As a matter of consistency, AXA no longer underwrites risks related to oils sands production and oil sands transportation via pipelines. In addition, AXA will not underwrite upstream oil & gas exploration business in arctic regions.
AXA and the IFC, a member of the World Bank Group focused on the private sector, announced the launch of a $500 million partnership supporting an infrastructure fund that will notably finance green infrastructures in emerging countries, including renewable energy, water, green transport and telecoms. There will be no investments in coal and oil-sands related projects. Our policies are applied consistently.
Integration of Climate risks & opportunities into investment strategy; 2°C alignment
Instead of relying on carbon footprinting, AXA is exploring ways to measure the positioning of its portfolio versus a 2°C target. AXA is thus currently reviewing and testing a “warming potential” methodology on a share of its portfolio (corporate bonds and equity: 45% of AXA’s General Accounts assets) to capture climate-related aspects of a company’s activities, including socalled “Scope 1” (i.e. direct) emissions, “Scope 2” (i.e. indirect emissions, from electricity consumption), recent technology development, and green revenue opportunities. This is derived from the carbon intensity alignment of each company relative to the sectoral carbon intensity target needed for each sector to make its contribution to reach the global 2°C target. This produces a “warming potential” per company and sector. Based on a comprehensive set of databases for emissions budgets and energy mixes, a carbon intensity aligned to a temperature target of 2°C can be designed for each sector, and each company positioning is derived within its sector, enabling to sketch a “temperature” for AXA’s corporate bonds and equity portfolio.
emission vehicles (e.g. promoting electric, hybrid and low emissions vehicles), home insurance policies encouraging energy eff iciency (e.g. environmental appliances upgrades), renewable energy installations (e.g. wind and solar power), and environmentally friendly claims strategies (e.g. repair rather than replace automotive spare parts). In addition to specific products, AXA France developed Assurance Citoyenne, a screening methodology and label encouraging environmental considerations. In 2017, AXA France also launched a new responsible Unit-linked offer called “AGIPI Gestion Pilotée Option ESG”. Most of the funds within this offer are evaluated according to their ESG performance using a market-based tool.
AXA Corporate Solutions Assurance launched an Energy line of business reinforcing AXA’s expertise and capacity for insuring clients in the energy industry, with a strong focus on renewable energy, and an explicit exclusion of coal and oil sands-related business. This includes insurance products supporting renewable energy production facilities, for which AXA aims to double its footprint by 2020. AXA also off ers parametric insurance products which, for example, help insured communities facing the consequences of climate-related disasters on agricultural crops (notably drought or flooding).
AXA took an active role in the EU High Level Expert Group on Sustainable Finance, developing recommendations on how sustainability could be placed in the European Union’s core financial processes, how diff erent participants in the financial system could act on it, and how to mobilize capital more effectively for a sustainable economy. Sustainable finance off ers Europe a powerful tool for achieving its goals of economic prosperity, social inclusion and environmental regeneration.
Finally, AXA has joined or supported many Investor and Insurance-led coalitions over the years in the fields of ESG, RI and Corporate Responsibility: UN PRI, UN PSI, IIGCC, Montreal Carbon Pledge, Science Based Targets, RE100, Caring for Climate Carbon Pricing Leadership Coalition, UN Global Compact, CDP, ORSE, EpE, Finance for Tomorrow, “Kyoto statement” of the Geneva Association, etc. AXA also co-chairs the Global Steering Committee of the Finance Initiative of the United Nations Environment (UNEP FI) and is an Advisory Board member of the OECD’s Centre on Green Finance and Investment. AXA chairs the French Insurance Federation working group on exclusions and divestments.
AXA also has climate-related NGO partnerships. These include UN Habitat, focusing on strengthening building codes and their implementation in countries vulnerable to natural disasters, encouraging countries to “build back better”, and to reduce fatalities and limit economic losses as a result of disasters. AXA also signed the UNISDR Private Sector Commitment for Disaster Risk Reduction. These principles cover 5 key areas around the role that the private sector can take to further encourage Disaster Prevention, Resilience and Risk Reduction. Finally, AXA and the international NGO CARE work on both disaster risk reduction and climate change adaptation.
/$m of revenue in 2016 and 284 in 2015). This footprinting highlights our portfolio’s
largest carbon emitters, which may be an interesting “carbon asset risk” proxy. It also reveals that broad asset-class data do not provide useful insights given the heterogeneity of metrics across assets, but that sub-sectors breakdowns may inform shareholder engagement efforts. More sophisticated works, such as the “Carbon Value at Risk” and the “Temperature gauge” developed in our TCFD report, are required to better understand materiality of “energy transition” risks. This would consider an estimate of the carbon cost (carbon Value at Risk) as well as measures of the “green share” accounting for the positive contribution of some business models to the transition to a low carbon world.
saved with the following breakdown: infrastructure debt wind farms (1.8MT CO
As described under Section 7.3, AXA has implemented an environmental reporting process since 2002, and has a target to reduce its direct carbon emissions (related to its operations, not investments) by 25% between 2012 and 2020, as well as paper and water-related targets. This target has been achieved in 2017. Since 2017, as part of our RE 100 pledge, AXA is committed to shift to 100% renewables for its electricity consumption by 2025, with an interim target of 70% by 2020. See detailed information under Section 7.3.
