Additional information relating to the management report of the company and the Group – correspondence table 344APPENDIX E
Date of incorporation and term of the issuer The Company was incorporated on August 16, 1855, as a limited partnership (société en commandite), under the name Compagnie Impériale des Voitures de Paris. In 1866, the Company was converted into a joint stock company (société anonyme) under the name Compagnie Générale des Voitures de Paris. The Company changed its name to SCOR SA on October 16, 1989 and in 1990, absorbed the Société Commerciale de Réassurance, created in 1970, and took over the reinsurance business of the latter. On May 13, 1996, SCOR SA changed its name to SCOR. On June 25, 2007, SCOR changed its legal form to a European Company (Societas Europaea) and became SCOR SE. In 2012, the Company relocated its registered office from Paris-La Défense to Paris. On April 25, 2013, the Company’s term was extended for 99 years by decision of the Extraordinary Shareholders’ Meeting and will expire on April 25, 2112 unless extended or previously dissolved.
Risk appetite Risk appetite defines the quantity of risk that SCOR is willing to accept to achieve a desired level of profitability. This determines where the Group wishes to position itself on the assumed riskexpected return spectrum, between extremely risk averse (low risklow return) and extreme risk taker (high risk-high return). SCOR uses a target solvency ratio as well as a target expected profitability. These two components provide a comprehensive definition of its risk appetite. The Group actual solvency ratio and profitability profile are regularly reported to the Board of Directors via the Risk Committee.
Footprint scenarios Footprint scenarios are an innovative and complementary risk management tool. Whereas risk drivers and extreme scenarios are probability-based, the footprint approach consists of carrying out an impact assessment on the Group under a deterministic scenario. This approach is complementary to a probability-based view.
SCOR has a very targeted approach, focused on North America, the London Market and Brazil (through Essor).
Information about the SCOR Group SCOR GROUP01 21SCOR Universal Registration Document 2019
The SCOR technical environment is based on a secured international network, a private cloud-based global data center with a fully replicated dual site, providing a strong disaster recovery capability. This homogeneous technical environment is a solid ground to prepare for a global move to the public cloud, which starts in 2020 and aims at providing even more flexibility and scalability to SCOR IT operations. SCOR is also investing continuously in cybersecurity and data protection, reinforcing the physical and logical access controls, the network security through introduction of artificial intelligence monitoring, the data leakage prevention and the employee awareness through cybersecurity training programs.
The solvency capital benefit of this merger on the Eligible Own Funds is approximately EUR 200 million. The merger was treated as a transaction under common control under IFRS and did not result in a merger profit at consolidated Group level.
SCOR SE and its consolidated subsidiaries formed the world’s fourth largest reinsurer (1) serving more than 4,000 clients.
Original estimated loss net of retrocession as at 203Typhoon Jebi 167September 2018 125October 2018 141Hurricane Michael 61Camp California Wildfire 110November 2018 60September 2018 55Hurricane Florence 41Woolsey California Wildfire 34November 2018 31September 2018 61Typhoon Trami 26Friederike Storm 26January 2018 22September 2018 22Typhoon Mangkhut 18Papua New Guinea EQ 18February 2018 11April 2018 11Ituango heavy rain 28Italian Storms 10October 2018 68 58Other natural catastrophes (less than EUR 10 million)
September 2017 285270Hurricane Irma 245 191August 2017Hurricane Harvey 197209 113September 2017 9498Hurricane Maria 73 40October 2017California wildfire 44
August 2017 1212Typhoon Hato 12 1December 2017Flash Flood N. Italy (Brescello) 2565537Other natural catastrophes (less than EUR 10 million)
In 2019, SCOR Global Life continued to grow profitably in a competitive life reinsurance market. The solid operating profitability of SCOR Global Life was increased thanks to a robust flow of new business and expansion of franchise in various key markets and product lines. The in-force book globally contributed positively to the results, despite the underlying US mortality claim experience being higher than expected, thanks to a strong overall reserve position, as well as successful premium rate increases on certain individual reinsurance treaties. Changes in estimates due to reserve harmonization across certain US portfolios in 2019 resulted in a one-off net reduction in reserves on these portfolios of EUR 159 million, largely offset by changes in estimates across various other portfolios. Both claim expenses and in-force management actions may vary over time.
The following table presents a reconciliation of these figures with the IFRS figures as presented in Section 4.6. – Notes to the consolidated financial statements, Note 18 – Investment income.
floating-rate notes due 2020, on June 25 and July 6, 2015 respectively. On December 2, 2015, SCOR successfully placed a dated subordinated notes issue on the Euro market in the amount of EUR 600 million.
Market and financial review SCOR GROUP01 39SCOR Universal Registration Document 2019
(2) See Section 1.3.5.4. – Net investment income and investment income on invested assets.
(1) Total expenses are investment management expenses, acquisition and administrative expenses and other current operating expenses as presented in Section 4.2. – Consolidated statement of income. (2) Unallocated loss adjustment expenses are part of gross benefits and claims paid.
Market and financial review SCOR GROUP01 42 SCOR Universal Registration Document 2019
• Director of Havas (France) • Member of the Management Board in charge of the Group finance, strategy, legal affairs and Group company secretary of BPCE Group
Kory Sorenson, a British citizen, was born in the US. She speaks fluent French and has a DESS degree in corporate finance from the Institut d’Etudes Politiques de Paris, a master’s degree in applied economics from the University of Paris Dauphine, a bachelor’s degree in econometrics and political science from the American University in Washington, D.C. and a certificate in governance from Harvard Executive Education and another from INSEAD. Kory Sorenson has over twenty-five years of experience in financial services, most of which has been focused on insurance and banking. She was Managing Director, Head of Insurance Capital Markets of Barclays Capital and also held senior positions in the insurance capital markets and debt capital markets divisions of Credit Suisse, Lehman Brothers and Morgan Stanley. She began her career in the treasury department of Total SA in Paris. Kory Sorenson is currently a non-executive director of several major companies.
