year period. The $216.9 million increase
in revenues to $6.02 billion for the Financial Advisory/Insurance segment in the
2006 period was principally due to higher policy fee income partially offset by
lower investment results and lower premiums. The $476.6 million increase in
revenues to $2.82 billion for the Investment Management segment resulted
principally from higher investment advisory and services fees and higher
dividend and interest revenues partially offset by higher interest expense at
AllianceBernstein.
Premiums decreased by $60.9 million to $1.16 billion for the first nine months
of 2006. Policy fee income was $1.81 billion, $271.7 million higher than in the
first nine months of 2005. The policy fee income increase resulted primarily
from fees earned on higher average Separate Account balances due to positive net
cash flows and market appreciation.
Net investment income decreased $5.4 million to $2.39 billion in the first nine
months of 2006 as the increase of $42.2 million for the Investment Management
segment was more than offset by the $50.7 million decrease in the Financial
Advisory/Insurance segment. The increase for the Investment Management segment
was related to changes in the market value of AllianceBernstein's trading
account securities. The decrease for the Financial Advisory/Insurance segment
was primarily due to the $108.8 million decrease in the fair value in the first
nine months of 2006 of derivative instruments related to hedging programs
implemented to mitigate certain risks associated with the GMDB/GMIB features of
certain contracts as compared to a $55.8 million decrease in fair value in the
first nine months of 2005. Similarly, investment income related to other
derivatives including interest rate swap, floor and future contracts was $0.2
million in the first nine months of 2006, as compared to investment income of
$7.4 million of in the comparable prior year period.
Investment gains totaled $40.1 million in the first nine months of 2006, a
decrease of $21.9 million as compared to $62.0 million in the first nine months
of 2005 as the $22.8 million higher gains in the Investment Management segment
were offset by $15.4 million in losses in the Financial Advisory/Insurance
segment in the first nine months of 2006 as compared to $29.3 million of gains
in the Financial Advisory/Insurance segment in the 2005 period. The higher gains
for the Investment Management segment in the 2006 period were primarily due to
gains principally resulting from AllianceBernstein's issuance of units to its
employees under long-term incentive plans in first quarter 2006 that exceeded
the gains on the transfer of AllianceBernstein's cash management services
reported in the second and third quarters of 2005 and the gain on the sale of
its right to manage certain Indian mutual funds in third quarter 2005. In the
Financial Advisory/Insurance segment, the investment losses in the 2006 period
primarily resulted from higher writedowns on General Account fixed maturities,
$35.3 million in the first nine months of 2006 as compared to $29.5 million in
first nine months of 2005 and lower gains from sales of fixed maturity
securities ($11.9 million in the 2006 period as compared to $48.4 million in
comparable 2005 period).
29
Commissions, fees and other income increased $509.6 million to $3.38 billion in
the first nine months of 2006 with higher income of $411.6 million and $101.5
million in the Investment Management and Financial Advisory/Insurance segments,
respectively. The Investment Management segment increase was principally due to
the $403.2 million increase in investment advisory and services fees at
AllianceBernstein in the first nine months of 2006 as compared to the comparable
2005 period. The increase of $403.2 million to $1.99 billion in investment
advisory and services fees was primarily due to an increase in average assets
under management ("AUM") resulting from net asset inflows and market
appreciation experienced in the nine-month period and from $23.0 million higher
performance fees. The Financial Advisory/Insurance segment increase of $101.5
million to $777.8 million in the first nine months of 2006 was due to higher
gross investment management fees received from EQAT and VIP Trust due to a
higher asset base partially offset by the lower increase in the fair value of
the GMIB reinsurance contracts. As required by SFAS No. 133, the GMIB
reinsurance contracts are considered derivatives and are reported at fair value.
In the first nine months of 2006, the fair value of these contracts increased
$38.3 million as compared to a $45.4 million increase in fair value during the
first nine months of 2005 due to market fluctuations.
Benefits and Other Deductions. Total benefits and other deductions increased
$604.8 million to $7.15 billion in the first nine months of 2006 as increases of
$323.9 million and $281.3 million were reported for the Financial
Advisory/Insurance and the Investment Management segments, respectively.
