Are you hoping to expand your unit-linked business in France and, if so, how?
In 2004, premium income totalled €21,442 million, an increase of 10.4% at constant exchange rates. In France, new money invested in savings products rose 10.4%, compared with 13% growth for the market as a whole (FFSA estimate – January 2005). Net new money was up 21.1%. Foreign subsidiaries contributed premium income of €846.2 million, 5.9% more than in 2003; at constant exchange rates, the total was €888.4 million, up 11.2%.
Embedded value at 31 December 2003 45.5 2004 management performance +2.1 Change in economic conditions +0.9 One-year rollforward +2.9 Brazil +0.3
The value of new business in 2004 totalled €110 million, after deducting the €129.5 million solvency margin carrying cost. This represented €0.79 per share, an increase of 31% over 2003.
The Audit Committee is chaired by a director who fulfils the independence criteria set out in the Viénot Report on Corporate Governance, in accordance with its internal rules. Its responsibilities include obtaining assurance that the accounting policies applied to prepare the financial statements of the Company and the Group are appropriate, that 12 Applying the principles of sustainable growth
From left to right: Gérard Ménéroud, Gilles Benoist, Jean-Pierre Walbaum, Xavier Larnaudie-Eiffel, Antoine Lissowski.
Internal control is intended to provide reasonable assurance that the company’s objectives are met in terms of protection of assets, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations as well as with internal rules and procedures.
■ Total number of employees in France: 2,821 (including 2,379 employees under contract and 442 civil servants seconded to the Group)
During 2004, we decided to deepen our long-standing commitment to preventing sexual and moral harassment by setting up a formal process to detect possible cases of harassment and deal immediately with the source of the problem. A network of mainly human resources professionals has been set up with strict instructions to report immediately to Human Resources management any suspicions they may have that such practices are going on. This initiative was supported by a communication plan, involving the organisation of eight employee awareness-raising sessions between December 2003 and June 2004 that were attended by 700 employees from the Angers, Arcueil and Paris sites.
The latest innovation to come out of our CNPLab, CNPNet speeds up processing and decision-making for loan insurance applications for consumer loans and mortgages. One of the purposes is to facilitate compliance with the Belorgey convention, which aims to improve access to credit and insurance for people suffering from serious illnesses. Accessible on line at sales points, CNPNet can be integrated in the bank’s lending system. CNPNet partners the bank’s sales force in preparing the insurance file to go with the loan application. Compared to a paper-based system, CNPNet significantly reduces the time required to process insurance applications and facilitates the tracking process. It can also be used to notify borrowers immediately if they need to obtain a doctor’s certificate or biological analyses. The new system delivers improvements in processing time, service quality and tracking, with: ■ Insurance decisions made in real time (for around 70% of applications).
The convention now applies to loans of up to €250,000 for periods of up to 15 years.
France’s first specialised dental care centre for the physically and mentally handicapped, which opened in Clermont Ferrand in 2004, is an example of best practice in pain management for these populations. The experience of this unit should encourage the creation of similar structures applying the same innovative approach throughout France.
CNP Assurances is the largest private owner of forests in France, with 49,498 hectares spanning 196 different woodland areas in various regions of the country. The forests are managed by Société Forestière de la Caisse des Dépôts, based on sustainable management guidelines drawn up in 2003. The principles that led to our forests obtaining PEFC (Programme for the Endorsement of Forest Certification) certification also underpin the management plans adopted in 2004. The new approach consists of maintaining older trees in the midst of new growth, to promote biodiversity and provide shelter for rare animal species.
Action was also taken in 2004 to make our forests safer to the public. Signs have been installed in 15% of the woodland areas to warn visitors of the potential risks. And all of our 150 forest buildings – located in around half of the woodland areas – have been audited by specialised consultants to identify health and other risks.
26% Free float 1% French State * Sopassure is a holding company owned by La Poste (50.1%) and the Caisses d’Epargne Group (49.9%).
Private shareholders can also call a tollfree number to listen to an audio newsletter updated every two weeks and obtain real time stock quotes. Members of the CNP Assurances shareholder relations team can also be reached on this number.
The individual insurance contracts developed and managed by our Group are distributed by our two partner networks, the French Post Office and the Savings Banks – together representing over 20,000 sales outlets – and since 1 January 2004 by our own CNP Trésor insurance advisors. In group insurance, we handle all phases of the process, from development and distribution to management.