French – Age: 74 – Generali France, 2 rue Pillet Will, 75009 Paris, France
• Director of Europ Assistance Holding (France) • Director of Generali France (France) • Director of Generali Vie (France) • Director of Generali IARD (France) • Director of Eramet (France)* • Chairman of RVS (association) (France) • Member of the Executive Committee of MEDEF (France) • Chairman of the Institut pour l’innovation économique et sociale (2IES) (France) • Chairman of the Foundation ARC contre le cancer (France)
Fields Wicker-Miurin, an American and British citizen, studied in France at the Institut d'Etudes Politiques de Paris, in the United States and Italy. She graduated from the University of Virginia (BA) and the School of Advanced International Studies of the Johns Hopkins University (MA). Fields Wicker-Miurin began her career in banking, before joining Strategic Planning Associates (now Oliver Wyman Consulting) as a senior partner where she was the main advisor to Lloyd’s of London. In 1994, she became Chief Financial Officer and Head of Strategy of the London Stock Exchange. She was a member of the Nasdaq Technology Advisory Council and advised the European parliament on financial markets harmonization. In 2002, she was one of the founders of Leaders' Quest, a social enterprise that works with leaders from all sectors and across the globe who want to make a responsible, positive difference through their leadership. In 2007 she was awarded the OBE (Officer of the British Empire) and in 2011 she was awarded Fellow of King’s College London. She is also a director of BNP Paribas and of Prudential plc and is a nonexecutive Member of the Board of the Department of Digital, Culture, Media and Sport of the UK Government where she chairs the Audit and Risk Committee.
The Board meets at least four times a year. In accordance with legal provisions, it approves the financial statements, proposes dividends and makes investment and financial policy decisions. The Board examines and takes decisions on major operations, possibly after review by an ad hoc committee. Beyond the cases provided by law, some operations are subject to the prior approval of the Board: any major organic growth investments or internal restructuring operations, any significant operation falling outside of the strategy announced by the Group and any project regarding a sale or acquisition, merger or asset contribution higher than one hundred million euros (EUR 100 million). The Board’s duties and responsibilities beyond those set forth by applicable laws and regulations are set out in SCOR SE’s bylaws.
IARD; • Zhen Wang, director of Bank of China Insurance Company; • Fields Wicker-Miurin, director of BNP Paribas SA.
He convenes the non-executive directors as often as needed. The Lead Independent Director of the Company chairs the nonexecutive directors’ session.
The Board of Directors of SCOR SE decided, in order to protect the Company’s interests, to implement an internal control program to prevent risks of conflict of interest through: 1. a review by the Audit Committee of related party transactions; 2. an annual review of each director’s situation, in order to analyze his or her independent status and the existence of any potential existing conflicts of interests; 3. its Board Internal Charter, according to which any director in a situation involving a risk of conflict of interest undertakes to resign from his or her position if the conflict situation is not solved; 4. the adoption of a Code of Conduct communicated to all employees. This Code establishes reinforced requirements as regards the prevention of situations with risks of conflict of interests. It is complemented by a policy defining the alert procedures (“whistleblowing”) available for employees, which are reported to the Audit Committee; 5. the systematic addition of an item to the agenda of each meeting of the Board of Directors on the potential conflict of interest of a director related to a topic on the agenda.
Compensation and Nomination Committee and if the situation has not been cured within one (1) month following the notification, resign from the Board of Directors.
The average attendance rate of the members of the Board was 95%. The following table displays the attendance of the members of the Board of Directors during 2019: Board members Attendance rate (%)
Due to the experience and positions held by its members during their career, the Committee has a high level of financial expertise (for further detail, see Section 2.1.3.2. – Information concerning the members of the Board of Directors).
The Committee mainly discussed the following matters: the 2019 CSR action plan and its implementation including the deployment of sectoral policies in the coal and tobacco sector, the initiatives undertaken to limit the Group's environmental footprint, the review of the reduction and carbon neutrality objectives set out in the Quantum Leap Strategic Plan, the examination of an experimental analysis of the impact of climate change on the investment portfolio by 2025, the review of the non-financial performance declaration, the review of the ESG report on investments as well as the review of the 2018 activity and CSR report, the follow-up on a project study to develop forest in an emerging country, the review of the stakeholders’ expectations in CSR matters and of the subsequent materiality analysis, the review of the declaration on the UK Modern Slavery Act, the review of the non-discrimination and diversity policy, the review of the annual declaration on the gender equality and the review of a project to encourage the involvement of Group employees in the communities and territories where the Group operates.
2.1.5.2. Powers of the corporate officers The Board of Directors of the Company also limited the powers of the Chairman and Chief Executive Officer by stipulating in the Board’s Internal Charter the need for prior Board approval for the following operations: • organic growth investments and major internal structuring operations; • any significant operation falling outside of the scope of the strategy announced by the Group; • any project regarding a sale or acquisition, merger or asset contribution higher than one hundred million euros. In addition, any project regarding a sale, in one or more transactions, concerning at least half of the Company’s assets over the last two years must be submitted to the Shareholders’ Meeting.
Denis Kessler See Section 2.1.3.2. – Information concerning the members of the Board of Directors.
François de Varenne François de Varenne, a French citizen, is a graduate of the École polytechnique and a civil engineer of the École nationale des ponts et chaussées. He holds a PhD in finance and graduated as an actuary from the Institut de science financière et d’assurances (ISFA). François de Varenne joined the Fédération française des sociétés d’assurances (FFSA) in 1993 as Manager of Economic and Financial Affairs. In London, beginning in 1998, he served successively as Insurance Strategist with Lehman Brothers, VicePresident for asset management solutions and structured transactions specialist in insurance and reinsurance companies at Merrill Lynch and then at Deutsche Bank. In 2003, he became Managing Partner of Gimar Finance & Cie. He joined the Group in 2005 as Director of Corporate Finance and Asset Management. On September 3, 2007, he was named Group Chief Operating Officer. On October 29, 2008, he was appointed Chief Executive Officer of SCOR Global Investments and Chief Executive Officer of SCOR Investment Partners.
