2003 Annual Results Presentation

In attendance:

• Henri de Castries, Chairman of the AXA Management Board;
• Claude Brunet, member of the AXA Management Board, Head of Transversal Projects, Communications and Human Resources;
• François Pierson, member of the AXA Management Board, CEO of AXA France, head of large risks, in charge of AXA Canada and AXA Assistance;
• Denis Duverne, member of the AXA Management Board, Head of Finance, Control and Strategy.

I. Achievements in 2003

1. General remarks

Henri de Castries, Chairman and CEO of AXA

I'd like to begin with the reminder that we make a distinction between underlying earnings, which do not include net capital gains or losses, and adjusted earnings, which do. In 2003, underlying earnings improved significantly when compared to 2002.

Nevertheless, the environment was challenging. First of all, we were heavily penalized by the US dollar's depreciation against the euro. Indeed, on a constant exchange rate basis, underlying earnings rose by 30% (compared with 21% when the dollar's depreciation is factored in). This is because much of our business is done outside the euro zone. The capital markets during the first half of the year were also unfavorable, they began to improve gradually from March onwards. Finally, the regulatory environment became tougher in 2003, particularly in the United States. The penalties that we had to pay had an impact on earnings of more than 100 million euros.

On a more positive note, the claims environment in terms of property-casualty insurance, was better than average; this experience explains in part, the improvement in property-casualty earnings.

2. The reasons behind AXA's performance

a. Pick-up in organic growth and improvement in operational efficiency

AXA has often been criticized for not generating sufficient organic growth. In 2003, organic growth picked up momentum for the third year running. On a constant exchange rate and scope basis, revenues grew by 5.3% versus 2002. We are currently outperforming our main industry peers in this department, and we think we can do even better.

I would also like to note that we are now ahead of our combined ratio target. The combined ratio fell to 101.4% in 2003, bringing the improvement since 2000 to 13 percentage points. As a result, the property-casualty segment is making an important contribution to Group profitability.

We also made further efforts to reduce operating costs, while at the same time achieving additional revenue growth. Since September of 2001, we have achieved cost savings of more than €1.2 billion. Over the same period, revenues have risen by 14%. We are determined to continue reducing our operating costs while making ongoing investments that will pave the way for future growth.

b. Efforts have paid off in certain specific areas

In 2003, five AXA operating units whose performance had been sub-par reported improvement: property-casualty operations in the UK and in Germany; AXA Corporate Solutions Assurance; AXA RE, and life insurance operations in Japan.

In every case just mentioned, we achieved a significant improvement in underlying earnings and are pursuing efforts in this area.

c. An efficient business model

The strong performance in 2003 demonstrates the efficiency of AXA's business model. We have chosen to focus on a single business - financial protection and wealth management, and to acquire strong positions in selected markets where we have chosen to operate, and this gives us a competitive advantage. Our operations are geographically diversified, and our exposure to risk and earnings volatility is reduced - without impairing growth potential.

Overall, our aim is to increase revenue growth while maintaining profitability. The Group consistently seeks to leverage its size in order to accelerate its pursuit of new clients, reduce costs and increase efficiency. In addition, we are making efforts to ensure that best practices in financial protection and wealth management are communicatedGroup-wide.

Our competitive strength is based on four key pillars:

• Underwriting and pricing discipline

We have refined our risk selection criteria and readjusted premium rates where necessary. This discipline is reflected in the significant improvement in our combined ratio.

• Product and service innovation

We have brought new products to market, especially niche products for new client segments. We have picked up market share by delivering high-quality products.

• Distribution management

Generally, we like to own our distribution channels. However, we work with non-proprietary channels when doing so works to our advantage. Our network productivity has increased in all countries, although there's still room for improvement.

• Productivity and service quality

Productivity has improved substantially. Having said that, we still have room for improvement in service quality - a key driver of higher growth.

We have also managed to preserve Group earnings growth potential. We maintained our exposure to equity markets - an important component of long-term performance - refusing, at the height of the crisis, to give in to pressures to reduce exposures to equity marketsand raise capital. Thanks to our solid financial structure, we were able to avoid diluting our shares.

Consequently, in 2004 we will be able to pay a higher dividend in respect of 2003. This is because our key performance indicators improved significantly on a constant exchange rate basis: consolidated revenues, underlying earnings, adjusted earnings, net income, embedded value, and life new business contribution. Our decision to increase the dividend payout attests to our confidence in the future.

