AXA Financial - Press Release - AXA Consolidated Revenues Up 4.0% On A Comparable Basis In<br>The First Half Of 2001

AXA Consolidated Revenues Up 4.0% On A Comparable Basis In
The First Half Of 2001

Growth rates are based on adjusted numbers to provide comparability in scope, accounting standards and currency.

PARIS - AXA reported today that consolidated revenues for the first six months of 2001 rose 4.0% to $35.1 billion compared with the year-earlier period.

"Despite challenging conditions in the first six months of this year, AXA grew revenues at 4%, highlighting the benefits of being diversified across many markets and lines of business," said AXA CEO Henri de Castries. "Moreover, the near-term impact of the volatile and weak equity markets, especially in the U.S. and France, has not changed our outlook for strong long-term growth in these markets once stability returns.

"In Life and Savings, our U.K., Belgian, and Asian operations produced strong growth benefiting from both new product introductions and focused management execution of our strategy. In France, we are continuing to rollout new products monthly, act on our CRM segmentation project to refine our marketing programs and to upgrade the training of our distribution and customer service. Management also plays an increasingly important role in the U.S., where our new CEO, Kip Condron, who brings a wealth of expertise in financial planning and distribution, will be instrumental in continuing to refine and execute on our advice-driven strategy.

"Our Asset Management operations continue to outperform despite volatile equity markets. Alliance Capital, the largest contributor to this business, had a net funds inflow of Euro 40 billion across all its major channels. AXA Investment Managers revenues rose an exceptionally strong 25% as fee structure improved due to a rise in average unit-linked and third-party assets under management.

"In the Property and Casualty business, rates continued to recover in the first half of the year, but were partially offset by a decrease in policy count as we have continued to apply tougher underwriting standards which should improve profitability going forward. This process is essentially over and we would expect to see some growth in our book of business as we go forward.

"International Insurance revenues rose 32% as this business continues to benefit from a very strong upturn in rates despite tougher underwriting implemented last year.

"As challenging as these global market conditions were through the first six months of 2001, they reinforce the need for a strategy based on customers’ needs and sound financial advice. We will continue to invest in our advice-driven strategy and reinforce our management focus to best meet those needs and strengthen our leadership positions in growth markets."

France (23% of total Life & Savings): Revenues decreased 12.3% (generally in line with the market) to Euro 5,684 million, from last year’s record first half as investors were more cautious through a period of volatile equity markets.

Individual (63%): Individual savings premium declined 19%. In the comparable period of 2000, an extraordinarily high level of growth was fuelled by maturing tax-driven products (PEP). Unit-linked premiums fell 30% (estimated market decline is 38%) as a result of lower and volatile equity markets and represented 54% of Individual Life and Savings revenues compared to 59% a year ago. This decline was partially offset by the success of a structured equity-based product launched in March, that accounted for Euro 427 million.

Group (6%): Group annuities declined 10% due to high single premium sales a year ago and continuing aggressive pricing in a highly competitive market.

Health (29%): Health and disability premiums increased 7%, the highest growth rate since the AXA-UAP merger. This gain was primarily due to a mix of favorable new business and the impact of salary growth in 2000.

United Kingdom (19% of total Life & Savings): Total revenues grew 18% to Euro 4,589 million in the first six months of 2001. AXA UK’s life New Business Index (NBI) rose 23% in the first half of 2001, as compared with estimated market growth of 15%. In addition to new products, expansion in the agency and Independent Financial Advisors (IFA) distribution channels contributed to the strong result. IFA market share increased to 7.1% for the first quarter 2001 from 6.2% at the end of 2000.

Pension Policies (45%): Premium grew 35 % to Euro 2,032 million. Both unit-linked and non unit-linked products made strong contributions. Single premium pensions were up 54% driven by a campaign on a single premium transfer business as well as taking advantage of changes in legislation.

Life (42%): Total premium grew 9% to Euro 1,873 million. An increase in Bond revenues was partially offset by the withdrawal from the endowment market (mortgage-related new business). Revenue growth accelerated in the second half of the six-month period as the initiatives to focus on income based propositions delivered strong early results.

Mutual Funds (0.2%; fees only): Mutual fund sales rose 34% across all channels of distribution following a marketing campaign to promote Individual Savings Account (ISA) products, outperforming a steep decline in the overall market for ISAs.

Health (13%): Premiums in the health business rose 7.2 % to Euro 605 million. Individual life premiums (46%) are up 3% benefiting from higher pricing (+7%) partially offset by a 4% decline in policy count. Corporate lines increased 11% benefiting from higher pricing (up 6%), while head count increased 5%.

Germany (6% of total Life & Savings): Revenues rose 3.2% to Euro 1,418 million while the broader market was flat, as customers awaited government approval of the new Riester Pension products expected by the end of 2001.

Life (79%): Overall revenues grew 0.7%. Single premium life insurance increased 13.1% due to increased penetration of the medical profession. Unit-linked premiums, up 54%, continue to grow and now represent 5.6% of total German Life premiums (and 31% of regular new premiums). German consumers continue to favor unit-linked investments and AXA Colonia has repositioned to take advantage of these trends.