Distribution by business unit 1,141SCOR Global P&C 972981 960981SCOR Global Life 959 85SCOR Global Investments 8178 789792821Group Functions and Support(5)
These two projects are regularly monitored by the Group’s Executive Committee, and in particular by the Chairman and Chief Executive Officer.
In 2017, the Compensation and Nomination Committee acknowledged the achievement of all the performance conditions attached to the March 5, 2015 performance share plan, bringing the share acquisition rate to 100%. In addition to the performance conditions described below, the strict compliance with Group’s ethical principles as described in the Code of Conduct of SCOR Group was required.
The validation of performance conditions has been performed for no stock option plan in 2019 because no performance conditions have to be observed in 2019.
Compensation ratios The table hereafter shows the evolution of the compensation paid or granted to the executive corporate officer, the average compensation paid or granted on a full-time equivalent basis to the Group employees other than the executive corporate officer, the median compensation paid or granted on a full-time equivalent basis to the Group employees other than the executive corporate officer, and the performance of the Group over the past 5 years.
The compensation policy for the Group's corporate officers is adopted by the Board of Directors and is reviewed annually in light of the recommendations of the Compensation and Nominations Committee, based on a precise analysis of all of the elements that make it up.
Upon the proposal of the Compensation and Nomination Committee and within the limit of the amount agreed by the Shareholders’ Meeting, the Board of Directors’ meetings held on February 21, 2017 and October 23, 2018 set the terms and conditions of the allocation so as to encourage the attendance of the directors and to be compliant with the AFEP MEDEF corporate governance code which stipulates that directors’ compensation should include a significant variable portion.
In accordance with the law, the payment of the Chairman and Chief Executive Officer’s variable and exceptional compensation is subject to approval by an Ordinary Shareholders’ Meeting, under the conditions set out in Article L. 225-100 of the French Commercial Code.
Structure of the Chairman and Chief Executive Officer’s compensation The structure of the Chairman and Chief Executive Officer’s compensation is in line with market practice and is mainly composed of cash compensation, including a fixed part and an annual variable part, as well as variable long-term compensation and a supplementary pension scheme.
• 50% on the basis of the achievement of personal objectives (quantitative or qualitative), defined at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee.
The stock options could be exercised at the earliest four years after the grant date and would be subject to performance conditions over three calendar years, i.e. 2020, 2021 and 2022 for the plans granted in 2020.
In the event of the termination of the Chief Executive Officer’s term of office, the benefits he may be allocated would be determined according to the following situations: (i) in the event of dismissal for misconduct, non-renewal of the term of office of the Chief Executive Officer, resignation (other than for the purposes of paragraphs (ii) and (iii) below) or following a notably negative performance of the Company (non-achievement of the performance condition (C_n) as described below) no severance pay will be due; (ii) in the event of a forced departure or dismissal prior to the twelve (12) months preceding the end of his term of office as Chief Executive Officer, typically for divergent views on the Group's strategy, the Chief Executive Officer would then benefit from severance pay equal to the sum of the fixed and variable components of his gross annual compensation paid in the twenty-four (24) months preceding the date of his departure from the Group. No severance pay would be due if the performance condition (C_n) defined below is not fulfilled.
The total commitment of the Group for defined benefit pension plans in France, Germany, the United States and Switzerland for the Executive Committee members (including the Chairman and Chief Executive Officer) amounts to EUR 41 million as at December 31, 2019, i.e. 8% of the total commitment of the Group for pension plans of EUR 503 million.
François de Varenne - --40,000 02/24/20222016-2022 Long Term Incentive Plan 2019-2025 Long Term Incentive Plan - 02/20/2025--30,000
• of which number of potential new shares from outstanding warrants 0
(1) The free share allocation plans currently in force only allocate existing shares.
The awarded stock options will be exercisable provided: (1) that the conditions set out in the Plan are met and in particular that the beneficiary continuously remains an employee or a corporate officer of the SCOR Group until March 7, 2023 inclusive, except as otherwise provided by the Plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met in case of completion of a SCOR group e-learning course on CSRrelated topics and if the corresponding test has been passed.
October 25, 2019 stock option plan Pursuant to a decision taken by the Board of Directors on October 23, 2019 following a proposal from the Compensation and Nominations Committee at its October 23, 2019 meeting, in accordance with the authorization granted to it by the Combined Shareholders' Meeting of April 26, 2019, 148,140 stock options were granted on October 25, 2019 to 53 Partners (Executive Global Partners and Senior Global Partners).
Achievement of the performance conditions observed in 2019 The validation of performance conditions has been performed for no stock option plan in 2019, because no performance conditions have to be observed in 2019.
For additional information on the stock options plans currently in force within the Group see Appendix C – 5. Notes to the corporate financial statements, Section 5.3.5. – Stock options.
In any case, if the observed average ROE recorded is lower than 5%, the proportion of the shares that may be vested under this criterion will be 0%.
During 2019, the rights vested by the ten employees of the Company and of any company included in the scope of consolidation with the highest number of shares thus obtained represent 629,204 shares. Those rights relate, for non-French tax residents, to the performance share plans of September 1st, 2011, March 4, 2015 and February 23, 2016 whose transfer occurred on September 2nd, 2019, March 5, 2019 and February 24,2019, and for French tax residents to the performance plans of March 5, 2013 and February 23, 2016 whose transfer occurred on March 6, 2019 and February 24, 2019.