The Group’s Environmental, Social, and Governance (ESG) performance is evaluated by various organizations, including Socially Responsible Investment (SRI) rating agencies. The Group is ranked in the top tier within the main indices and rankings such as RobecoSAM (DJSI), FTSE4GOOD and Euronext Vigeo. The full details of AXA’s rankings are available on axa.com and in Chapter 1.1. According to our research, these high ratings translate into a significant presence of the AXA share in SRI funds compared to our peers.
As described under the environmental information section, AXA develops various products and services with added environmental value. AXA’s products – P&C, savings, health and associated services – do not pose direct health and safety concerns for our customers. On the contrary, through our products, we encourage and reward healthy and environmentally responsible behavior, as well as help reduce social exclusion. Recent examples of business developments addressing societal needs are developed below.
AXA France co-created the “Assurance Citoyenne” label with civil society representatives. It is a set of criteria that define minimum requirements to qualify as “sustainable insurance” products. These criteria are based on “Trust” considerations (e.g. clear communications to customers and dedicated claims handlers), “Prevention” (e.g. pricing incentives that help customers identify and prevent or reduce risks), “Environment” (e.g. paperless contract, products off ering incentives or pricing benefits when covering buildings using material that respect the environment), and “Fairness” (e.g.: product accessibility for populations usually excluded from insurance mechanisms). Based on this internal rating, AXA France launched a customer facing label which highlights to the customers that the AXA France products off er, above traditional coverage, extra features and services supporting the sustainability and business ethics dimensions. In 2017, the label was granted to 50 products representing almost half of AXA France’s P&C turnover.
Aft er more than 24 months of having launched AXA’s Emerging Customers business, live initiatives include: ■ India: Bharti AXA General Insurance (BAGI) is partnering since November 2016 with Airtel Payment Bank (APB) to insure all
APB account openers with free personal accident insurance, covering 2 million customers every month, and having already covered more than 16 million clients since launch. In addition, BAGI also covers -with the support of the Indian government- more than 360 thousand farmers through an agriculture insurance scheme across diff erent departments in India; ■ Indonesia: to address the lower middle-class customers asking for a loan, Mandiri-AXA General Insurance leverages its partnership with Mandiri Bank to propose Credit life, Personal Accident, and collateral insurance to all of Mandiri’s microbusiness clients; ■ Thailand: AXA GI launched a partnership with AIS, the first mobile network operator in Thailand, a pilot to provide Personal Accident and Hospital Cash products as a reward to loyal AIS prepaid customers. Alongside the Thai government, AXA GI is also insuring 2.6 million rice farmers; ■ Malaysia: In partnership with the Malaysian Post Off ice, AXA Malaysia is providing accessible accident and two-wheeler insurance to over 110,000 customers; ■ Philippines: AXA Philippines is working with TSKI, a leading Microfinance Institution (MFI), as well as several digital players to distribute insurance to emerging customers. AXA Philippines is also leading insurer of the Oversea Filipino Workers scheme, which provides protection to working migrants; ■ Morocco: AXA Morocco partners since 2012 with a MFI, Albaraka, to provide nearly 150,000 micro-entrepreneurs with credit life, property and hospital cash (“hospicash”) coverages; ■ Nigeria: AXA Mansard distributes microinsurance products through partnerships with MFIs and MTN, a leading mobile network operator; ■ Egypt: AXA Egypt is partnering with leading MFIs to distribute credit and health covers; ■ Brazil: AXA is partnering with Pernambucanas, a leading retailer in Brazil, to provide relevant covers for its clients; ■ Mexico: AXA is partnering with MFIs to provide P&C insurance to microentrepreneurs.
Since last year, AXA has also embarked in the exploration of specific segments that could require tailored protection solutions. Such is the case of migrant workers sending money back home and women as key decision makers of the wellbeing of their family.
To tackle the women’s market, our strategy is to tailor our off ers to women expectations by customizing our sales approach, adding value-added services, enhancing our customer interactions and humanizing our brand image. AXA is currently tailoring its insurance solutions to meet our client’s gender-specific needs. For example: ■ we adapt our sales approach: AXA France has launched Rencontres pour Elles to mobilize the salesforce to address women with a specific commercial pitch and to improve proximity to women clients (300 meetings organized in 2016); ■ we develop dedicated value-added services: AXA Sigorta has included in its Women Entrepreneurs product roadside assistance, concierge and psychological support services to correlate women’s business and personal lives.
When appropriate, the Group’s underwriters and portfolio managers integrate environmental and social risks, including human rights concerns, as well as more generally ethical concerns in their product development processes and policies. This is notably undertaken via (1) applying certain sector-specific exclusions, (2) the Group underwriting guidelines for P&C Commercial lines that require local AXA entities to exclude certain sensitive sectors or activities, and (3) the “Policy on business relationships involving sanctioned countries and countries identified as having high levels of corruption or political risk”. The latter policy formalizes the Group policies and procedures with respect to business in or with countries that are subject to international sanctions or embargoes or otherwise identified as high corruption, high political risk and/or tax haven jurisdictions.