Policyholders' benefits were $2.19 billion in the first nine months of 2006, an
$85.6 million increase from the first nine months of 2005. The increase
principally resulted from lower benefits and reserves in the reinsurance assumed
product line in the 2005 period due to a $16.1 million settlement of outstanding
issues with one life reinsurer in third quarter 2005 that resulted in the
release of $46.8 million of reserves as well as higher individual life death
claims.
Total compensation and benefits increased $167.9 million to $1.87 billion in the
first nine months of 2006 as a $197.9 million increase for the Investment
Management segment was partially offset by a $30.1 million decrease for the
Financial Advisory/Insurance segment. The Investment Management segment increase
reflected the $70.8 million increase in commission expense due to higher sales
across all distribution channels and Institutional Research Services, the
$68.1 million increase in incentive compensation primarily due to higher
deferred compensation amortization and the $59.9 million increase in base
compensation, fringe benefits and other employment costs due to increased
headcounts, annual merit salary increases and higher fringe benefits reflecting
the increased compensation levels at AllianceBernstein. The $30.1 million
decrease for the Financial Advisory/Insurance segment in the first nine months
of 2006 was primarily due to a $83.1 million decline in employee benefit costs
of which $45.4 million was due to the announced curtailment of age and/or
service credits toward the cost sharing rules for retiree health coverage for
active participants effective December 31, 2006, partially offset by higher
employee stock compensation expense of $58.5 million due to the effects of
implementing SFAS No. 123(R) in 2006.
For the first nine months of 2006, commissions in the Financial
Advisory/Insurance segment totaled $957.5 million, an increase of $132.8 million
from the first nine months of 2005, principally due higher sales of annuity
products and higher asset-based commissions.
Amortization of deferred sales commissions totaled $71.7 million for the first
nine months of 2006, $31.4 million lower than in the 2005 period as a result of
lower levels of back-end load shares sales.
DAC and VOBA amortization increased to $656.9 million in the first nine months
of 2006, $194.9 million higher than in the comparable 2005 period. This increase
in amortization was principally related to higher current margins on products
that are DAC reactive and lower favorable DAC unlocking in 2006 compared to
2005. This increase was partially offset by reactivity to decreases in the first
nine months of 2006 in the fair value of the derivative instruments related to
the GMDB/GMIB hedging programs and the lower increase in fair value of the GMIB
reinsurance asset. In 2006, the unlocking impact from recognition of higher
expected future margins driven by higher fees related to variable insurance and
annuity contracts in the 2006 period also offset the increase. In 2005, DAC
unlocking related to higher estimated future margins due to revised expectations
regarding lapses on certain variable annuity contracts based upon completion of
a comprehensive lapse study. Both years also reflect DAC unlocking associated
with higher estimated future margins due to expectations of life mortality
improvement based on emerging experience, which resulted in a deceleration of
DAC amortization. However, the deceleration of DAC amortization resulting from
these revised mortality projections was lower in 2006 than in 2005.
DAC capitalization totaled $1.06 billion for the first nine months of 2006; this
increase of $70.9 million from the $992.4 million reported in the first nine
months of 2005 primarily resulted from higher sales of annuity products.
30
The increases in rent expense and amortization of intangible assets of $11.6
million and $8.1 million, respectively, in the first nine months of 2006 were
principally due to higher occupancy expenses at AllianceBernstein related to
higher headcounts and to the acceleration in amortization related to mutual fund
investment management and distribution fees intangible assets due to declines in
estimated fair value.
The $123.2 million increase in other operating costs and expenses to $932.5
million in the first nine months of 2006 resulted from increases of $97.5
million and $29.1 million, respectively, for Investment Management and the
Financial Advisory/Insurance segments. The Investment Management segment
increase primarily resulted from increases in legal costs, market data services
and data processing costs at AllianceBernstein in the first nine months of 2006.
The increase in the Financial Advisory/Insurance segment was principally due to
higher sub-advisory fees at EQAT and VIP Trust due to higher average asset
balances, partially offset by lower litigation expenses.
Premiums and Deposits. Total premiums and deposits for insurance and annuity
products for the first nine months of 2006 were $13.35 billion, an increase of
$1.72 billion from the comparable 2005 period while total first year premiums
and deposits increased $1.64 billion to $9.11 billion in the first nine months
of 2006. First year premiums and deposits for the life products increased $52.3
million to $472.2 million for the first nine months of 2006 as the $104.4
million higher interest-sensitive life sales were offset by $28.5 million and
$23.8 million lower sales of traditional and COLI life products, respectively.