As at the date of the Universal Registration Document, the Company’s Board of Directors has not exercised this delegation of authority. This authorization was granted for a period of 18 months as from the date of the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2019.
As of December 31, 2019, SCOR’s shareholders are mainly institutional as they represent 85% of SCOR’s share capital. Institutional shareholders come mainly from Europe (73%), the United States (24%) and Asia (3%). The rest of the share capital is split between treasury shares (less than 1%), employees (5%), retail (2%), brokerage (2%) and others (6%).
(1) The percentage of voting rights is determined on the basis of the number of shares at year-end, excluding the Company’s own treasury shares. (2) As per Covea’s press release published on January 30, 2019, stating “Covéa reminds that it currently holds 8.17% of the share capital in SCOR”, representing 15,767,803 shares of SCOR’s capital as of December 31, 2018.
2.3.1.4. Agreement which could result in a subsequent change in control
This resolution can only be used with the 14th, 15th and 16th resolutions and is in any case capped by the 26th resolution 19th resolution (Authorization granted to the Board of Directors for the purpose of increasing the number of shares issued in accordance with the 14th, 15th and 16th resolutions in the event of over-subscription to the share capital increase, with or without cancellation of pre-emptive subscription rights)
(2) The authorization of the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2019 is limited to 3,000,000 existing shares (the remaining amount being on December 31, 2019 2,200,998 shares).
All powers would be granted to the Board of Directors, with the option to sub-delegate under the conditions provided for by law, in order to carry out all adjustments to the maximum price, including in the event of a capital increase by capitalization of reserves and the allocation of free shares, as well as in the event of a split or a reverse stock split of Company shares.
Note 14 – Provisions for employee benefits and other provisions; • Section 4.6. – Notes to the consolidated financial statements,
The related party commitments previously approved that were in force during the last financial year are described within section 2.3.3 of the reference document filed on 4 March 2019.
This procedure repeats the criteria adopted by the French National Association of Auditors (Commission Nationale des Commissaires aux Comptes) relating to ordinary transactions entered into at arm’s length conditions.
For further information on risks related to current legislation and regulations and their impact on SCOR’s operations, see Section 3.1.6.4 – Legal and regulatory risks in SCOR’s operating environment.
• Unknown acquired risks: due notably to the size and complexities of acquisitions, there may be a risk that not all financial elements (including litigation related to prior periods) have been fully and/or correctly evaluated. Unknown or unexpected financial risks could emerge, which may have significant consequences on the initially estimated impact of the relevant acquisition on the combined Group.
The specific nature of the catastrophic casualty loss events to which SCOR is exposed can vary widely, from systemic liability events caused by the negative impacts of commonly used materials on human health (with asbestos as a typical example) to massive product liability losses emanating from items produced by a single manufacturer. Casualty events can also be triggered by a single disastrous event (e.g. Deepwater Horizon oil rig explosion), or events related to cyber fraud and data theft.
Market risks can be influenced by various over-arching factors, including political, macro-economic, monetary, societal and environmental trends. Environmental trends include risks linked to sustainability, including those as a consequence of climate change, which can impact any of the market risks listed above. Specifically, climate risks correspond to the risk that the value of assets could be negatively impacted by acute physical risks, risks linked to the transition to a low carbon economy and the potential for risks to SCOR’s reputation linked to investment choices.
For further information on the sensitivity of the Group’s consolidated income and consolidated equity to currency risk, see Section 3.3.4.6 Monitoring of sensitivity to market risks.
Credit risk on future cash flows from Life reinsurance policies arises from two risk factors: • the payment of future cash flows expected under Life reinsurance contracts requires that the cedent is financially sound. Therefore, SCOR risks a reduction in the value of its portfolio of Life contracts in the event of a deterioration in the financial strength of the cedent. This may lead to the impairment of SCOR’s intangible assets, i.e. the value of business acquired (VOBA) and deferred acquisition costs (DAC); • a reduction in the value of future cash flows could arise from material unexpected lapsation of policies following a deterioration of the cedent’s credit rating or standing or an event which has a negative effect on the cedent’s reputation.
Maturity analyses of financial assets that are held for managing liquidity risk are presented within Section 4.6 – Notes to the consolidated financial statements, Note 7 – Insurance business investments.
As an international group, SCOR must comply with national and international laws, regulations and applicable accounting standards. This includes all applicable economic sanctions, programs relating to anti-corruption, anti-money laundering, in addition to anti-terrorism laws, and laws and regulations applicable to its operations. Laws and regulations applicable to some of SCOR’s operations refer inter alia to the economic trade sanctions laws and regulations administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) and to certain laws administered by the United States Department of State. They also refer to applicable economic trade sanctions laws, regulations and directives of the European Union and its member states. Other directives with which SCOR complies apply to anti-money laundering, corruption, terrorism financing and insider trading (e.g. the European Regulation of April 2014 on market abuses). Regarding anti-corruption laws and regulations, SCOR must comply with the Foreign Corrupt Practices Act (FCPA) and other laws such as the UK Bribery Act. SCOR must also comply with the provisions of Sapin II. Additionally, SCOR must comply with regulatory requirements regarding data management (both SCOR’s data and that of its clients), in particular the General Data Protection Regulation (GDPR) enacted by the European Union. Any breach to these requirements could lead to regulatory sanctions, including significant fines and expose SCOR to legal proceedings from clients, and reputational damage.
3.1.6.6. Cyber attack SCOR is exposed to cyber-attacks which can be very diverse in their sophistication and execution. The main targets are system functions, data and cash management. Immediate repercussions include: • systems could be slowed down, corrupted or stopped potentially resulting in loss of productivity, corrupted data and remediation costs; • funds could be stolen through fraudulent wire transfers; • data could be stolen, deleted or corrupted, or made public in contradiction with SCOR’s regulatory or contractual obligations.
