Total insurance business investments and cash and cash equivalents include mutual funds that the Group manages and controls and which are also open to external investors. At December 31, 2016, the carrying amount of assets under management eliminated in “Other liabilities” for consolidation purposes was EUR 1,742 million (December 31, 2015: EUR 1,189 million). The amount of cash held on behalf of third parties as part of SCOR’s asset management activity was EUR 177 million as at December 31, 2016 (December 31, 2015: EUR 81 million).
Available-for-sale investments include EUR 56 million of investments which are measured at cost (December 31, 2015: EUR 65 million). These investments primarily include equity securities and funds which are not listed.
Total impairment losses recognized in 2016 amounted to EUR 10 million (2015: EUR 21 million) of which EUR 8 million on the equity portfolio (2015: EUR 8 million) and EUR 2 million on the debt securities portfolio (2015: EUR 13 million).
The fair value of floating-rate and overnight deposits with credit institutions is their carrying amount.
The Group has certain investments which are valued based on models prepared by internal and external experts using observable market inputs. These primarily comprise structured products, other than securities issued by government agencies for which the market is considered active, hybrid tier 1 and tier 2 corporate debt, private placements, inflation-linked government assimilated bonds, specific alternative investments and derivative instruments. For further details on the valuation of derivative instruments please see Note 7 – Insurance business investments (Derivative instruments).
The value of these instruments is neither supported by prices observable on current market transactions in the same instrument nor is it based on available market data. If a fair value measurement uses inputs based significantly on unobservable inputs it is classified within level 3 of the fair value hierarchy. Level 3 instruments consist mainly of derivative instruments primarily relating to the Atlas catastrophe and mortality bonds. Further detail on the valuation of these derivative instruments is included below within the paragraphs on derivative instruments.
For certain investments, in addition to the above impairment guidelines, SCOR takes into consideration other important factors such as: ●● the fact that the asset is specifically excluded from any actively traded portfolio; ●● its ability and intent to continue to hold the investment for a significantly longer period than a normal investment; ●● its business relationship with the investee; and
A subsequent increase in value of an impaired available-for-sale equity instrument is not recognized in the statement of income. A subsequent increase in value of an impaired available-forsale debt security is recorded through income as a reversal of impairment if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment losses were recognized.
Net book value at January 1, 2016 - - - 40 40
Change in fair value through OCI - - - - -
(2) Additions to derivatives include the acquisition of Atlas IX Series 2016-1 for EUR 83 million.
In EUR million Equity securities Debt securities Loans and receivables Derivative instruments Total
Net book value at January 1, 2015 - - - 19 19
Income and expense recognized in statement of income - - - (15) (1) (15)
NET BOOK VALUE AT DECEMBER 31, 2015 - - - 40 40
One such indicator is that the building’s market-value is below its carrying amount. If any such indicators is found, the Group assesses the recoverable amount of the building in question. The recoverable amount is the higher of the property’s fair value less cost to sell and its value in use. The value in use is assessed using an internal discounted cash flow model based on current market assumptions and considers rental situation, completeness of construction and renovation work, as well as recent developments within the local real estate market. If the recoverable amount is greater than 20% below the carrying amount, the resulting impairment loss is recognized in the statement of income.
Cumulative depreciation and impairment at December 31, 2014 (115) - (115)
Cumulative depreciation and impairment at December 31, 2015 (137) - (137)
Cumulative depreciation and impairment at December 31, 2016 (144) - (144)
In 2015, increases in real estate investments related to renovation work on existing buildings for EUR 29 million. SCOR sold one building, resulting in a gain on sale of EUR 2.4 million.
In 2016, increases in real estate investments related to the acquisition of a new building, currently under construction, and renovation work on existing buildings for a total of EUR 85 million. SCOR sold four buildings, resulting in a gain on sale of EUR 69 million.
Real estate financing is presented in Note 13 – Financial liabilities.
The fair value of real estate investments is categorized within level 3. The valuation techniques and unobservable inputs were as follows as at December 31, 2016 and 2015: Real estate
The rental income related to investment property was EUR 43 million in 2016 (2015: EUR 45 million) and the related direct operating expenses amounted to EUR 12 million (2015: EUR 11 million).