3. AXA France - 2003 highlights (sorry the number shouldn't have changed here but I cant' get rid of it).

François Pierson

AXA France's performance was very satisfactory in 2003, with underlying earnings up for both property-casualty and life insurance operations.

Sales of personal property-casualty and individual life insurance and savings products rose significantly in 2003. We implemented effective personal lines sales campaigns, picking up market share in both motor and home insurance. Overall, AXA France's revenues rose by 5% in individual and personal lines, with further growth expected in 2004.

In addition to raising premium rates in commercial lines, we implemented a strict underwriting and pruning policy. In line with the market as a whole, property lines were up 10.5% on the year.

The property-casualty combined ratio was 101.5%, a 1.4-point decrease that reflects improvement in the expense ratio and lower general expenses.

Individual savings were up 5%, outperforming traditional insurers. Group savings premiums increased by 16%, a very good performance.

The nationwide launch of AXA Banque was a success, leading to the acquisition of 50,000 additional clients in 2003.

II. 2003 consolidated results and results by business segment

Denis Duverne

In 2003, the Group's revenues increased by 5.3% on a comparable basis. Life insurance revenues rose by 8.5%, while property-casualty revenues were up 4%.

Measured in terms of operational cash flows, AXA's life and savings, property and casualty, and asset management businesses all reported growth.

1. 2003 Consolidated earnings

In 2003, underlying earnings increased by 21% to €2,035 million. The increase was 30% on a constant exchange rate basis.

Net capital losses were €585 million, reflecting:

• €463 million in capital gains ;
• €1,048 million in equity valuation allowances, partly due to a more stringent equity impairment threshold (30% over six months in 2002 versus 20% in 2003).

Adjusted earnings increased by 7% in 2003, to €1,450 million (15% on a constant exchange rate basis). One-off items (acquisitions and disposals) had a positive impact of €148 million. Goodwill amortization of -€593 million was recorded in 2003. Net income totaled €1,005 million, an increase of 6% (18% on a constant exchange rate basis).

2. Underlying earnings by business segment

Overall, our performance in 2003 was mixed. Strong improvement in the property-casualty and international insurance segments was partly offset by declines in the life and savings and asset management segments.

a. Life & Savings

On a comparable basis (VF = effets de change et périmètre ?), underlying earnings from life and savings operations improved in all countries except the United Kingdom.

After having fallen in the wake of financial market crisis, sales of unit-linked products returned to positive territory in 2003. Separate account reserves also grew in 2003 over the previous year. When we compare the average annual and year-ending separate account balances over the last three years, we see an improvement in the trend, and we see a significant upturn in the ending balance for 2003.

Life insurance operations in both Japan and the United Kingdom have encountered difficulties in the past. Thanks to efforts undertaken in 2003, we have exceeded our objectives in Japan. In the United Kingdom, however, the situation remains difficult. Further turnaround measures have been adopted.

b. Property & Casualty Insurance

Property-casualty earnings were up across the board. Underlying earnings totaled €753 million in 2003, up from €226 million in 2002. The combined ratio improved from 105.4% in 2002 to 101.4% at year-end 2003. Combined-ratio improvement was also across the board.The 4 percentage point improvement in the Group combined ratio reflects successful efforts to control expenses, combined with further gains in productivity and an improvement in the loss ratio, the latter partly due to more selective underwriting.

We were able to lower the combined ratio without reducing our level of reserving. The net technical reserves to net earned premiums ratio was virtually unchanged, while net claims reserves to net claims paid was 256.3% in 2003. Both figures indicate that we have more than adequate reserves.

c. International Insurance

Underlying earnings were a profit of €141 million, versus a loss of €78 million in 2002. The turnaround was driven by improvements in both the reinsurance and global risks portfolios.

At AXA RE, the P&C reinsurance combined ratio improved by 11.3 points, falling from 109.5% to 98.2%. On a comparable basis, premiums were down 18%, reflecting the adoption of a stringent underwriting policy.

At AXA Corporate Solutions Assurance, the global insurance risks business, AXA adopted a more selective underwriting policy and focused on key European markets and business lines. Efforts made to improve the expense ratio and reinsurance protection helped to reduce the combined ratio from 109.1% to 102.3%.