AXA defines its stakeholders as any individual or group aff ected, or likely to be aff ected, by its business operations, or who, in turn, may aff ect the Group’s performance or the environment in which it operates. AXA’s stakeholders include the Group’s shareholders and investors, its employees, its business partners and suppliers, as well as governments, international organizations and community groups.
Engagement may take place through regular discussions, meetings, conferences, surveys or more formal structures, such as the Company’s European Works Council. AXA may also work directly with stakeholders through strategic partnerships (please see below). AXA also has a Stakeholder Advisory Panel, which meets twice a year and provides high-level input to the Group’s strategy and its approach to corporate responsibility. AXA also conducted a global stakeholder survey to encourage greater engagement with local civil society and community groups.
As part of this strategy, AXA works closely with a number of civil society partners. These partnerships address key social and/or environmental issues; they include AXA’s long-standing partnership with CARE. This partnership was renewed in 2016 for a further three years. Together, AXA and CARE are working in three main areas: disaster risk reduction, climate change and financial inclusion. In addition, AXA launched one other partnership: the Group is working with UN Habitat on strengthening building codes to build resilience in countries vulnerable to natural disaster.
AXA’s approach to community investment covers various activities and initiatives, including: ■ employee volunteering, through the AXA Hearts in Action international program (see dedicated section below) and local volunteering programs; ■ the AXA Research Fund (see dedicated section below); ■ strategic partnerships, including long-standing partnership with CARE (since 2011, AXA has donated €5.4 million), and partnership signed with UN Habitat; ■ humanitarian crises and natural catastrophes in response to which AXA’s main non-profit partners are mobilizing to provide emergency relief and develop medium or longterm reconstruction or empowerment projects for the aff ected populations. In 2017, the Group decided to set aside approximately €800 thousand to support CARE, UNICEF and the Red Cross.
In addition, can be counted the data from the skill-based missions of AXA entities in France. In 2017, 45 employees performed volunteering skill-based missions at AXA Atout Coeur France (13 people), at Les Entreprises pour la Cité (2 people) and at various partner charities (30 people) as part of the AXA Expérience Solidaire programme. In total, the salary expenditures paid over the 49,751 hours dedicated to these skill-based volunteering missions represent the equivalent of a €3.2 million donation.
The AXA Research Fund supports academic innovation made by top-tier researchers all over the world, in the fields of Health, Environment, Data & Tech and Socio-Economic Risks. In 2017, it has been granting Post-Doctoral Fellowships (up to €130 thousand), Chairs (up to €800 thousand), Awards (up to €250 thousand) and Joint Research Initiatives (up to €250 thousand). The Fund provides researchers with the means and freedom to complete their work successfully, so that they feel encouraged to explore new avenues. The awarding of grants is based on strict academic criteria following a transparent and rigorous selection process, which is overseen by our Scientific Board and presided by Prof. Tom Kirkwood (Newcastle University, UK).
(1) In 2017, data is drawn from almost 73% of the Group’s total number of FTE’s.
As of December 31, 2017, the AXA Research Fund has been supporting 563 research projects, of researchers from 58 nationalities, in 35 countries, with a financial support of €140 million.
More information on the AXA Research Fund is available at axaresearch. org for funding schemes and supported projects; and gallery.axa-research.org for disseminated science.
AXA furthermore incites its suppliers to be socially and environmentally responsible and asks them to sign a Corporate Responsibility Clause committing them to respect the four principles of the International Labor Organization.
In addition, the Group applies social and environmental criteria to assess supplier performance through the EcoVadis tool, a specialist assessment platform. The EcoVadis score provides a framework for building a tailored action plan in order to improve the quality of the services or to reduce the supply chain risk. AXA also commits itself to same principles and received a Gold Rating for its 2017 EcoVadis assessment.
Most of our principal IT, services, and overhead suppliers have now been assessed. An awareness training pack is available for all the procurement community by the intermediaries of the 25 AXA Corporate Responsibility Champions network. This pack is reviewed annually by the Corporate Responsibility Community of Champions.
AXA is an active member of the non-profit Transparency International France. As such, AXA supports TI’s vision, values and founding principles. This includes a commitment to promote “responsible” lobbying practices when AXA engages with public authorities. Our public commitment is detailed in our “Public Aff airs Charter”, which is available on axa.com.
Most importantly, AXA provides supports 105 million customers around the world, including individuals, local communities and businesses. Our products and services help our customers protect their lives, their property and belongings, their health, and their savings, providing long-term peace of mind which allows them to build and invest in the future.
I Report by one of the Statutory Auditors, appointed as an independent third party, on the consolidated human resources, environmental and social information presented in the management report
In our capacity as Statutory Auditor of AXA SA (the “Company”), appointed as independent third party and certified by COFRAC under number 3-1060 (whose scope is available at www.cofrac.fr), we hereby report to you our report on the consolidated human resources, environmental and social information for the year ended December 31, 2017, included in the management report (hereinaft er named “CSR Information”), pursuant to Article L.225-102-1 of the French Commercial Code (Code de commerce).