As part of its real estate investment activities the Group committed to purchasing several properties through contracts of sale before completion. As at December 31, 2016, SCOR has an off-balance sheet commitment of EUR 157 million.
(1) During 2016 and 2015, SCOR had no exposure to the sovereign debt of Portugal, Ireland, Italy, Greece or Spain.
The net unrealized gain (loss) on equity securities as at December 31, 2016 comprised EUR 174 million in unrealized gains and EUR 28 million in unrealized losses (as at December 31, 2015: EUR 116 million in unrealized gains and EUR 26 million in unrealized losses).
As at December 2016, revaluation reserves of EUR 134 million (as at December 2015: EUR 112 million) also include: ●● tax effects on available for sale securities net unrealized gains and losses of EUR (32) million (2015: EUR (44) million) ; ●● net of tax foreign exchange gains and losses of EUR 7 million (2015: EUR 7 million) ; ●● net of tax shadow accounting impacts of EUR 32 million (2015: EUR (2) million) ; ●● elimination of assets under management for external clients net unrealized gains and losses in other liabilities of EUR 1 million (2015: 13 EUR million) ; ●● investments in associates net unrealized gains and losses of EUR 1 million (2015: EUR 2 million) ; ●● net of tax unrealized gains and losses relating to funds withheld of EUR (7) million (2015: EUR (10) million).
The table below presents the estimated maturity profiles of financial assets, for which the Group is expected to generate cash inflows to meet cash outflows on financial and reinsurance contract liabilities: In EUR million As at 12/31/2016 As at 12/31/2015 in 2016 n●13% Less than one year 2,135 13% 1,936 13%
Loans and receivables primarily include cash deposits made at the request of ceding companies as collateral for commitments (insurance contract liabilities), short-term investments and related accrued interest. Short-term investments include government bonds, certificates of deposit (CDs) and treasury bills (T-bills) maturing between three and 12 months from the date of purchase. CDs and T-bills maturing in more than 12 months from the date of purchase are included in “Other loans maturing in more than one year”. A portion of the assets presented within loans and receivables is managed by SCOR Investment Partners (short-term government bonds, infrastructure and real estate loans, and the majority of loans secured against collateral).
Short-term investments include EUR 593 million that are carried at fair value at December 31, 2016 (EUR 408 million at December 31, and 2015). Other loans and receivables are carried at cost, which approximates their fair value at December 31, 2016 and 2015.
When the Group has not designated the derivative as a hedging instrument, gains and losses resulting from changes in the fair value of the instrument are recorded in the statement of income in the period in which they occur. The Group uses the following derivative instruments to reduce its exposure to various risks: interest rate swaps, foreign currency forward purchase and sale contracts, caps and floors, puts and calls and insurance-linked securities (ILS).
An embedded derivative is a component of a hybrid instrument which includes a non-derivative host contract, which causes part of the hybrid instrument’s cash flow to vary in the same way as that of a freestanding derivative. The host contract can be a financial instrument or an insurance contract.
A material embedded derivative is separated from the host contract and is recognized as a derivative when: ●● its economic features and risks are not closely linked to the economic features of the host contract; ●● the embedded instrument has the same conditions as a separate derivative instrument; and
Atlas IX – extreme mortality risk transfer contract 8 13 - - (5) (4) - -
Atlas IX 2015 and 2016 catastrophe bond transactions (see Note 2 – Scope of consolidation, Information related to non-consolidated special purpose vehicles) are recorded as derivative assets recognized at fair value through income and as other liabilities representing the value of interest payments. Atlas IX catastrophe bonds are valued using an expected cumulative loss model that is based on a combination of market inputs, to the extent that trades in these instruments are active, and catastrophe modeling tools developed by third-party companies (AIR/RMS). These assets are disclosed as level 3 investments within insurance business investments (see Note 7.1 above).
Expected loss US Named Storm based on AIR model 4.45% 5.10%
The Atlas IX mortality risk transfer contract transaction (see Note 2 – Scope of consolidation, Information related to non-consolidated special purpose vehicles) is recorded as a derivative asset recognized at fair value through income and a payable for the value of interest payments. SCOR values the derivative asset using a model that is based on indicative secondary market interest rate, considering both the probability of trigger and alternative investment opportunities to the extent that trades in these instruments are active.