Garantie Retraite Ecureuil 38.4 514.6 Points Retraite Ecureuil 60.2 1,023.5 Perspective Ecureuil 35.3 1,558.1 Plein Temps CNP Trésor 36.1 1,351.1 Assurimmo CNP Trésor 16.8 521.8 Contrats Groupe Retraite 240.0 2,814.0 Solésio 179.1 173.7 Perp Poste 6.7 6.5 Perp Ecureuil 69.0 67.1 “Article L.441.1” products (including Préfon Retraite, excluding Perp Poste) 587.8 7,350.9 Brazilian products 298.6 593.2 Certival CNP Trésor 25.9 301.9 Revenus Pluriel Ecureuil 7.4 109.1 Other annuity products 79.7 1,146.8
In 2001, we teamed up with Azur-GMF to form Filassistance International, an assistance company governed by the Insurance Code. Filassistance International offers a range of services to meet social needs, such as helping people adapt to retirement, enabling elderly or disabled people to continue to live in their own home and remain in contact with the outside world, and generally partner clients at all stages in their life.
Under the Pensions Reform Act, companies may add another layer to their “Article 83” contract, allowing employees to make voluntary personal contributions to the plan. These two-layer contracts are known as Peres (Plan d’Epargne Retraite en Entreprise).
In 2004, we continued to expand internationally through a combination of partnerships and acquisitions. We now have subsidiaries in Brazil, Argentina and
Caixa Seguros, acquired in July 2001, reported premium income of BRL 2,455.3 million (€662 million) in 2004, an increase of 4.2% compared with 2003 or 10.9%
The 7.2% decline in personal risk premiums was due to low sales by the CEF banking network which put its weight behind helping to meet government targets.
Life insurance This term covers endowment products and whole life insurance. Under endowment insurance, the insured receives the face value of the policy, either in a lump sum or in the form of annuities, if he or she survives the endowment period. Under whole life insurance, a benefit is paid out to a named beneficiary on the death of the insured. Certain endowment contracts also include whole life cover.
To underscore the importance of active participation, directors’ fees are allocated among the members solely on the basis of their attendance rate at meetings of the Supervisory Board and, where applicable, of the Committees of the Board.
To closely link the personal interests of Supervisory Board members with that of the Company, each member is required to hold at least 50 registered shares, or 500 shares in the case of the Chairman of the Supervisory Board.
We closely examined the creation of the CNP Trésor sales force and the measures taken to integrate the roughly 180 former French Treasury employees who transferred to our Company to join this team.
The eighth resolution tabled at the Meeting concerns an authorisation to be given to the Executive Board to make stock grants to employees and/or officers of the Company without consideration, under the system introduced in the 2005 Finance Act. The number of shares granted would not exceed the equivalent of 0.4% of the Company’s issued capital.
The rules of procedure of the Supervisory Board and the Executive Board are described in detail in their respective internal rules, consisting of practical guidelines that extend the related provisions of the Articles of Association.
In line with its primary role of assisting the Supervisory Board, in 2004 the Audit Committee examined the following issues: • Report on the internal auditors’ activities during 2003 and determination of the 2004 internal audit programme.
• Financial statements of the Company and the Group for 2003 and the first half of 2004, and financial forecasts and projections for 2004 and 2005.
Thus, in preparing this report, I personally met with the heads of the departments that have specific responsibility for cross-functional controls – Internal Audit, Risks & Internal Control, Management Accounting, Actuarial Analyses – as well as the heads of certain operating departments (Investments, Policyholder Services, Legal & Tax Guidance) and the Director, Accounting and Legal Affairs, so that they could describe to me the measures taken in the area of internal control. I also talked to the managers in charge of group insurance business, IT investments and quality and safety.
• Monitor daily processing operations and information about processing delays, as well as error and exception reports.
2.2.4.1 Determination of underwriting results Insurance policies written by CNP Assurances give rise not only to the financial risks described above, but also to insurance risks such as mortality, morbidity, disability and unemployment risks.
• A technical committee made up of representatives of the Company and the external auditors, which is responsible for validating the options selected.
The LSF-IC project will be pursued, with the aim of completing, by the end of this year, the modelling of the 22 remaining processes at CNP Assurances as well as the processes that have a material impact on financial information at Ecureuil Vie and Assurbail. These analyses will also be extended to the main foreign subsidiaries. As has been the case up to now, work on describing processes will go hand in hand with action to identify and assess risks and controls based on reported information.
Following publication of the Pensions Reform Act enabling legislation, CNP Assurances launched a comprehensive personal pensions offering that is being marketed by leveraging the complementary attractions of the new Perp products and life insurance. A broad range of Perps has been developed, including traditional unit-linked/ non-unit-linked products and Préfon points-based plans (“L.441 plans”) distributed by the French Post Office.