Health (21%): Rate increases continue to drive health premiums growth, which were up 13.5% to Euro 299 million, compared to an estimated market growth of 4.5%. Tariff increases on existing business (+2%) and on new business (+10%) contributed to the above-market growth. Intensive Customer Relationship Management helped manage the commercial impact of the new tariffs.

Belgium (4% of total Life & Savings): Revenues were Euro 870 million, up 69.8% from the comparable period primarily from new generation investment products (67% of revenues). The first six months of 2001 benefited from the introduction of structured mutual funds and strong 2000 investment performance of the fixed rate products.

Individual (81%): Revenues from non unit-linked products rose 262% primarily from growth in fixed-rate products. Unit-linked products grew 31% in the first half of 2001. These two product categories accounted for 83% of revenues in the individual life and savings line compared with 67% in the first six months 2000.

Group (19%): Group insurance premiums grew 10% in the first half, driven mainly by stronger single premium sales.

Other European Countries + Morocco (5% of total Life & Savings): Revenues increased by 10.4% to Euro 1,255 million. AXA Assicurazioni has concluded four bank assurance agreements late in the first half that should provide further growth to the business in the second half.

United States (24% of total Life & Savings): Revenues were Euro 5,966 million, down 9.2% from the record first half of 2000.

Individual annuity premiums (56%): Individual annuity revenues decreased 20.4% as compared with a record performance in the first half of 2000. Despite this fall, AXA increased market share in individual variable annuities and rose to fifth place from sixth in new sales. Assets in the Asset Management Account (AMA), the linchpin of our advice-driven strategy, rose 30% in the first half of the year to Euro 5.8 billion and the number of funded AMA accounts grew 55% to 55,069.

Other fees (4%): other fee revenues, particularly investment management fees and higher commissions on distribution of third-party products, grew 3.6%.

Life premiums (24%) decreased 4.5%, primarily due to the loss of two COLI accounts, including DLJ. Excluding COLI, life premiums declined 2.6% as increases in the wholesale channel were offset by declines in the retail channel. Despite these declines, AXA moved to fifth from seventh in variable life sales.

Mutual Funds: Gross mutual fund sales were Euro 1,886 million, down 11% due to equity market volatility.

Life and Savings revenues rose 10.5% to Euro 4,703 million and are 19% of total Life & Savings. Revenues for Japan for the six-month period ended March 2001, as compared to proforma numbers for the same period in 2000. The six-month period for Australia & New Zealand also ended March 2001.

Australia and New Zealand (4% of total Life & Savings): Revenues increased 28.2% to Euro 1,056 million.

Savings (53%): Savings products grew 22% compared with the year-ago period primarily due to annuity products with more competitive returns, improvement of client service, and growth in distribution.

Health (26%): Health premiums rose 19% due to a government program to increase the universe of coverage benefited premiums.

Other Products (21%): Other product lines grew 9.1% primarily because of rate increases. Risk Products, including Income Protection, grew 10.9% and now equal 7% of total premium.

Japan (12% of total Life & Savings): Revenues were down 0.6% to Euro 2,936 million on a comparable basis. AXA Japan continues to focus on higher margin Individual Life and annuity products.

Individual (54%): Revenues grew 6.9%, fuelled by market demand for newly launched variable life and annuity products. Variable products revenues reached Euro 120 million and already represent 4% of total Japan premium. Traditional life insurance products (39% of premium) decreased 1.8% as a result of the company focus on investment and variable type products.

Group (30%): As expected, Group product premium continues to decline 14.8% due to non-renewal of certain low margin contracts.

Health (16%): Health premiums grew 1.5%. Medical Whole Life, up 28.8%, represent Euro 128 million of Health premiums.

Property & Casualty revenues rose 3.9% to Euro 8,718 million in the first six months.

France (26% of total P&C revenues): Revenues grew 5.4% to Euro 2,292 million, driven by strong sales activity in all business lines and higher rates especially in Commercial Lines, where rate increases were particularly strong. Performance should be in line with or slightly higher than the market for the first time since the UAP merger as the Group has completed the merger restructuring.

Personal (47%): Personal Lines grew 4.6%, despite stricter underwriting standards. Direct distribution increased 10% with 11% of new business coming from Internet sales. Personal Motor (33% of France P&C) rose 3% due to positive net inflows across all channels. Personal Property (14% of France P&C) was up 3% driven mainly by higher rates.

Commercial (53%): Commercial Lines grew 6.3%, primarily due to higher rates. Commercial Motor, which represents 10% of France P&C premium, rose 6% due to higher. Commercial Property, which represents 18% of France P&C, grew 5%, primarily from rate increases which took place at the end of 2000. The strong rise of 24% in Construction Lines (6% of France premium) is attributable to important contracts gains and significant rate increases.

Germany (22% of total P&C revenues): Revenues grew 1.5% to Euro 1,932 million as rate increases in both Personal and Commercial Lines were partially offset by stricter underwriting policies.