The average indicative secondary market interest rate is calculated based on third-party sources, which provide regular overviews of the current indicative secondary market. The average indicative secondary market interest rate used as at December 31, 2016 was 2.41% (December 31, 2015: 2.66%).
Extreme mortality events in the US (such as pandemics, natural catastrophes and terrorist attacks) covered by the Atlas extreme mortality bond and occurring during the coverage period of this bond, would increase the fair value of the derivative instrument.
SCOR has entered into interest rates swaps to cover its exposure to financial liabilities with variable interest rates relating to real estate investments. The fair value of these swaps is obtained from the banking counterparty and is based on market inputs. As part of the usual analysis of accounts processes these third-party valuations are checked for reasonableness against internal models. The total notional amount relating to these swaps is EUR 266 million as at December 31, 2016 (December 31, 2015: EUR 320 million). Net interest paid under these swaps amounted to EUR 15 million in 2016 (2015: EUR 9 million).
In order to hedge the foreign exchange risk associated with certain debts issued in CHF (CHF 650 million issued in 2011, CHF 315 million issued in 2012, CHF 250 million issued in 2013, see Note 13 – Financial debt), SCOR entered into cross-currency swaps which exchange the principals and the coupons on the notes into EUR, and mature on August 2, 2016, June 8, 2018 and November 30, 2018 respectively.
Cash-flow hedge accounting is applied. The fair value of the swaps is obtained from the banking counterparty using market inputs. As part of the usual analysis of accounts processes these thirdparty valuations are checked for reasonableness against internal models. The total related notional amount is CHF 565 million as at December 31, 2016 (December 31, 2015: CHF 1,215 million). The fair value of the swaps is EUR 61 million as at December 31, 2016 (EUR 157 million as at December 31, 2015). No inefficiency was identified on these swaps during 2016.
At December 31, 2016 and 2015, one forward contract is designated as a hedge of a net investment (see Note 12 – Information on share capital, capital management, regulatory framework and consolidated reserves).
See Note 12 – Information on share capital, capital management, regulatory framework and shareholders’ equity, for the details on the issuance of warrants to UBS in the context of the contingent capital facility program.
NOTE 8. ACCOuNTS RECEIVABLE FROM AND pAYABLE ON ASSuMED AND CEDED INSuRANCE AND REINSuRANCE TRANSACTIONS
Gross receivables from ceding companies 359 455 814 293 (1) 387 680
Estimated premiums receivable from cedents, net of commission 2,956 2,414 5,370 2,323 (1) 2,310 4,633
Accounts receivable from ceded reinsurance transactions 44 59 103 15 60 75
Amounts payable on assumed insurance and reinsurance transactions (533) (259) (792) (302) (182) (484)
Liabilities for cash deposits from retrocessionaires (370) (334) (704) (360) (331) (691)
(1) In 2016, Management revised the allocation of unassigned cash receipts for settlements not yet recorded. The amounts previously reported for 2015 were gross receivables from ceding companies of EUR 1 million and estimated premiums receivable from cedents, net of commission of EUR 2,615 million.
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 Section 3.5.2 – Counterparty default risks.
The useful lives of intangible assets are either finite or indefinite.
Gross value at December 31, 2015 276 Foreign exchange rate movements (6)
Gross value at December 31, 2016 301 Cumulative amortization and impairment at December 31, 2014 (118) Foreign exchange rate movements (5)
Cumulative amortization and impairment at December 31, 2016 (126) CARRYING VALUE AS AT DECEMBER 31, 2014 142 CARRYING VALUE AS AT DECEMBER 31, 2015 162 CARRYING VALUE AS AT DECEMBER 31, 2016 175
The other intangible assets include all the intangible assets except goodwill and VOBA.
Other intangible assets with finite useful lives at December 31, 2016 amounted EUR 152 million, compared with EUR 137 million at December 31, 2015.
Other intangible assets also include indefinite useful life intangible assets associated with Lloyd’s syndicate participations acquired through the Converium business combination. The Lloyd’s intangible assets of EUR 9 million as at December 31, 2016 (compared to EUR 11 million as at December 31, 2015 – due to the weakening of the British pound) are deemed to have an indefinite useful life due to the ability to realize cash for these contractual rights through the Lloyd’s auction process. Other intangible assets with an indefinite useful life amounted to EUR 14 million as at December 31, 2016 compared with EUR 14 million as at December 31, 2015.