The related commitments will be co-insured by UNPMF and CNP Assurances on a 50/50 basis.
On 25 June 2004, CNP Assurances carried out an employee rights issue giving participants in the CNP Group employee share ownership plan the opportunity to invest their profit-shares and incentive bonuses in CNP shares. The issue was authorised at the Annual General Meeting of 4 June 2002. The take-up rate was high, with 75.3% of employees choosing to participate in the issue.
Acquisition of a 57.5% interest in Fineco Vita, the life insurance subsidiary of Capitalia, an Italian banking group
The acquisition, which represents a significant transaction in the Italian market, will position CNP Assurances as Italy’s sixth largest bancassurer and will bring the Company closer to its goal of generating 15% of premium income outside France. CNP is already present in the Italian market through its CNP Italia branch, which specialises in writing loan insurance.
Premium income from Other Development Initiatives in France, including direct sales and sales by other networks, rose by a strong 11.1% to €92.8 million.
During 2004, the IFRS project moved into the active deployment phase.
The audited information on the effects of the transition, to be published once it has been reviewed by the Supervisory Board, will include the following reconciliations: • Reconciliation of French GAAP and IFRS equity at
The key aims of the LSF project are to: • Build an internal control database • Model the Group’s business processes • Establish a continuous assessment process covering the quality of supporting documentation and the effectiveness of internal controls.
The Group selected as the basis for the new system the internationally-recognised COSO (Committee of Sponsoring Organizations of the Treadway Commission) standards.
This cross-functional method allows comparative assessments to be made, to the extent that a single business is often conducted by several departments. It was implemented at the end of 2002, because it enabled the Group to identify and satisfactorily assess the largest risks within a realistic timeframe and without an unreasonable investment of resources.
The second phase, consisting of setting up a risk monitoring system, has been launched for selected financial risks and one category of operational risks. In addition, a draft risk reduction plan has been drawn up on a topic viewed as critical.
These management information systems: • Roll down Group objectives to the level of the individual businesses.
The effectiveness of the contingency plan is tested three times a year, through emergency simulations carried out at the Group’s various facilities. In 2004, simulations were performed at Paris, Angers and Arcueil, as well as at two subsidiaries in the Paris region, involving departments with around 20 to 50 staff whose activities are considered as crucial to the business’s survival. Every effort was made to ensure that the simulations were realistic. All staff were prevented from accessing the premises and were given no advance warning of the drill.
In 2004, we extended our main initiatives, and at the end of the year, we appointed a Sustainable Development Officer to coordinate activities in this area and drive the process forward in 2005.
Client complaints are a good indicator of perceived quality. In 2004, the number of complaints fell by 17% to the equivalent of 0.03% of contracts managed. Clients can also take their complaints up with our Mediation department or the independent Mediator. A total of 667 complaints were submitted for mediation in 2004, nearly a hundred more than in 2003. At the same time, however, the number that ended up in court fell by 10%, showing the success of efforts to resolve complaints before they get that far.
Employee relations and agreements 16 Works Council meetings with employee representatives 12 meetings of employee delegates 40 meetings with trade union representatives 14 meetings of the Health, Safety and Working Conditions Committee
The Executive Board and the Supervisory Board share the common goal of reducing the risk of behaviours that could adversely affect the interests of shareholders and all of the Company’s partners.
Appropriation of profit, approval of the recommended dividend of €1.66 per share and transfer of the special long-term capital gains reserve to an ordinary reserve account (3rd resolution)
• To acquire shares for allocation to employees and officers of the Company or the Group through stock grants without consideration governed by Articles L. 225-197-1 et seq. of the Commercial Code, or under employee profit-sharing or share ownership plans, or on exercise of stock options.
Caisse des Dépôts first elected: 20 December 1991/current term expires: June 2007.
Directorships and functions within the Caisse des Dépôts Group • Director and Member of the Executive Committee of
• Permanent representative CNCE on the Board of Directors: Banque des Iles Saint-Pierre and Miquelon SA; Banque des Antilles Françaises SA; Banque de La Réunion SA; Banque de Tahiti SA; Banque de NouvelleCalédonie SA.
Permanent representative of the State on the Board of Directors of CNP Assurances since 7 September 2004/ current term expires: June 2007.
CNP Assurances has been publishing its embedded value and the value of new business since 1998. The calculations are performed with the assistance of B&W Deloitte, who certify the methods used and review the calculations. The embedded value of an insurance business corresponds to the sum of revalued net assets (NAV) and the discounted present value of in-force business, less the solvency margin carrying cost. Since 2003, we have also published details of the solvency margin carrying cost At 31 December 2004, a total of 138,635,302 ordinary shares were outstanding, compared with 137,854,064 at the previous year-end.