The Group Risk Management and the P&C business unit are organized to enable them to assess and control P&C risks at each level of its business.
• In order to mitigate its property exposure, the Group retrocedes a portion of the risks it underwrites. See 3.3.3 – Retrocession and other risk mitigation techniques for further information on how these instruments are managed.
SCOR’s Life business unit is organized in order to be able to assess and control its risks at each level of its business.
• Generally, the Life reinsurance business is underwritten throughout the year and is monitored on a quarterly basis against prior year development. In addition, the business plan and regular updates are provided to the Executive Committee.
• A quarterly review of technical results is performed by region and by business area.
Note 5 82 71Goodwill arising from non-insurance activities Value of business acquired 1,471Note 6 1,302 30,283Insurance business investments 28,586Note 7 661 685Real estate investments 17,61118,843Available-for-sale financial assets 1,2451,351Investments at fair value through income 8,978Loans and receivables 9,220
9,030Disposals of other insurance business investments (5) 9,8187,435 (130) (51)(82)Acquisitions of tangible and intangible assets -- -Disposals of tangible and intangible assets
Consolidated statement of changes in shareholders’ equity CONSOLIDATED FINANCIAL STATEMENTS04 163SCOR Universal Registration Document 2019
Note•1.3 IFRS STANDARDS APPLIED FOR THE FIRST TIME AND IFRS STANDARDS PUBLISHED BUT NOT YET EFFECTIVE
The amended International Financial Reporting Standards and Interpretations as adopted by the European Union applicable for the first time for annual periods beginning January 1, 2019, did not materially impact the Financial Statements.
The following standards relevant to SCOR and expected to have a significant impact on its consolidated financial statements have been issued by the International Accounting Standards Board but are not yet effective or have not been adopted by the European Union: • On July 24, 2014, the IASB published IFRS 9 – Financial Instruments. The final version of IFRS 9 replaces the previously published versions of IFRS 9 on classification and measurement and hedge accounting. It also replaces IAS 39 – Financial Instruments: Recognition and Measurement and covers classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted. The EU endorsed IFRS 9 on November 22, 2016. However, as described below, SCOR opted for the Deferral Approach for IFRS 9 as granted by IFRS 4 and thus can defer application of the standard until January 1, 2022 if such effective date will be confirmed by the IASB and endorsed by the EU.
SCOR benefited in 2019 of an additional recovery of USD 13 million (EUR 12 million) with regards to Atlas IX 2015-1, following the exceptional series of large natural catastrophes that occurred during the second half of 2017. In 2018, the recovery related to Atlas IX 2015-1 amounted to USD 26 million
The company was initially created in 2011 by SCOR and MAF and started its insurance operations in December 2012. The Group held 49% of the company since 2011. Until December 31, 2017 M&S Brazil was accounted for as an equity method investee. It has been fully consolidated in the SCOR Group financial statements since
SCOR Global Investments is the asset management business unit of the Group. Its role is complementary to the two reportable operating segments as it manages SCOR Global P&C’s and SCOR Global Life’s investment assets associated with their contract liabilities. SCOR Global Investments also manages thirdparty assets, however this activity is currently considered not material. Therefore, SCOR Global Investments is not considered a separate reportable operating segment for the purposes of IFRS 8 – Operating segments.
The distribution of gross written premiums by geographic region for SCOR Global P&C, based on the country in which the ceding company operates for treaty business and location of the insured for facultative business, is as follows: 2018In EUR millions 2019 2017
Cumulative impairment at December 31, 2018 (181) Foreign exchange rate movements -Impairment for the period -- -Shadow accounting - -Cumulative impairment at December 31, 2019 (181) 71CARRYING VALUE AS AT DECEMBER 31, 2017 788
The IFRS 4 liability adequacy testing, which includes VOBA recoverability, showed no indicators of impairment for the financial years ended
Level 1 Cost or amortized costLevel 3In EUR millions Total Level 2 - 685Real estate investments - -685 -355 7186Equity securities 512 711,761 -17,611Available-for-sale financial assets 15,779 --Debt securities --9791, 245Investments at fair value through income - -266 - 8,93840Loans and receivables -8,978 -48 1967 -Derivative instruments 2,788TOTAL INSURANCE BUSINESS INVESTMENTS 1928,586 16,085 9,694
Note•7.3 MOVEMENTS IN FINANCIAL INSTRUMENTS CATEGORIZED WITHIN LEVEL 3 OF THE FAIR VALUE HIERARCHY
As at December 31, 2019, the increase in loans and receivables of EUR 242 million compared to year-end 2018 is mainly due to the increase of funds held by ceding companies (mostly linked to Life business), partially offset by the decrease of short-term investments.
Accounts receivable from and payable to cedents and retrocessionaires are mostly due in less than one year. A complete aging of financial assets is included in the Universal Registration Document in Section 3.3.5 – Management of credit risks.
Notes to the consolidated financial statements CONSOLIDATED FINANCIAL STATEMENTS04 198 SCOR Universal Registration Document 2019
The shares issued in 2019, 2018 and 2017 were issued at a par value of EUR 7.8769723 per share.
Note•12.3 REGULATORY FRAMEWORK One objective of insurance and reinsurance regulators is protecting the interests of policyholders. They ensure that the Group maintains an adequate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.
Notes to the consolidated financial statements CONSOLIDATED FINANCIAL STATEMENTS04 209SCOR Universal Registration Document 2019
The amounts presented in other financial liabilities include certain letters of credit charges, custodian and overdraft fees, amortization of issuance fees and other bank charges (commissions, etc.).