Intangible assets with an indefinite useful life are tested for impairment at least annually. The prices of the Lloyd’s syndicate participations from the Lloyd’s auction process are key inputs in the impairment tests conducted, which demonstrated that there are no indicators of impairment.
Tangible assets as at December 31, 2016 amounted to EUR 621 million compared to EUR 593 million as at December 31, 2015 and primarily relate to operating property, office furniture and equipment, and building fixtures and fittings.
Payments for operating leases relate primarily to rental payments for offices and business premises of the Group. They include extension options as well as restrictions regarding subleases. In the period under review, lease payments of EUR 25 million (2015: EUR 24 million; 2014: EUR 21 million) were recognized as an expense, net of sublease payments of EUR 1 million (2014: EUR 3 million; 2013: EUR 2 million). The main lease contracts are for the US and Zurich offices. The minimum payments are as follows: In EUR million
Minimum payments in 2016 n●11% Less than one year 24 23 n●45% From one to five years 98 97 n●44% More than five years 94 34
In October 2013, SCOR entered into an agreement to acquire two floors in a building still under construction in Singapore and has since purchased eight additional units located on two floors. The total estimated acquisition price, including fees, is SGD 87 million as at December 31, 2016 (SGD 86 million as at December 31, 2015). As at December 31, 2016, SGD 78 million (EUR 54 million) were recognized in the balance sheet (SGD 45 million (EUR 31 million) as at December 31, 2015). As at
SCOR purchased in November 2016 a contract of sale before completion to acquire a building in front of the Paris head office for a total cost of EUR 28 million. The total cost of the land and the finished portion of the building (EUR 26 million, including acquisition costs) have been recognized in the balance sheet as at December 31, 2016. The building delivery is planned for 2017.
Changes in foreign exchange rates 9 (16) (7) 39 35 74 24 26 50
The following table reconciles consolidated net income to net cash flows provided by/(used in) operations as presented in the statement of cash flows: In EUR million 2016 2015 2014
Change in fair value of financial instruments recognized at fair value through income 118 (97) 33
Dividend and interest cash receipts relating to investments held during the year were EUR 24 million (2015: EUR 20 million and 2014: EUR 14 million) and EUR 494 million (2015: EUR 495 million and 2014: EUR 360 million).
Tax cash outflows during the year was EUR 127 million (2015: outflow of EUR 190 million and 2014: outflow of EUR 275 million). 2014 outflows included exceptional tax payments of EUR 144 million resulting mainly from an expected one-time payment in respect of the Generali U.S. acquisition.
The caption “Share-based payments” is used to offset the cost of services received in exchange for the granting of shares or stock options to Group employees. As the instruments granted are subordinated to the fulfillment of a vesting period by the employee, the increase in equity is firstly recognized at the grant date in the line “Share-based payments”. Once the shares are fully vested, they are recognized as ordinary shares under “Share capital” and “Additional paid-in capital”.
In 2014, the movements were due to the following operations: ●● the Board of Directors’ meeting held on March 4, 2014 decided to reduce the Group’s share capital by cancellation of 777,454 treasury shares for EUR 13 million (EUR 6 million in share capital and EUR 7 million in additional paid-in capital); ●● the issuance of new shares relates to the exercise of stock options for EUR 12 million (EUR 6 million in share capital and EUR 6 million in additional paid-in capital). This resulted in the creation of 711,022 new shares throughout the year.
In 2015, the movements were due to the following operations: ●● the Board of Directors’ meeting held on April 30, 2015 decided to reduce the Group’s share capital by cancellation of 1,260,227 treasury shares for EUR 24 million (EUR 10 million in share capital and EUR 14 million in additional paid-in capital); ●● the issuance of new shares relates to the exercise of stock options for EUR 21 million (EUR 10 million in share capital and EUR 11 million in additional paid-in capital). This resulted in the creation of 1,221,843 new shares throughout the year.
The shares issued in 2016, 2015 and 2014 were issued at a par value of EUR 7.8769723 per share.