Gross technical reserves: 151,202.8 139,944.3 128,999.2 - Life technical reserves 146,659.6 135,550.5 125,102.3 - Non-life technical reserves 4,543.2 4,393.8 3,896.9
Amounts credited directly to shareholders’ equity in application of tax rules or insurance accounting standards are treated as follows: • Reserves resulting from legal revaluations are maintained in consolidated shareholders’ equity. Amounts written off from the revaluation reserve in the individual statutory financial statements are restated and included in shareholders’ equity.
• The amount of the provision corresponds to the difference between carrying value and recoverable value. If the asset is intended to be sold in the short term, recoverable value is equal to market value. If the company intends and is able to hold the securities, taking into account foreseeable changes in technical reserves and the asset churn rate, the recoverable amount should reflect the intended holding period.
Transactions denominated in foreign currencies are converted into euro at the year-end exchange rate. Any conversion gains or losses are recorded in the profit and loss account for the period in which they are incurred.
Underwriting expenses are accounted for in accordance with cost accounting principles: • Claims handling and benefit payment expenses include the costs of the departments responsible for settling claims and endowments, processing surrenders and paying annuities.
• The costs of line functions, as increased by the allocated costs of staff functions, which are allocated to cost accounting sections using allocation keys tailored to the type of business.
In € millions Group Minority interests Total 12.2 CHANGES IN SHAREHOLDERS’ EQUITY IN 2003
Deferred taxes Balance at Tax benefit Tax charge Balance at In € millions 31/12/2003 31/12/2004
Other commitments received 5,041.7 3,905.9 2,977.7 2a. Loan guarantees 20.0 40.0 2b. Securites and other assets purchased under resale agreements 2c. Other commitments related to securities, assets or income 942.8 1,138.4 1,284.0 2d. Other commitments given 540.3 467.4 327.1
Direct business and inward reinsurance 31/12/2004 31/12/2003 31/12/2002 In € millions 20.6 PREMIUM INCOME BY GEOGRAPHIC AREA
Caixa Seguros reclassified amounts of €60.2 million in 2003 and €27.0 million in 2002 from direct business to ceded business. As a result of these reclassifications, “Change in technical reserves” was increased from €5,932.7 million to €5,992.9 million in 2003 and from €3,087.4 million to €3,114.4 million in 2002.
180 Consolidated Financial Statements * Excluding information system migration costs of €68.7 million in 2003 Excluding costs of the CNP Trésor network for €23.8 milllion in 2004
In accordance with Article L. 225-235 of the Commercial Code relating to the justification of our assessments, we draw to your attention the following matters: • The consolidated balance sheet includes certain specific insurance and reinsurance assets and liabilities that are estimated on the basis of statistics and actuarial assumptions. This is the case, in particular, for technical reserves. The methods used to determine the amount of these items are described in notes 3.4, 3.5 and 3.6 to the consolidated financial statements.
The entities and individuals concerned by these transactions are Caisse Nationale des Caisses d’Epargne et de Prévoyance, Caisse des Dépôts, Charles Milhaud, Nicolas Mérindol, Francis Mayer and Dominique Marcel.
The agreement, which was approved by the CNP Assurances Supervisory Board on 20 March 2000, sets out the methods to be used to share management expenses and to determine the remuneration to be received by each partner, based on their respective tasks and the level of underwriting profit on the business written.
An agreement between CNP Assurances and CDC Ixis Asset Management setting out the terms of transfer within the CDC Group of a former member of the Executive Board was approved by the Supervisory Board on 16 December 2003. One of the main purposes of the agreement is to provide for the sharing between CNP Assurances and CDC Ixis Asset Management, on a 50/50 basis, of any indemnities that may be due to the person concerned in the event of termination of his new employment contract.
The shares may be offered to employees at a 20% discount to the market price, or a 30% discount in the case of shares acquired through a voluntary employee savings plan (“PPESV” plan). The Executive Board may also decide to issue bonus shares to employees to be paid up by the Company or in lieu of the 20% or 30% discount.
TOTAL SHARES HELD BY THE SIGNATORIES OF THE SHAREHOLDERS’ PACT* 101,393,501 73.54% 73.80%
At 31 December 2002, current and former employees of the Company held a total of 1,744,969, including shares held through Group savings plans, representing 1.26% of the capital.
1.2 STATEMENT BY THE PERSON RESPONSIBLE FOR THE DOCUMENT DE RÉFÉRENCE
• Fees paid to the Auditors and members of their networks...........................................................................................................................141