We performed our work in accordance with the order dated May 13, 2013 defining the conditions under which the independent third party performs its engagement and with the professional guidance issued by the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this engagement and with ISAE 3000 concerning our conclusion on the fairness of CSR Information (Assurance engagements other than audits or reviews of historical financial information).
We conducted around ten interviews with about 8 persons responsible for preparing the CSR Information in the departments in charge of collecting the information and, where appropriate, responsible for internal control and Risk Management procedures, in order to: ■ assess the suitability of the Guidelines in terms of their relevance, completeness, reliability, neutrality and understandability, and taking into account industry best practices where appropriate; ■ verify the implementation of data-collection, compilation, processing and control process to reach completeness and consistency of the CSR Information and obtain an understanding of the internal control and Risk Management procedures used to prepare the CSR Information.
We determined the nature and scope of our tests and procedures based on the nature and importance of the CSR Information with respect to the characteristics of the Company, the human resources and environmental challenges of its activities, its sustainability strategy and industry best practices.
Regarding the CSR Information that we considered to be the most important and whose list is given in annex: ■ at parent entity level, we referred to documentary sources and conducted interviews to corroborate the qualitative information (organisation, policies, actions), performed analytical procedures on the quantitative information and verified, using sampling techniques, the calculations of the data. We also verified that the information was consistent and in agreement with the other information in the management report; ■ at the level of a representative sample of entities, AXA Colpatria, AXA Assistance Colombia, AXA Singapore Insurance, AXA Direct Korea, AXA Banque, AXA Corporate Solutions France, AXA Corporate Solutions Italy, AXA France Assurance, AXA Investment Managers Paris, GIE AXA, AXA Konzern AG, AXA Seguros Generales, AXA Life Insurance Ukraine, AXA Insurance UK Plc, AXA PPP Healthcare et AXA UK Plc, selected by us on the basis of their activity, their contribution to the consolidated indicators, their location and a risk analysis, we conducted interviews to verify that procedures are properly applied, and we performed tests of details, using sampling techniques, in order to verify the calculations and reconcile the data with the supporting documents. This work represents 35% of headcount considered as typical size of the human resources component, between 21% and 55% of environmental data considered as characteristic variables of the environmental component, and between 29% and 62% of social data considered as characteristic variables of the social component.
Appendix: CSR information that we considered to be the most important
HUMAN RESOURCES: ■ total workforce and split by gender, age and geographical area, including indicators headcount of salaried workforce as at the end of the year and average FTE of salaried workforce, headcount of salaried non-sales and sales force men and women by professional category, average age and average seniority of salaried non-sales force; ■ hires and dismissals, including indicators external recruitments, resignations, dismissals and involuntary turnover of salaried nonsales force; ■ compensation and variation, including total gross payroll of salaried non-sales force and gross fixed payroll of salaried sales force; ■ absenteeism, including indicator absenteeism rate and proportions by type of absence of salaried non-sales and sales force; ■ organization of social dialogue; ■ work accidents, in particular frequency and gravity as well as work disease; ■ training policy; ■ training hours, including indicator average number of days; ■ implemented policy and measures taken in favor of the equality between the women and the men; ■ implemented policy and measures taken in favor of the employment and of the insertion of the disabled people; ■ respect of the freedom of association and of the right of collective bargaining; ■ elimination of segregation in terms of employment and professions.
ENVIRONMENTAL INFORMATION: ■ organization of the Company to take into account the questions of environment; ■ measure of prevention, recycling and elimination of waste, including indicators unsorted waste, sorted paper for recycling and percentage of cartridges and/or toners for recycling; ■ water consumption and water supply according to the local constraints, including indicator water consumption per person; ■ consumption of raw materials and measures taken to improve the eff iciency of their use, including indicators off ice paper, marketing and distribution consumption and percentage of paper recycled and/or guaranteeing sustainable management; ■ energy consumption, measures taken to improve the energy eff iciency and resort to the renewable energies, including indicators consumption of electricity, gas, fuel, steam and chilled water and energy consumption per person; ■ significant greenhouse gases emissions contribution generated due to the Company activity, including the use of goods and services it products, including indicators CO
SOCIAL INFORMATION: ■ territorial, economic and social impact in respect of employment and regional development; ■ actions of partnerships or sponsorship, including volunteering hours during paid hours and cash donations to community projects; ■ taken into account the social and environmental issues in the policy purchase; ■ actions committed to prevent the corruption; ■ other actions carried out to promote human rights.
The Vigilance Plan applies to AXA Group companies and their respective activities and operations, including intra-group activities, and all AXA employees, worldwide.
AXA’s direct operations, focusing on financial services, do not generate major impacts on the environment. As a result, AXA’s environmental reporting and management processes focus on energy, water and paper consumption, as well as related CO
emissions. AXA’s comprehensive environmental reporting process, which is verified by an independent third-party, allows AXA to evaluate its impact on and identify risks to the environment from its activities. Please refer to Section 7.3 “Environmental Information – Environmental r eporting n etwork and p rocess” of the Annual Report for further information on AXA’s environmental reporting process.
