AXA has reported its 2004 results under International Financial Reporting Standards ("IFRS") principles. These results are audited and have been prepared in accordance with the IFRS and IFRIC2 interpretations issued and effective or early adopted as of June 2005.
AXA has applied the amendment to IAS 39 regarding the fair value option issued by the IASB3 on June 16, 2005 and the amendment to IAS 19 regarding employee benefits approved by the ARC4. Both amendments are expected to be formally endorsed by the European Commission in the second half of 2005. The IFRS standards and IFRIC interpretations that will be applicable at December 31, 2005, including those that will be applicable on an optional basis, are not known with certainty at this time.
- Shareholders' equity at December 31, 2004 amounts to 28.5 billion under IFRS, compared to 26.2 billion under French GAAP (FGAAP)
- 2004 underlying earnings1: 2.6 billion under IFRS, compared to
- 2.7 billion under FGAAP
- 2004 adjusted earnings1: 3.3 billion under IFRS, compared to 2.9 billion under FGAAP
- 2004 net income: 3.7 billion under IFRS, compared to 2.5
- billion under FGAAP
- AXA's dividend policy is unchanged: dividend is expected to represent 40% to 50% of IFRS adjusted earnings starting year-end 2005
- 2004 P&C combined ratio stands at 98.5% under IFRS, compared to
- 99.3% under FGAAP
- Gearing at December 31, 2004 is 42% under IFRS versus 39% under
- FGAAP, well within our comfort zone
IFRS impacts on shareholders' equity
The IFRS impact on the shareholders' equity as of January 1, 2004 is a decrease of 0.9 billion or 4%, within our flat to -5% range announced at the January 6, 2005 IFRS presentation. As of December 31, 2004, the IFRS impact on the shareholders' equity is an increase of 2.4 billion or 9%.
Main differences between FGAAP and IFRS shareholders' equity as of December 31, 2004 are:
- Invested assets and scope of consolidation: The recording of invested assets (excluding real estate and loans) at fair value and the extension of the scope of consolidation result in a positive impact of 4.7 billion.
- Share-based compensation and employee benefits: Past deficit and on-going actuarial gains and losses on employee benefits are incorporated in the IFRS shareholders' equity, with a negative impact of 2.2 billion.
- Business combination: Goodwill is booked in the local currency of the acquired entity under IFRS, and therefore is subject to exchange rate fluctuations. This is partly offset by no 2004 goodwill amortization, resulting in a net negative impact of 0.8 billion.
- Compound financial instruments and TSS reclassification: For compound financial instruments (convertibles), the equity component (value of the option granted to convert the debt instrument into an equity instrument of the Company) is reported in shareholders'equity under IFRS. In addition, the "Titres Super Subordonnés" (TSS, which are undated deeply subordinated notes) issued in 2H04 are reclassified in shareholders' equity as they do meet the IFRS definition of equity. These two elements result in a positive impact of 0.8 billion.
IFRS impacts on 2004 earnings
2004 underlying earnings amount to 2,640 million under IFRS compared to 2,723 million in FGAAP.
The 83 million decrease in underlying earnings between FGAAP and IFRS is mainly due to the newly consolidated entities (mostly real estate companies) for which IFRS captures earnings on the underlying securities when FGAAP reflected the dividends distributed, leading to some timing differences in the emergence of earnings.
The share-based compensation expense of 65 million reflects the facts that (1) the fair value at grant date of equity-settled instruments is accrued over the vesting period and (2) the fair value of the discount on Shareplan offered to employees is expensed.
Regarding employee benefits, as past actuarial gains and losses are recognized in the Openin