Interest income on plan assets (1) (1)(5) (2)(2) (1) (2)(1) (4)(2) (1)
UNEARNED PREMIUM RESERVE (UPR) 1,9381,663Gross UPR – end of year 2,2612,2391,384 2,4961,135 2,2701,6831,516 2,980 51 20840 1609384 275142101Ceded UPR – end of year 167187 1,7961,562Net UPR – end of year 2,0942,0521,333 2,2881,095 2,1101,5901,432 2,705
Note•15.2 SCOR GLOBAL LIFE The change in SCOR Global Life mathematical reserves for the years ended December 31, 2019 and 2018 is as follows: 2019 2018In EUR millions 8,550Gross mathematical reserves as at January 1 8,095 Change in scope of consolidation 106-
(301)Change in reserves from portfolio movements and actuarial calculation (674) Impact of foreign exchange movements 11390 7,884 8,095Gross mathematical reserves as at December 31 - -Reinsurance Recoverable
(95) (240)Ceded mathematical reserves as at January 1 --Change in scope of consolidation
Share of retrocessionaires contract liabilities 2,14140 56445- 362134Deposits received -23 -56 3Letters of credit - 15798-
The total expense for 2019 relating to share-based payments is EUR 32 million (2018: EUR 43 million), with EUR 1 million (2018: EUR 1 million) relating to stock options granted under the 2015 to 2019 plans (2018: 2014 to 2018) and EUR 31 million (2018: EUR 42 million) relating to free shares allocated under the 2013 to
Notes to the consolidated financial statements CONSOLIDATED FINANCIAL STATEMENTS04 226 SCOR Universal Registration Document 2019
(14)(4)Current tax – prior years 35 Deferred taxes due to temporary differences (53)(60) 17 74Deferred taxes from tax losses carried-forward 1529 -Changes in deferred taxes due to changes in tax rates or tax law (57)(5)
Pledged assets granted and received SCOR has pledged financial assets to ceding companies, regulators, financial institutions and pension plans for a total amount of EUR 4,847 million (2018: EUR 4,313 million).
Note•24.2 MARKET RISKS Please see Section 3.1.3 – Market risks and Section 3.3.4 – Management of market risks.
Subsequent events relate to relevant and material events that occur between the reporting date and the date when the financial statements are approved for issue by the Board of Directors. Such events lead to: • an adjustment of the consolidated financial statements if they provide evidence of conditions that existed at the reporting date, and if relevant and material; • additional disclosure if they relate to conditions which did not exist at the reporting date, and if relevant and material.
The report of the Statutory Auditors on the consolidated financial statements for the financial year ended December 31, 2019 is reproduced below.
Valuation of Goodwill and Value of business acquired (VoBA) on Life reinsurance portfolios (Please refer to Notes 5 and 6 of the notes to the consolidated financial statements)
• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the consolidated financial statements.
• Collects information related to persons and entities included in the scope of consolidation that it deems sufficient and appropriate to express an opinion on the consolidated financial statements. The auditor is responsible for the management, supervision and execution of the audit of the consolidated financial statements as well as the opinion expressed on these accounts.
The Board of Directors can also decide to allow the shareholders to participate in and vote at any Shareholders’ Meeting by videoconference or by any means of telecommunication that allows them to be identified and in compliance with the conditions set by applicable regulations.
5.3.2. INFORMATION FROM THIRD PARTIES The Company certifies that the following information in this Universal Registration Document and received from third parties has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by said third party, no facts have been omitted, which would render the reproduced information inaccurate or misleading: • data issued from the AM Best Special Report Reinsurance (2019 Edition) and relating to the ranking on reinsurance market participants quoted in Section 1.1.1 – Group key figures and Section 1.3.4 – Information on SCOR‘s competitive position; • ratings issued by the Standard & Poor’s, Fitch Ratings, AM Best and Moody’s rating agencies quoted in Section 1.2.4 – Ratings information and Appendix A – Internal control and risk management procedures; • 2018 Society of Actuaries (SOA) and Munich Re Life survey of U.S. life reinsurance, published in 2019, quoted in Section 1.3.5.3 – SCOR Global Life.
The principles contained in these initiatives are translated into standards and norms in the Group’s main reference texts, including: (i) its Code of Conduct, a complete section of which is dedicated to the Group’s mission, the United Nations Global Compact and the Principles for Sustainable Insurance, (ii) its climate policy, which sets out the three main orientations pursued by the Group in this area, and (iii) its sustainable investment policy.
In accordance with the requirements of the French non-financial reporting directive and its most recent non-binding guidelines, SCOR has conducted an internal assessment of the main nonfinancial issues and risks relating to its business activities.
SCOR’s Human Resources strategy is based on unifying values that reflect its commitment to its clients, to the employees themselves and to the shareholders. Alongside financial capital, human capital is an essential resource for the Group. Financial capital ensures solvency, while human capital ensures profitability. In this sense, one of SCOR’s strategic objective resides in its ability to attract, mobilize, optimize and retain talented people to achieve excellence in terms of expertise. Inadequate remuneration policy, lack of initiatives to develop employees’ skills, or insufficient consideration for diversity may contribute to an operational risk of lack of key people attraction and retention (see Section Risk factors – operational risks). In this respect, the human capital management, steered by the Group Chief Operating Officer, member of the Executive Committee, strives to retain women and men working in the Group, particularly through its compensation policy, and through structuring actions designed to develop employees skills (SCOR University) and promote diversity, well-being in the workplace and community engagement (#WorkingWellTogether).
Following decisions from the General Assembly of Shareholders and from the Board of SCOR SE, the vesting of these share-based compensation plans is now subject to the satisfactory completion of training linked to Corporate Social Responsibility (CSR). Adding this requirement is in line with the extension of the commitments made by the Group in the area of CSR, and the dialogue with the shareholders that the Group is actively pursuing. In 2019, the CSR training requirement consisted of Anti-Harassment and AntiDiscrimination digital modules, helping SCOR employees to recognize situations that may involve harassment or discrimination and identify what to do when they experience or witness these situations in the workplace.