See further details in Section 7.2 “Social Information” of the A nnual Report .
The AXA Group is also committed to using information relating to an identified or identifiable physical person (“Personal Data”) in a responsible manner and safeguarding employee and client privacy, to ensure responsible, transparent and ethical treatment of Personal Data in line with the European legislation on Personal Data protection. AXA’s Data Privacy Declaration, the public statement covering AXA’s network of privacy-related policies, is available on the AXA Group’s website.
AXA was the first insurance group to have adopted privacyrelated Binding Corporate Rules (2013), available on the AXA Group’s website, to define processing principles and actions (e.g. trainings, governance, responsibilities) to ensure data protection and the responsible transfer of data. The Binding Corporate Rules are the result of consultation with European data protection authorities, and constitute an internationally approved data privacy contractual framework for the treatment of customer, employee and other stakeholder Personal Data that multinationals such as AXA encounter and collect in the course of their business activities.
integrate AXA’s policies regulating insurance activities in sectors that represent increased risks, which policies can be directly or indirectly related to human rights.
Please refer to Section 7.3 – Environmental Information of the Annual Report for further details on the strategy, policy, targets and results.
As an investor, AXA seeks to integrate ESG criteria considerations into its investment strategy. In line with the Group Responsible Investment Policy, available on the AXA Group’s website, the Group has in particular designed five sector policies to address investments in particularly sensitive sectors from an ESG perspective. These guidelines cover human rights and environmental concerns (i.e. controversial weapons, tobacco, coal mining, palm oil production), and entities are required to certify compliance. Please refer to Section 7.4 “Responsible Investment” of the Annual Report for detailed information about AXA’s responsible investment governance, policy, targets and results .
As a business partner, AXA partners with service providers and suppliers including professional service firms and advisers of all types, and procures technical and maintenance services, which service sectors are generally considered as having a low risk of endangering human rights and the environment.
The AXA Group examines all escalated or identified violation and misconduct cases with the objective of ensuring an adequate response to any alleged, suspected or confirmed situations (which could constitute a breach of AXA’s values or policies). Most AXA Group companies have well-defined internal regulations and other policies governing whistleblowing pursuant to local laws and regulations.
AXA shall present the Vigilance Plan for stakeholder input to the French employee representatives, and further intends to promote dialogue over this Vigilance Plan with AXA employees, shareholders, investors, business partners as well as public institutions, international organisations and community groups.
Please refer to Section 7.5 “Societal Information – Stakeholder d ialogue” of the Annual Report for further details about the stakeholder dialogue implemented by AXA.
The AXA Group ensures the implement ation of all policies and procedures described in this Vigilance Plan through a network of compliance, data privacy, corporate responsibility and physical security professionals.
In 2018, in an effort to continually improve its management of risks, AXA plans additions and refinements to the Vigilance Plan and to roll out further work from the various stakeholders involved in developing, implementing and monitoring its risks policies.
APPENDIX I MANAGEMENT’S ANNUAL EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING 402
APPENDIX I MANAGEMENT’S ANNUAL EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING
In line with the COSO framework, AXA Group’s ICOFR is organized around the following key process categories: Entity-Level Controls (ELC), IT ELC, Financial Statement Closing Process, Business Processes, and IT General Controls.
For every key process category, the in-scope entities (i) document the significant processes and/or controls, as well as the rationale of how the associated risk of material misstatement due to error or fraud can be reduced to an acceptable level, (ii) test the design and operational eff ectiveness of key controls based on the test plans elaborated with insight into risks, and (iii) remediate identified control deficiencies.
Outstanding control deficiencies are consolidated at Group level to evaluate their impact on Consolidated Financial Statements, considering their likelihood, potential impact, compensating controls and other qualitative factors. This evaluation process is designed to identify any control deficiencies that may rise to the level of a material weakness. A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on time.
Management conducted an evaluation of the eff ectiveness of AXA Group’s ICOFR in accordance with the IFC framework as described above. Based on this evaluation, management concluded that AXA Group’s ICOFR was eff ective as of December 31, 2017.
We conducted our work in accordance with French professional standards and ISAE 3000 (“Assurance engagements other than audits or reviews of historical financial information”). These standards require that we plan and perform the audit procedures to obtain reasonable assurance about whether AXA management’s assertion that internal control over financial reporting is eff ective, was fairly stated in all material respects. Our audit procedures included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating eff ectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit procedures provide a reasonable basis for our opinion.
APPENDIX II STATEMENT OF THE PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT
Operating expenses amounted to €443 million compared to €420 million in 2016, an increase of €23 million mainly due to the preparation of the Initial Public Off ering on AXA America Holdings Inc. and acceleration on innovation.
Capital operations resulted in a gain of €122 million in 2017, versus a loss of €501 million in 2016, and breaks down as follows: ■ €39 million foreign exchange gain compared to €69 million exchange loss in 2016 mainly due to pound sterling hedging review following its depreciation; ■ a €128 million net reversal of impairments on investments in subsidiaries, of which €191 million in AXA Global Life shares following its merger with AXA Global P&C becoming AXA Global Re and benefiting from its capital surplus, compared to €249 million net allowance in 2016; ■ €21 million in allowances to provisions for risks and charges versus €127 million in 2016, decreasing given there was no allowance to provisions for the 2017 convertible subordinated bond redemption premium following its maturity in January 2017.