While great strides have been made in international insurance, this is not the end of the road. We must continue to improve reinsurance protection and costs, and pursue an even lower breakeven point. We remain focused on results rather than on volume. In any case, we have no intention of increasing business volume indiscriminately.

d. Asset Management

Asset management underlying earnings were negatively impacted by the charge taken by Alliance Capital. Excluding this penalty, underlying earnings improved slightly despite lingering uncertainty in the financial markets.

Assets under management increased in 2003. Once again, a comparison with year-end 2002 reveals substantial improvement near the end of the period, which bodes well for the future.

III. Embedded Value

Denis Duverne

This indicator measures the accumulated value of the business, which is the basis on which future profits in the life insurance business are built. Our embedded value grew by 2% in 2003 (11% on a constant exchange rate basis), to €16.31 per share.

The life new business contribution was up by 4% (16% at constant exchange rates), to €675 million.

Our life new business margin went from 14.5% to 15.2%, a decent performance considering the degree of financial market uncertainty.

IV. Outlook for 2004

Henri de Castries

Our primary objective in 2004 is to continue building organic growth and improving our operational performance. We believe that the AXA Group has significant potential for further improvement. For example, I am convinced that we can continue to grow our revenues as we continue to improve the quality of our technical results.

We also expect to consolidate the recovery that certain Group subsidiaries and segments began in 2003: International insurance, life insurance operations in Germany, property-casualty operations in the United Kingdom, and operations in Japan. In addition, we need to overcome the challenges we face in the UK life insurance market.

Finally, we hope that Mutual of New York (MONY) will be rapidly integrated once the deal closes.

We are confident that earnings will continue to grow: all of our life and savings and asset management operations should reap the benefits of the economic recovery that is unfolding. As for the property-casualty business, our intention is to further improve our combined ratio: we'd like to see it range from 98% to 102%, depending on the point in the cycle.

We are also pragmatic, and ready to seize on opportunities that may arise in markets where our base of operations is already solid.

Questions from the floor

Do you believe that UK operations will return to profitability in 2004?

Denis Duverne

Let's just say that we are guardedly optimistic about the United Kingdom: we expect positive earnings in 2004, but we know that turning this expected improvement into sustainable profitability will require more work over several years.

Henri de Castries

The UK market is over-regulated. Fees are limited to 1%, which penalizes every player in the market. But even though the situation remains challenging in 2004, we feel that staying in the UK is the right move from a long-term perspective. We are one of the most powerful players in the UK market today, in financial terms as well as in terms of coverage of the market.

Have you altered the terms and conditions of your bid for MONY?

Henri de Castries

We haven't changed the price, which is US$ 31 per share. That's an attractive price for MONY shareholders. Moreover, the rating agencies have indicated that MONY would be downgraded if the deal doesn't go through.

You seem very optimistic about the outlook in the pension and retirement savings business. Do you have any idea when the legislative changes will be coming in France?

Henri de Castries

In general, our earnings are in positive territory in life and savings - thanks to the improvement in the financial markets, the economic recovery and the quality of our products.

François Pierson

We have excellent distribution channels in France, with 8,000 sales associates who are qualified client advisors. Because of the relative complexity of the pension products that will soon become available, the quality of the network is critical. However, we don't have any idea when these products will be ready for sale in the marketplace.

You stated that the dollar's persistent weakness of late penalized the AXA Group in 2003. In order to reduce exposure to this risk, do you intend to step up development in the euro zone in the medium term?

Henri de Castries

Generally speaking, our strategy is to pursue growth in countries whose own economic growth is substantial, which basically means the dollar zone. Although exchange rates may be erratic over the short term, they tend to balance out over the long run. For this reason, short-term exchange rate trends are not a decisive factor in our business strategy considerations.

According to the presentation we have just heard, your strategy is to remain tightly focused on financial protection and wealth management. Yet you pushed the development of AXA Banque. What is your long-term strategy in this area?

Henri de Castries

Here's our analysis: AXA's business is to design products and manage distribution channels. We don't need to buy up big bank chains to grow our business. Their business is not our business. We can certainly make our products available via non-proprietary banking channels. The wisdom of this strategy has been demonstrated, particularly in the US market.

However, we may opt to own technical bank platforms in a limited way, so that we can offer our own clients complementary bank products. This is the case for AXA Banque. It is important to note here that we acquired Banque Directe for only €60 million, which is not a lot considering the number of AXA clients in France.

How do you plan to improve the profitability of life and savings operations in Germany?

Denis Duverne

In Germany, interest credited to policyholders is calculated a year ahead of time. This being the case, we thought it would be wise to set the rate on the basis of returns we could get in the financial markets. This is why we reduced these rates significantly for 2004.