Ensuring employment and integration of employees with disabilities SCOR intends to enhance its support to disabled-people’s employment. To do so, SCOR focuses on an internal and proactive communication on the notion of disability, in order to change negative and subconscious attitudes, to inform disabled employees about their rights and to offer them tools and solutions to ensure their full integration.
• The “Future@SCOR” program in Asia was continued. It is anchored around three objectives: enhanced employee benefits, scheme to help employee wellbeing in the workplace, and flexible work arrangements.
6.2.2.1. Social indicators The social indicators published below include SCOR Channel for 2019, unlike for the previous years.
(1) All trainees paid under a tripartite relationship between the company, the school and the student. SCOR had 164 trainees as at December 31, 2019 (57 in France, 8 in Switzerland, 27 in Germany, 6 in the US, 16 in the United Kingdom, 5 in Russia, 6 in Spain, 1 in Australia, 1 in Hong Kong, 9 in China, 2 in Singapore, 25 in Ireland and 1 in Colombia). The trainees’ employment contracts differ depending on the country and training objectives. All trainee programs aim to introduce the students to the work environment, whether through work-study programs or vocational training courses for specific professions.
6.2.2.2. Methodological note The report covers the 12-month period from January 1, to December 31, of the year under review.
More detailed information on investment policy governance in general, and the Group's sustainable investment policy in particular, can be found in the ESG Investment Report mentioned above.
Positive screening: best-in-class approach Given its strong concerns about environmental factors, SCOR also encourages its investment managers to overweight issuers with good ESG ratings and decisive strategies, in order to align with the Paris Agreement. SCOR closely monitors the implementation of all its preferences and regularly reviews its positions.
The focus is placed on greenhouse gas emissions, for which the indicative reduction target in terms of intensity has been raised to 30% (1) by the end of the “Quantum Leap” strategic plan. After expanding it in 2018 compared to 2017, the Group has decided to extend its CO2 offsetting program to all the residual emissions measured in this section.
The monitoring of cyber risks is integrated into a dashboard that compares the level of identified threats, the level of protection of the systems concerned, and the resulting residual risk. This dashboard is shared with the Group's Chief Risk Officer, the Risk Committee of the Executive Committee and the Risk Committee of the Board of Directors, as well as with the Boards of Directors of several local entities.
Independence and quality control Our independence is defined by the requirements of article L. 822-11-3 of the French Commercial Code and the Code of ethics of the profession. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements of the professional doctrine and of the applicable legal and regulatory texts.
We lead works enabling us to appreciate the compliance of the Declaration with the legal provisions and regulations and the accuracy of the Information: • we took note of activity of all of the companies included in the scope of consolidation, of the presentation of the main social and environmental risks associated with this activity, and its impacts regarding respect of human rights, the fight against corruption and tax evasion with the policies related from them; • we assessed suitability of the Guidelines in terms of relevance, completeness, reliability, neutrality and understandability, taking into account industry best practices where appropriate; • we verified that the Declaration covers each category of information provided for in the III of Article L. °225-102-1 relating to social and environmental information, including the respect of the human rights and the fight against corruption and tax evasion; • we verified that the Declaration includes an explanation of the reasons justifying the absence of the required information by the sentence 2 of the III of article L. 225-102-1; • we verified that the Declaration presents the business model and the main risks associated to the activity of all entities included in the consolidation scope, including, when relevant and proportionate, the risks created by its business relations, its products and services, with related policies, actions and results, including key performance indicators; • we verified that, when they are relevant regarding the main risks and policies presented, that the Declaration presents the information required at the II of article R. 225-105; Report by the independent third party, on the extra-financial performance declaration included in the management report NON-FINANCIAL PERFORMANCE DECLARATION
Additional information provided in the management report of the Company and the Group – correspondence table 3486.
Group business standards and practices are governed by Group policies and underlying guidelines established in a common format, by the three business units (SCOR Global P&C, SCOR Global Life, SCOR Global Investments) and the central functions such as Group Internal Audit and the functions managed by the Group Chief Financial Officer, the Group Chief Operating Officer and the Group Chief Risk Officer respectively. Group policies are approved by the Group Executive Committee and for certain topics are submitted regularly to the relevant committees of the Board and, ultimately, to the Board of Directors of the Company. These Group policies are not intended to enumerate all the rules governing SCOR’s activities in the different countries in which the Group operates, but rather to establish certain principles intended to ensure that
Middle office department of SCOR Investment Partners has been reinternalized in the management company during the course of 2019.
SCOR Global Investments Monitoring of financial assets and cash flows is provided through various operating methods. The information systems used provide an audit trail of the transactions carried out. In certain entities, accounting activities are delegated to external service providers; controls implemented by these entities make it possible to verify the proper recording of accounting data and consistency of the figures. “Cash” reconciliations are made on a daily basis, for the most part, and security transactions are reconciled the following day) with reports from the various custodians. Portfolios managed directly are monitored in real time.
Accounting and consolidation process Regarding the processes of preparation of consolidation packages and consolidation of accounting data by the Group Consolidation Department, internal control is ensured by: • the definition of a closing process, clear responsibilities and a detailed financial statement closing schedule, which is monitored, in the closing period, on a daily basis; • use of a market recognized consolidation software package ("SAP BFC”) common to all Group entities, which ensures the whole consolidation process through automated and formalized controls; • the use of a general accounting software tool shared by all Group entities; • the centralized management of charts of accounts and the use of a single chart of accounts (with minimum local specificities, aligned with existing Group systems); • a definition of responsibilities for controlling the integration of auxiliary accounting systems; • the formalization of the reconciliations between auxiliary, general and consolidation accounting systems; • at least three levels of control of the consistency and completeness of the consolidation packages, one by the entity concerned, another by the finance departments of SCOR Global P&C and SCOR Global Life relative to technical accounting and the third by the Group Finance Department; • systematic analyses of results, shareholders’ equity, taxation and cash flow; • internal monitoring of changes in legislation and accounting standards, together with the Group’s external consultants and auditors; • the work of the IFRS Center of Excellence, whose objectives are to (1) communicate developments in accounting standards to all contributors, (2) determine IFRS accounting policies and (3) coordinate justification and documentation of accounting treatment for complex operations; • an audit performed by external auditors as at December 31, and a review as at June 30.