Intangible assets totalled €336 million. They mainly included the AXA brand contributed by FINAXA as part of the 2005 merger and valued at €307 million at the time based on brand royalties billed to Group subsidiaries and to the Mutuelles AXA, and €29 million relating to the capitalisation of soft ware expenses.
Investments in subsidiaries, net of valuation allowances, totalled €62,373 million, versus €62,548 million at year-end 2016, representing a decrease of €175 million, reflecting: ■ €474 million capital reduction of AXA Global Life; partly off set by: ■ €127 million related to the internal acquisition of AXA Belgium shares; ■ €128 million in net reversal of impairments on investments in subsidiaries as mentioned above.
Tax receivables increased by €384 million including a €369 million receivable as a result of the expected refund of the 3% tax on dividends paid to shareholders.
Miscellaneous receivables totalled €709 million, mainly reflecting €514 million of dividend receivables and €169 million of financial income receivables.
Marketable securities of €1 billion represent AXA shares to meet its obligations to deliver shares and to eliminate the dilutive eff ect for certain share-based compensation schemes.
Cash instruments amounted to €76 million and relate to premiums on US dollar options.
Shareholders’ equity, before net income for the period and aft er payment of the dividends relating to the prior fiscal year, stood at €37,361 million, a decrease of €112 million, including €688 million related to the cancellation of shares bought back, partly off set by a €443 million capital increase reserved for employees and €133 million following the exercise of stock options.
Other shareholders’ equity, including the undated deeply securities (TSS), amounted to €4,640 million, compared to €5,206 million in 2016, taking into account the €335 million repayment of TSS and a positive currently translation adjustment of €225 million.
Provisions for risks and charges amounted to €571 million mainly include €334 million of provisions for the possible repayment of tax savings to subsidiaries belonging to the French tax consolidation group and €103 million provision for exchangerate risk. The decrease of €963 million is mainly explained by the payment of the redemption premium linked to the convertible subordinated bond matured at the beginning of January 2017.
Total Amount VAT included of invoices concerned (euros) 33,130,480 43,675,896 13,397,483 20,634,049 23,064,582 100,772,010
Percentage of the total amount VAT included period purchases (euros) 0,00% 0,00% 0,96% 0,49% 0,05% 1,49%
Total Amount VAT included of invoices concerned (euros) 846,167 325,111,262 72,320,496 62,126,691 89,066,790 548,625,239
Percentage of the total amount VAT included period purchases (euros) 0,15% 58,38% 12,99% 11,16% 15,99% 98,51%
Payment delay used for these calculation is french legal delay (30 days aft er the invoice issuing day). No invoice out of these disclosures due to receivables or payables due to litigation or not accounted.
In 2017, The Company did not acquire any significant equity interests within the meaning of Article L.233-6 of the French Commercial Code.
III. NET INCOME FOR THE FINANCIAL YEAR VI + VII +VIII 4,958 432
1 - Closing balance sheet summary a) Capital - Ordinary shares (in Euro million) 5,537 5,593 5,557 5,554 5,554 b) Ordinary shares (numbers in million) 2,418 2,442 2,426 2,425 2,425 c) Bonds convertible into ordinary shares (numbers in million) 7 7 7 7 2 – Income statement summary (in Euro million)
(a) Dividend proposed at year end 2017 is submited to the Shareholders‘ Meeting of April 25, 2018 and based on 2,425,235,751 outstanding ordinary shares.
Tour Majunga – 6, place de la Pyramide 92908 PARIS LA DEFENSE CEDEX – France
AXA LIFE INSURANCE COMPANY CO Ltd 628 1,978 77. 92% 2,381
NBF Platinium Tower 1-17-3 Shirokane – Minato-ku 108-8020 TOKYO – Japan
Wolfe Tone House, Wolfe Tone street – DUBLIN 1 – Ireland
Les collines de l’Arche – 76 route de la Demi Lune 92057 PARIS LA DEFENSE – France
General Guisan-str, 40 – CH-8401 WINTERTHUR – Switzerland 21, avenue Matignon – 75008 PARIS – France 39, rue du Colisée – 75008 PARIS – France 30, rue Fortuny – 75017 PARIS – France
Net income for the fiscal year ended December 31, 2017 resulted in a profit of €4,958 million compared to a profit of €432 million for the year ended December 31, 2016.
Since January 1, 2011, AXA has applied regulation ANC n°2015-05 linked to financial futures instruments and hedge operations.
Since January 1, 2005, AXA has applied regulations CRC 2002-10 related to depreciation and amortization of assets (amended by regulations CRC 2003-07 and CRC 2005-09), and CRC 200406 related to the definition, recognition and measurement of assets, repealed and replaced by regulation ANC n°2014-03 chapter “titre II, chapitre I Actifs non financiers”; application of these regulations has had no impact on the Company’s financial statements.