Annuity products' first year premiums and deposits increased $1.60 billion to
$8.63 billion for the first nine months of 2006 as $1.79 billion higher variable
annuity sales, including the wholesale channel's $1.35 billion increase, were
partially offset by $188.3 million lower fixed annuity sales. There was a $494.6
million increase to $4.39 billion in mutual fund and fee based assets sales in
the first nine months of 2006. In July 2006, AXA Equitable launched its
Accumulator(R) '06 variable annuity products with additional features, including
a guaranteed withdrawal benefit for life. Accumulator(R) '06 variable annuity
products are currently available for new sales in place of the prior Accumulator
products in most states and will be available in the remaining jurisdictions as
applicable regulatory approvals are received.
Surrenders and Withdrawals. Surrenders and withdrawals increased, from $5.70
billion in the first nine months of 2005 to $6.78 billion for the first nine
months of 2006. There was a $988.2 million increase in individual annuities
surrenders and withdrawals with smaller increases of $52.7 million and $37.5
million reported for the traditional life and variable and interest-sensitive
life insurance lines, respectively. The annualized annuities surrender rate
increased to 9.0% in the first nine months of 2006 from 8.6% in the first nine
months of 2005. The individual life surrender rates increased to 4.2% from 4.0%
for the same respective periods. The surrender and withdrawal rates described
above continue to fall within the range of expected experience.
Assets Under Management. Breakdowns of assets under management follow:
ASSETS UNDER MANAGEMENT
SEPTEMBER 30,
-----------------------------------
2006 2005
--------------- ---------------
(IN MILLIONS)
Third party..................................................................... $ 593,967 $ 491,053
General Account and other....................................................... 55,172 54,775
Insurance Group Separate Accounts............................................... 82,122 71,615
--------------- ---------------
Total Assets Under Management................................................... $ 731,261 $ 617,443
=============== ===============
Third party assets under management at September 30, 2006 increased $102.91
billion from the September 30, 2005 total primarily due to increases at
AllianceBernstein. The $10.51 billion increase in Insurance Group Separate
Account assets under management resulted from market appreciation and net new
deposits.
AllianceBernstein assets under management at September 30, 2006 totaled $659.28
billion as compared to $555.47 billion at September 30, 2005 as market
appreciation of $56.6 billion and net inflows across all distribution channels
totaling $48.1 billion were partially offset by the approximately $1.3 billion
reduction in client AUM during fourth quarter 2005 related to
AllianceBernstein's business dispositions in that period. Non-U.S. clients
accounted for 34.3% of the September 30, 2006 total.
31
LIQUIDITY AND CAPITAL RESOURCES
AXA Financial. On April 21, 2006, AXA Financial prepaid the MONY Holdings $300.0
million Insured Notes. AXA Financial paid $319.3 million, which included
principal, accrued interest, bond call premium and swap settlement payments. The
$319.3 million was funded with $260.0 million borrowed from AXA and available
cash. The AXA borrowing matures in April 2011 and has a floating rate of
interest that resets semi-annually. The current interest rate is 5.52%.
In June 2006, AXA Financial repaid $150.0 million of its $200.0 million
Subordinated Note to AXA. The maturity date of the remaining balance of this
note was extended for an additional 6-month term with the same interest rate
terms, with the interest rate being reset on June 20, 2006. Also in June 2006,
AXA Financial repaid its $100.0 million note issued in December 2005 and its
$75.0 million note issued in March 2006.
During the first nine months of 2005, AXA Financial Group purchased 309,435 AXA
ADRs for approximately $8.0 million, which were used for AXA Financial Group's
restricted stock plan. Additionally, in third quarter 2005, AXA Financial Group
purchased approximately 4.5 million AXA ADRs for $107.5 million through the
exercise of call options put in place to hedge employee compensation plans.
These AXA ADRs will be used for AXA Financial Group's employee option and
restricted stock programs.
The Insurance Group. In the first nine months of 2006 and 2005, AXA Equitable
paid cash dividends of $300.0 million and $250.0 million, respectively.