Personal (61%): Personal Motor premium (31% of total premium) grew 2.7% as a result of rate increases. Personal Property (14%) decreased 2.1% due to a decrease on policy count resulting from intense price competition.

Commercial (33%): Commercial Motor (4% of total premium) grew 9.5% as a result of well-accepted higher rates. Property, which represents 10% of total premiums, grew 5.3%. Commercial Liability grew 0.9% due to the increase of the book of business.

United Kingdom (15% of total P&C revenues): Revenues decreased 2.5% to Euro 1,307 million (excluding business ceded to AXA Corporate Solutions) mainly as a result of the restructuring of the Personal Motor business. The restructuring of Personal Motor that began after the minority buy-in of Sun Life Provincial Holdings in 2000, is now mainly completed. The effect of the restructuring is likely to last until the end of 2001.

Personal (52%): Personal Motor fell 30% to Euro 340 million. This fall in Personal Motor is due to the ratings actions taken during the last 12 months (16% on average), which lead to a decline in business with the intermediary channel (-22%) and by the deliberate withdrawal from non-profitable contracts particularly within the affinity group distribution network (-66%). Personal Non-motor revenues fell 5% due to reduced business levels from affinity partners following strong rate increases.

Commercial (45%): Underlying revenues increased by 13% due to selective rate increases of approximately 15% on average being applied across all lines of business. Furthermore early-mover advantage allowed AXA to be very selective in the business acquired from underwriting a portion of the ex-Independent Insurance business (less than 16% of Independent Insurance Co. Ltd. book).

Belgium (8% of total P&C revenues): Revenues increased 2.4% to Euro 702 million over the year-ago period.

Personal (62%): Revenues decreased 0.8% to Euro 435 million over the year-ago period. Motor lines (37%) rose 0.4% as a result of higher average premiums. Property household (16%) was stable. Other lines premium, including personal liability, personal accident and workers’ compensation decreased 5.5% following specific portfolio cleaning measures. Other lines account for 10% of Personal.

Commercial (37%): Revenues rose 4.4% due to strong production across all business lines, particularly for Property (16%), where premium increased 11.5% following strong new business volumes on the Small and Medium Enterprises market.

Other Countries (29% of total P&C revenues): Revenues increased 8.6% to Euro 2,486 million. Spain and Italy, which each represent 6% of the P&C segment, were up 14.6% and 5.3% respectively. The increase was mostly attributable to motor business, as Spain (excluding Direct Seguros) increased its rates by 12.6% and Italy by 6.3%.

Alliance Capital (87%): Revenues, were Euro 1,625 million, up 1.5% on a comparable basis versus the year-ago period. Total assets under management (AUM) grew 3% to Euro 549 billion since the end of 2000. Net inflow reached approximately Euro 40 billion including Euro 9 billion from the new joint venture with AXA Asia Pacific. Advisory fees declined with lower average assets under management (-3.6%), reflecting the large swings in equity markets in the first half of 2001. Institutional research services (up 47.7%) and performance fees revenue growth (up 30%) more than offset the decline in advisory fees.

Alliance achieved positive net flows in all of its major market channels: retail, institutional and private client while outperforming its value and growth benchmarks on a trailing-twelve-month basis. Market depreciation reduced AUM by Euro 27 billion in the first six months of 2001. In May, Alliance Capital was chosen to run the Euro 14 billion Vanguard U.S. Growth Fund. Revenues from this significant win will largely be reflected in second half of 2001.

AXA Investment Managers (13%): Revenues for the six-month period were Euro 233 million, up 25.2%. Average assets under management increased 6.9%, or Euro 17 billion. AUM growth of 3.5% to Euro 265 billion since December 31, 2000 was derived from strong net inflows and partially offset by market depreciation. In addition to AUM growth, fee revenues benefited from a favorable product mix shift, as average assets in separate accounts have increased 10.2% and average third-party assets under management increased 19.4%. Performance fees increased to Euro 24 million from Euro 17 million as a result of outperforming relative benchmarks. AXA IM Paris won a Euro 2 billion savings plan from Elf in the first half and collected Euro 0.7 billion from Calpers Pension Funds.

Reinsurance (71%): Premiums were up 58.2% to Euro 2,338 million. Property & Casualty lines premiums rose 60.5% mainly from the upturn of the retrocession market for Property Catastrophe business (92% of reinsurance), the increase in renewals, as well as the strong development of the Program Business, a new program on natural catastrophe coverage.

Insurance (21%): Premiums decreased 8.6% to Euro 678 million primarily due to a purge of unprofitable business implemented in 2000.

AXA Group is a worldwide leader in financial protection and wealth management. AXA's operations are diverse geographically, with major operations in Western Europe, North America and the Asia/Pacific area. AXA had $845 billion in assets under management as of December 31, 2000 and reported revenues of approximately $74 billion for the full year 2000. The AXA ordinary share is listed and trades under the symbol AXA on the Paris Stock Exchange. The AXA American Depositary Share is also listed on the NYSE under the ticker symbol AXA.