Financial assets consist in (i) investments in and receivables from subsidiaries and aff iliates and (ii) other financial assets and loans.
Intangible assets totaled €336 million. They mainly included the AXA brand contributed by FINAXA as part of the 2005 merger and valued at €307 million at the time based on brand royalties billed to Group subsidiaries and to the Mutuelles AXA, and €29 million relating to the capitalization of soft ware expenses.
The Company is the head of a French tax consolidation regime group. The tax consolidation regime provides that tax savings should be recognized directly in the Company’s financial statements. However, a provision for the return of tax savings is recognized when there is a high probability that the benefit will accrue to subsidiaries as a result of the prospect of future taxable income resulting from the Group’s strategic planning.
This account includes the AXA brand contributed by FINAXA as part of the 2005 merger and valued at €307 million at the time based on brand royalties billed to Group subsidiaries and to the Mutuelles AXA, and €29 million relating to the capitalization of soft ware expenses.
(a) The net decrease of €681 million was mainly explained by €474 million capital reduction of AXA Global Life. (b) The net increase of €246 million is mainly due to $944 million (€801 million) in loans granted to the US operations partly off set by the repayment of £350 million
(€409 million) by AXA UK Plc and €83 million due to foreign exchange impact.
December 31, 2017 Less than 1 year 1 to 5 years More than 5 years
Other debt issue expenses 104 78 4 22 3.7. Unrealized foreign exchange losses
T h e C o m pa n y ’s s h a r e c a p i ta l i s r e p r e s e n t e d b y 2,425,235,751 shares with a par value of €2.29, giving a total value of €5,553,789,869.79 at December 31, 2017. These shares were all entirely subscribed and paid with rights from January 1, 2017.
Undated deeply Subordinated Notes (nominal) 5,127 (335) (225) 4,567 3.11. Provisions for risks and charges
(a) The €360 million provision for deferred taxes at end of the period includes €334 million of provisions for the possible repayment of tax savings to subsidiaries belonging to the French tax consolidation group.
The perpetual subordinated notes are undated bonds. The Company has the option of deferring payment of the coupons under certain conditions. Nonetheless, the coupons must be paid when these conditions cease to be met or on redemption of the instruments. When payment is deferred for an extended period, the coupons remain payable by law. Similarly, in the absence of dividends being paid, unpaid coupons accumulated over the years will be recognized as payable upon liquidation, if any. These instruments are classified as debt on the basis of this contractual obligation to pay the coupons.
Group entities for €694 million and fewer margin calls received from banking counterparties under collateral agreements for €348 million.
(a) Debt relating to non-current assets totaled €75 million and included shares issued by AXA Life Europe but not yet fully paid. (b) Of which €163 million of expenses payable.
Income tax expense (b) - 1,048 1,048 * A positive sign indicates tax benefit.
(b) The corporate income tax benefit amounted to €1,048 million compared to €692 million in 2016. It mainly included €710 million of tax receivables from members of the tax consolidation group, €369 million representing the refund of the 3% tax on dividends paid to shareholders, €96 million due to the eff ect of the lower tax rate on future fiscal years linked to provisions for tax credit repayment risk partly off set by €133 million in corporate income tax expense for the fiscal year.
Commitments to buy back shares and bonds from Group entities 46 -
Of which financial guarantees given to Group entities 11,731 6. SENSITIVITY
(e) A 10% depreciation of the Euro leads to a 7.8% improvement in the fair value of debt, a -18% deterioration in the fair value of derivatives and a -10.2% deterioration in the fair value of loans.
We conducted our audit engagement in compliance with independence rules applicable to us, for the period from January 1, 2017 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 or in the French Code of Ethics (code de déontologie) for statutory auditors.
In accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the financial statements of the current period, as well as how we addressed those risks.
Verification of the Management Report and of the Other Documents Provided to the Shareholders
We have also performed, in accordance with professional standards applicable in France, the specific verifications required by French law.
INFORMATION PRESENTED IN THE MANAGEMENT REPORT WITH RESPECT TO THE COMPANY’S FINANCIAL POSITION AND THE FINANCIAL STATEMENTS
Concerning the information considered by your Company as likely to have an impact in the event of a public cash or exchange off er, provided in accordance with the requirements of Article L. 225-37-5 of the French Commercial Code (code de commerce), we have verified its consistency with the underlying documents provided to us. Based on this work, we attest the accuracy and the fair presentation of this information.
In accordance with French law, we have verified that the required information concerning the identity of the shareholders and holders of the voting rights has been properly disclosed in the management report.
As part of an audit conducted in accordance with professional standards applicable in France, the statutory auditor exercises professional judgment throughout the audit and furthermore: ■ Identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be suff icient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
■ Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the statutory auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) No 537/2014, confirming our independence within the meaning of the rules applicable in France such as they are set in particular by Articles L.822-10 to L.822-14 of the French Commercial Code (code de commerce) and in the French Code of Ethics (code de déontologie) for statutory auditors. Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards.