AllianceBernstein. For the nine months ended September 30, 2006 and 2005,
respectively, cash flows included inflows of $63.2 million and $30.8 million
representing additional investments by AllianceBernstein Holding with proceeds
from the exercise of compensatory options to buy AllianceBernstein Holdings
units offset by outflows related to purchases of AllianceBernstein Holdings
units totaling $16.6 million and $6.5 million to fund obligations under deferred
compensation plans. Cash flows in the first nine months of 2006 were also
impacted by the $47.2 million additional investment by AllianceBernstein Holding
through the issuance of AllianceBernstein Holding units in exchange for
earnings-based awards made under an AllianceBernstein compensation plan. Capital
expenditures at AllianceBernstein were $75.0 million in the first nine months of
2006 compared to $59.7 million in the comparable 2005 period while purchases of
investments totaled $54.8 million in the first nine months of 2006 as compared
to $7.4 million in the year earlier period. AllianceBernstein's available cash
flow from operations totaled $1.02 billion and $452.3 million for the first nine
months of 2006 and 2005, respectively. Proceeds from the issuance of commercial
paper totaled $169.6 million in the 2006 period. Distributions paid were $774.9
million and $588.9 million for the first nine months of 2006 and 2005,
respectively.
At September 30, 2006, AllianceBernstein had $8.1 million of short-term debt and
$173.9 million under its commercial paper program outstanding; no amount was
outstanding under its revolving credit facility at September 30, 2006. In August
2006, the $400.0 million, 5.625% Senior Notes matured and were retired using
cash flows from operations and the proceeds from the issuance of commercial
paper with a 5.4% interest rate.
In February 2006, AllianceBernstein entered into an $800.0 million five-year
revolving credit facility with a group of commercial banks and other lenders.
The revolving credit facility is intended to provide back-up liquidity for
AllianceBernstein's commercial paper program, which increased from $425 million
to $800 million in May 2006. Under the revolving credit facility, the interest
rate, at AllianceBernstein's option, is a floating rate generally based upon a
defined prime rate, a rate related to LIBOR or the Federal Funds rate. The
revolving credit facility contains covenants that, among other things, require
AllianceBernstein to meet certain financial ratios. In March 2006, SCB LLC
entered into four separate uncommitted line of credit facility agreements with
various banks, each for $100.0 million. As of September 30, 2006, no amounts
were outstanding under these credit facilities.
On May 2, 2006, AllianceBernstein purchased the remaining 50% interest in its
Hong Kong joint venture at a cost of $16.1 million net of cash acquired.
32
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted pursuant to General Instruction H to Form 10-Q.
Item 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of AXA Financial
Group's disclosure controls and procedures (as defined in Rule 13a -15(e) of the
Securities Exchange Act of 1934, as amended) as of September 30, 2006. Based on
that evaluation, management, including the Chief Executive Officer and Chief
Financial Officer, concluded that AXA Financial Group's disclosure controls and
procedures are effective. There has been no change in AXA Financial Group's
internal control over financial reporting that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, AXA Financial Group's internal control over financial
reporting.
33
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 10 of Notes to Consolidated Financial Statements
contained herein. Except as disclosed in Note 10 of Notes to
Consolidated Financial Statements, there have been no new
material legal proceedings and no new material developments in
legal proceedings previously reported in the 2005 Form 10-K.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors described
in Part I, Item 1A, "Risk Factors," of the 2005 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Number Description and Method of Filing
--------------------------------------------------------------------
31.1 Certification of the Registrant's Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Registrant's Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Registrant's Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Registrant's Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, AXA
Financial, Inc. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 13, 2006 AXA FINANCIAL, INC.
By: /s/ Stanley B. Tulin
-----------------------------------------
Name: Stanley B. Tulin
Title: Vice Chairman of the Board and
Chief Financial Officer
Date: November 13, 2006 /s/ Richard S. Dziadzio
-----------------------------------------
Name: Richard S. Dziadzio
Title: Executive Vice President and
Deputy Chief Financial Officer
Date: November 13, 2006 /s/ Alvin H. Fenichel
-----------------------------------------
Name: Alvin H. Fenichel
Title: Senior Vice President and
Controller
35