Capital injections in SCOR Europe SE SCOR SE carried out two capital injections in SCOR Europe SE: a first one for EUR 2.7 million in November 2019 and a second one in December 2019 for EUR 7 million.
This new obligation was recorded as a derivative asset in “Other receivables”; capital and interests are recorded in “Other liabilities” and the change in fair value is recorded in "Other expenses/other operating income ".
Assumed reinsurance transactions Assumed reinsurance is recorded upon receipt of accounts transmitted by ceding companies.
As a result: • the deposit portion of the treaty as well as receivables and liabilities with the ceding company are the only balances recognized on the balance sheet; • treaty income is fully recognized in financial income.
Risk transfer testing is applied to every newly underwritten treaty as well as during an annual review of contractual conditions, which determines whether a treaty is to be accounted for as a finite reinsurance or standard reinsurance contract transferring significant insurance risk.
Balance sheet positions in foreign currencies At each reporting date, items in foreign currencies are converted into euros by allocating the underlying transactions as follows: • transactions relating to assets and liabilities generating a “structural” foreign currency position, primarily investments in subsidiaries and related impairments; • other transactions generating an “operational” foreign currency position.
Cat bonds amortization stands at USD 45 million (EUR 38 million) in 2019 compared to USD 30 million (EUR 24 million) in 2018.
SCOR benefited in 2019 of an additional recovery of USD 13 million (EUR 12 million) with regards to Atlas IX 2015-1, following the exceptional series of large natural catastrophes that occurred during the second half of 2017. As a reminder, the recovery in 2018 related to Atlas IX 2015-1 amounted to USD 26 million (EUR 23 million).
Loans • The USD 425 million (EUR 371 million) of cash advance to SCOR
Sub-total 26,13822,228 5,35320,785 - - -• Investment or divestment strategy - - -• Anticipation of investment - -
• SCOR CAPITAL PARTNERS SAS 5 avenue Kléber, 75116 Paris, France
• On December 7, 2015, SCOR issued EUR 600 million in dated subordinated notes, redeemable at interest payment dates from June 8, 2026. The coupon has been set at 3.00% until June 8, 2026 and will be reset every 10 years at the prevailing 10-year EUR mid-swap rate +3.25%.
2017In EUR millions 2019 of which mergers contributions* 2018 253Loss reserves (Life) 876 2,229 Unearned premiums reserves (Non-Life) 7841,552 639 593 2,4346,266Loss reserves (Non-Life) 9,932 2,361 Other underwriting reserves (Non-Life) 1,951 6 7261,761 39 28Equalization reserves (Non-Life) 22 5
Total Related companies Other affiliates Other TotalIn EUR millions Related companies Other affiliates Other 85 - - -Accounts receivable for Atlas Cat bonds -- - 85
Personal training account As of January 1, 2015, the personal training account (Compte Personnel de Formation – CPF) replaces the individual training entitlement (Droit Individuel à la Formation – DIF), in accordance with Law No. 2014-288 of March 5, 2014 relating to professional training, employment and social democracy. It should be noted that the CPF is managed externally by the Caisse des dépôts et consignations.
In March 2016, the CNMC (Comisión Nacional de los Mercados y la Competencia, former CNC) has commenced the reevaluation procedure of SCOR’s fine imposed in 2009.
On March 9, 2017, the CNMC issued a resolution in which it confirmed SCOR’s fine at the amount of EUR 18.6 million. SCOR has appealed the CNMC’s resolution in front of the AN, and on April 25, 2019, the AN has rejected SCOR’s appeal. Subsequently, on June 5, 2019, SCOR has appealed this decision in front of the Spanish Supreme Court. On January 30, 2020 SCOR was notified that the Spanish Supreme Court has not accepted SCOR’s appeal, thereby triggering the requirement to pay the EUR 18.6 million fine. SCOR is currently reviewing its legal position and potential next steps.
Information given in the Management Report and of the Other Documents Provided to Shareholders with respect to the financial position and the financial statements We have no matters to report as to the fair presentation and the consistency with the financial statements of the information given in the management report of the Board of Directors and in the other documents provided to shareholders with respect to the financial position and the financial statements, except for the below mentioned observation reminded that it is not our responsibility to conclude on the fair presentation and consistency with the financial statements of the solvency related information required by article L. 355-5 of the French Insurance code (Code des assurances).
RISK APPETITE Defines the target risk profile (assets and liabilities combined) that SCOR actively seeks in order to achieve its expected return.
APPENDIX E ADDITIONAL INFORMATION RELATING TO THE MANAGEMENT REPORT OF THE COMPANY AND THE GROUP – CORRESPONDENCE TABLE
Important events occurred since the closing of the last financial year Sections 1.3.10
Expert 5.3.1 Expert’s Report 2551.3 2551.4 Third party information 5.3.2 Information from third parties 2 STATUTORY AUDITORS
1.2.1 Introduction 11 to 134.1. Legal and commercial name of the issuer 1.2.1 Introduction4.2.
(a) Most significant trends in production, sales, inventory, costs, and selling prices since the end of the last financial year (b) any significative change in the financial performance of the group since the end of the last financial year
Appendix C – 6 334 to 337Statutory Auditors’ report on the financial statements 157 to 2454Consolidated financial statements 4.9Statutory Auditors’ report on the consolidated financial statements 240 to 245 356 SCOR Universal Registration Document 2019