The split by geographies is detailed below: ■ France (insurance and banking activities, and holdings); ■ Europe, consisting in: • Switzerland (insurance activities),
The calculation of Return on Equity (“RoE”) is based on following principles: ■ for net income RoE: calculation is based on consolidated financial statements, i.e. shareholders’ equity including undated subordinated debt (“Super Subordinated Debts” TSS/“Undated Subordinated Debts” TSDI) and Other Comprehensive Income “OCI”, and net income not reflecting any interest charges on TSS/TSDI; ■ for adjusted RoE* and underlying RoE: • all undated subordinated debts (TSS/TSDI) are treated as financing debt, thus excluded from shareholders’ equity,
Free C ash F lows are defined as a measure of dividend capacity calculated as the sum of earnings and required capital change.
This ratio is calculated as per Solvency II regulation, and is equal to the total of available financial resources (AFR) divided by the Group solvency capital requirement. The solvency capital requirement is set at a level ensuring that insurers and reinsurers are able to meet their obligations towards policyholders and beneficiaries over the next 12 months, with a 99.5% probability. The denominator of the ratio can be calculated either through a standard formula or through an internal model. AXA is using an internal model.
Underlying expenses include the following components: ■ acquisition expenses, including commissions and general expenses allocated to new business; ■ capitalization of acquisition expenses linked to new business: Deferred Acquisition Costs (DAC) and net rights to future management fees only for investment contracts without DPF; ■ amortization of Deferred Acquisition Costs (DAC) and net rights to future management fees for investment contracts without DPF, including the impact of interest capitalized; ■ administrative expenses; and
• the “Investment margin” represents the net investment result in the Statement of Income and is adjusted to consider the related policyholder participation (see above) as well as changes in specific reserves linked to invested assets’ returns and to exclude the fees on (or contractual charges included in) contracts with the financial risk borne by policyholders, which are included in “Fees & Revenues”,
• change in URR (Unearned Revenue Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues and fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin Analysis; ■ for investment contracts without DPF: • deposit accounting is applied. As a consequence, fees and charges related to these contracts are presented in the underlying Statement of Income within Gross Consolidated Revenues on a separate line, and in Margin Analysis in the lines “Fees & Revenues” and “Net Technical Margin”,
• change in UFR (Unearned Fee Reserve – capitalization net of amortization) is presented in the line “Change in unearned premiums net of unearned revenues & fees” in the underlying Statement of Income, whereas it is located in the line “Fees & Revenues” in the Margin Analysis.
INSURANCE RATIOS (APPLICABLE TO PROPERTY & CASUALTY, HEALTH AND PROTECTION ACTIVITIES)
All accident year loss ratio net of reinsurance is the ratio of: ■ all accident years claims charge gross of reinsurance + claims handling costs + result of reinsurance ceded on all accident years excluding unwind of the discount rate used in calculating technical reserves; to
Underlying expenses include two components: expenses (including commissions) related to acquisition of contracts (with the related acquisition expense ratio) and all other expenses excluding claims handling costs (with the related administrative expense ratio). Underlying expenses exclude customer intangible amortization, but include the impact from the changes in VBI amortization.
Net inflows: Inflows of client money less outflows of client money. Net inflows are used by the Management to measure the impact of sales eff orts, product attractiveness (mainly dependent on performance and innovation), and the general market trend in investment allocation.
Operating net banking revenues are disclosed before intercompany eliminations and before realized capital gains/ losses or changes in fair value of “fair-value-P&L” assets and of hedging derivatives.
This Annual Report includes all the elements required to be included in the Board of Directors’ report of AXA established pursuant to Articles L.225-100 et seq. of the French Commercial Code (Code de commerce).
Sections Pages 1. Trends/Earnings/Financial position and key performance indicators 12 to 16 ; 26 to 80 and 406 to 431 2. Use of financial instruments by the Company when relevant for assessing its assets and liabilities, financial position, and profits and losses 3. Description of major risk factors and uncertainties 142 to 154 and 169 to 185 4. Internal control and Risk Management procedures 155 to 168 5. Acquisition of significant equity interests in companies headquartered in France 408 6. Events subsequent to fiscal year end/Outlook 78 to 80 and 332 and 333 7. Dividend distributions over the last three years 14 and 15 8. Information on market and liquidity risks (interest rate, exchange rate and stock price fluctuation risk) 73 to 78; 142 to 154 and 169 to 178 9. Purchase and sale of the Company’s own shares 344 10. Transactions involving Company stock completed by corporate off icers 129 13. Adjustment of the rights of holders of securities with a claim on the capital of the Company n/a 14. Social and environmental information 362 to 395 15. Financial risks related to climate change 147 and 381 to 387 16. Research and development activities 390 and 391 17. Terms of payment 408 19. Corporate governance report 439
Exhibits 20. Table of the Company’s financial results over the last five years 413 21. Report of the Statutory Auditors on the corporate governance report 429
APPENDICES A APPENDIX VIII EUROPEAN COMMISSION REGULATION (EC) NO. 809/2004 OF APRIL 29, 2004 – CROSS-REFERENCE TABLE
Statement made by the person responsible for the Annual Financial Report 405
Report of the Statutory Auditors on the consolidated financial statements of the Group 334 to 339
Report of the Statutory Auditors on the corporate governance report 429