Axa Replaces Kraus and Shakes Up AB's Board
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Monday, May 1, 2017

Axa Replaces Kraus and Shakes Up AB's Board

A new duo is taking over for Peter Kraus atop AB [profile], and the board is transforming, too, with a host of Axa board members stepping in.

Peter Kraus
Past CEO & Chairman
Kraus, the 64-year-old CEO and chairman of the New York City-based asset manager's board, left the company Friday, and Bob Zoellick and Seth Bernstein (no relation to Sandy Bernstein, the founder of what is now AB) are stepping in, Zoellick as chairman and Bernstein as president, CEO, and board member, Axa Financial board chair and AB board member Denis Duverne confirms this morning. Axa owns about 63.8 percent of publicly-traded AB.

In addition to Bernstein and Zoellick, four other new directors are joining AB's board, three of them independent (and all of them already on Axa's own board): Anders Malmstrom, chief financial officer of Axa (and thus not independent); Barbara Fallon-Walsh; Daniel Kaye; and Ramon de Oliveira. Duverne and Mark Pearson, president and CEO of Axa, will both remain on the AB board, too. AB's board previously also included: Christopher Condron, Steven Elliott, Deborah Hechinger, Weston Hicks, Heidi Messer, Scott Schoen, Lorie Slutsky, and Joshua Weinreich. All told, nine directors are leaving the AB board.

Seth Bernstein
President & CEO
Duverne praises Bernstein and Zoellick as "two world class executives", and he points to the three new independent directors as bringing "fresh perspectives and relevant expertise." Duverne also hints at a mandate for Bernstein and Zoellick to make big changes at AB.

"Looking forward, continued success requires us to keep partnering closely with our clients to create the right solutions for their needs through constant innovation," Duverne states. "In an industry that is confronting significant shifts, we need to continue transforming the business to improve the quality of our investment solutions while delivering our services more effectively."

"We are confident that with Bob and Seth we have the right leadership team in place to capitalize on new opportunities and deliver superior value to all of our stakeholders," Duverne adds.

Bernstein, age 55, most recently served as managing director and global head of managed solutions and strategy at J.P. Morgan Asset Management [profile], overseeing all discretionary assets in the private banking channel. Bernstein's base salary will be $500,000, and his minimum cash bonus for 2017 will be $3 million, per an AB filing with the SEC. AB will also grant Bernstein "restricted units in respect of limited partnership units in AB Holding with a grant date fair value" of $3.5 million.

Zoellick previously served as president of the World Bank from 2007-2012. AB will pay Zoellick $425,000 in cash annually, plus "an annual equity-based grant with a grant date fair value equal to $425,000."

Meanwhile, AXA America Holdings will buy Kraus' 4,337,643 shares of AB for $22.90 each, for a sum total of $99.33 million.

"We thank Peter Kraus for his service to AB and its stakeholders since taking over in the challenging environment of 2008," Duverne states. "He has built a strong team and we believe the company is well positioned for an excellent future. We wish him well."

Kraus, an alumnus of both Trinity College and New York University, took over AB in December 2008, in the middle of the financial crisis. Prior to that he held senior leadership roles at Merrill Lynch and Goldman Sachs, and he also worked at Peat, Marwick, Mitchell & Co.

Bernstein spent 32 years at J.P. Morgan. His past roles there include managing director and global head of fixed income and currency for J.P. Morgan Asset Management and chief financial officer for J.P. Morgan Chase's investment management and private banking division. He is an alumnus of Haverford College, where he serves on the board of managers.

Zoellick previously served served as: vice chairman, international of Goldman Sachs and managing director and chairman of Goldman's board of international advisors; deputy secretary of the U.S. State Department and U.S. trade representative (both under U.S. President George W. Bush); executive vice president for housing and law at Fannie Mae; and in various U.S. State Department, Treasury Department, and White House positions in the George H.W. Bush and Reagan administrations.

Fallon-Walsh, who retired from the leadership team at Vanguard in 2012, is also a director of Axa Financial, Axa Equitable, and MONY Life Insurance Company of America. She previously served on the boards of Axa Investment Managers, Axa IM, and Axa Rosenberg.

Kaye, who retired from Ernst & Young in 2012, is also a director of Axa Financial, Axa Equitable, MONY Life Insurance Company of America, and Axa Insurance Company. He also previously served as interim chief financial officer and treasurer of HealthEast Care System.

Malmstrom currently serves as senior executive vice president and chief financial officer of Axa Financial and senior executive director and CFO of Axa Equitable Life Insurance Company. He previously worked with Axa Winterthur and the Swiss Life Group.

de Oliveira is managing director of Investment Audit Practice, a consulting firm, and a board member of Axa Financial, Axa Equitable, and MONY Life Insurance Company of America. He previously spent 24 years at J.P. Morgan, eventually rising to chairman and CEO of J.P. Morgan Investment Management.

AB has $498 billion in AUM as of March 31.

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