In addition, since these rates are guaranteed in advance, it is necessary to adopt a conservative asset allocation strategy that favors fixed-income investments. We adjusted our German asset allocations accordingly.

Finally, we hope to develop in the area of unit-linked products: equity investments offer the client greater potential return over the long term, and the insurer doesn't expose its shareholders' equity to the associated risk.

Claude Brunet

Significant efforts have been made to reduce operating costs in Germany, and this obviously contributes to improving profitability. Since September of 2001, we have reduced fixed costs by around 12%. We plan to pursue this strategy of reducing costs, shifting our focus from fixed to unit costs in order not to limit our growth potential.

Why did you decide to make allowances for gross impairments rather than increase PRE reserves? It seems that if you had opted for the latter, the charge would have been more evenly spread over time.

Denis Duverne

According to accounting regulators, PRE reserves are purely prudential. They are not justified economically, in other words. We were obliged by regulations to set up a €47 million PRE allowance in 2002. In 2003, the French National Accounting Board felt that the reserve set up in 2002 was no longer needed, and it was released.

The charge for gross impairments, on the contrary, is required from an economic standpoint.

In light of the significant reductions already achieved, do you think further reductions can be made?

Henri de Castries

Cost reduction is a never-ending process. It is not possible to stay competitive over the long run without constantly looking for ways to reduce the cost of operating your business, regardless of the business you're in. Consequently, we are pursuing this strategy. Our focus going forward will be on reducing unit rather than fixed costs.

Can you explain the gross impairment charge for the bond portfolio?

Denis Duverne

We took a gross impairment charge of €166 million on the bond portfolio in 2003, principally in the United States. The corporate bond market in the United States went through a rough patch in 2002 that continued going into 2003. Given the composition of our portfolio and the rules for estimating liabilities on high-yield corporate bonds, it was reasonable to take a gross impairment charge on the bond portfolio. Since the economic situation has improved, we believe that this allowance can be gradually diminished.

But isn't this a common occurrence...?

Denis Duverne

Our French GAAP financial statements follow the same practices as those governing US GAAP statements: if corporate bonds show a capital loss for 12 months, then we set aside an allowance for impairment.

For three years now, ROE (return on equity) has been less than 5%. Do you see the situation improving in the future? Can you give us some information that will reassure your shareholders?

Denis Duverne

In the last three years, the equity markets have lost a lot of ground. As a result, we have had to set aside equity valuation allowances, and this has adversely impacted earnings. Without offering specific guidance, we can say today that if the financial markets don't depreciate significantly, both our adjusted and underlying earnings can be expected to improve in 2004.

Henri de Castries

I would think that the quality of our insurance results would reassure our shareholders. More generally, AXA's stock price performance in recent months suggests that our shareholders aren't really worried.

What is the level of capital gains you expect to generate next year and thereafter?

Denis Duverne

Today we are in a situation of unrealized capital gains. The market has been moving in the right direction since the beginning of the year, which means that we should be able to harvest capital gains in 2004. But we don't wish to give any quantified estimates at this time.

What is your strategy in China?

Henri de Castries

We have two life insurance licenses in China - in Shanghai and Guangzhou. Right now, the focus is on building up a strong sales force. China will be a key market in the future. Currently, we are achieving significant growth in China, even though the size of our operation there is fairly limited for the time being.

We know that it will be difficult to operate in China. We are currently on an upward learning curve there. Until 2002, we were not able to meet our own business development objectives. In 2003, we exceeded those objectives, and business looks promising in Guangzhou.

Do you feel that AXA RE has turned things around completely? What is your strategy for the reinsurance business?

Henri de Castries

With respect to AXA RE, our top priority was to achieve underlying earnings recovery. Although we achieved a significant turnaround, we think there is still room for improvement and expect it.

We haven't altered our strategy, which is to turn this business around without having to inject additional equity. This strategy has paid off so far.

In 2002, US GAAP and French GAAP led to very different earnings outcomes. Will this be the case again for 2003?

Denis Duverne

We are not giving US GAAP earnings guidance or disclosures today. Our financial statement filings in the US are in June. As a rough guide, US and French GAAP differ in terms of how the value of equities are recorded. As a result, our US GAAP earnings will be higher in 2003 than our earnings under French GAAP. This is the opposite of what happened last year.

Henri de Castries

I'd like to thank all of you for being here.