The number of shares held as treasury shares by the Group and or its subsidiaries at December 31, 2016 amounted to 7,203,282 shares compared to 6,661,000 shares at the end of 2015. These treasury shares are not entitled to dividends.
SCOR’s Ordinary and Extraordinary Shareholders’ Meeting of April 30, 2015 resolved to distribute, for the 2014 financial year, a dividend of one euro and forty cents (EUR 1.40) per share, being an aggregate amount of dividend paid of EUR 260 million, calculated on the basis of the number of shares eligible for dividend as at the payment date. The ex-dividend date was May 5, 2015 and the dividend was paid on May 7, 2015.
The resolution to be presented to the Annual Shareholders’ Meeting called to approve, during the first half of 2017, the financial statements for the financial year 2016, sets out the distribution of a dividend of EUR 1.65 per share for the financial year 2016.
Subordinated debts 2,256 2,613 n●24,4% Accrued interest on subordinated debts (39) (39)
The Groups’ capital management objectives are to: ●● match the profile of its assets and liabilities, taking into account the risks inherent to the business;
In this regard, and in line with its Group’s strategic plan “Vision in Action” for the period from mid-2016 to mid-2019, the Group aims to achieve the following two specific targets: ●● a ROE ≥ 800 basis points above the five-year risk-free rate over the cycle (1); ●● a solvency ratio (2) in the optimal 185% and 220% range.
Tranches not triggered would have no impact on the dilutive earning per share, as related increase in capital did not take place.
Following previous arrangements, BNP Paribas is committed to subscribing to the new shares but does not intend to become a long-term shareholder of SCOR and will resell the shares by way of private placements and/or sales on the open market. In this respect, SCOR and BNP Paribas have entered into a profit sharing arrangement whereby 75% of the gain, if any, will be retroceded to SCOR. If the resale of the new shares occurs immediately upon exercise through an off-market transaction, the profit share owed to SCOR will be paid in the form of SCOR shares in order to limit the dilutive impact of the transaction for SCOR’s shareholders.
At initial recognition, other financial liabilities are recorded at fair value less directly attributable transaction costs. After initial recognition, they are measured at amortized cost using the effective interest rate method.
SCOR’s subordinated debt is classified under financial liabilities as under the terms and conditions of the issuance contracts, SCOR does not have an unconditional right to avoid delivering cash to settle contractual obligations and based on projected cash flows the instruments do not have an equity component.
During 2009, the Group provided liquidity to both its perpetual deeply subordinated debt security (Tier 1 type) (TSSDI
On May 11, 2011, SCOR reopened its existing CHF perpetual subordinated notes placement by issuing an additional amount of CHF 225 million. The placement was increased to CHF 250 million at the settlement date of June 3, 2011, given the market appetite. The notes are fungible with those issued on February 2, 2011. The conditions and the accounting treatment are similar to the first placement.
On October 8, 2012, SCOR issued CHF 250 million in perpetual subordinated notes, redeemable by SCOR each quarter on each interest payment date from June 8, 2018. The strong market demand observed prompted the Group to extend its placements from CHF 250 million to a total of CHF 315 million on September 24, 2012. The coupon has been set at 5.25% (until June 8, 2018) and 3-month CHF Libor plus a margin of 4.8167% thereafter.
SCOR has entered into a cross-currency swap which exchanges CHF 250 million of the principal for EUR and exchanges the CHF coupon on the notes for EUR 6.2855% and matures on June 8, 2018. SCOR has entered into a second cross-currency swap which exchanges CHF 65 million of the principal for EUR and exchanges the CHF coupon on the notes for fixed-rate EUR 6.2350% and matures on June 8, 2018. See Note 7 – Insurance business investments (Derivatives instruments).
SCOR has entered into a cross-currency swap which exchanges CHF 250 million of the principal for EUR and exchanges the CHF coupon on the notes for fixed-rate EUR 5.8975% and matures on November 30, 2018. See Note 7 – Insurance business investments (Derivatives instruments).
Real estate financing relates to the acquisition of investment property through bank loans of EUR 491 million (EUR 534 million as at December 31, 2015), including real estate financing related to MRM S.A. property for EUR 75 million (EUR 112 million as at December 31, 2015). The main real estate financing amounts to EUR 161 million and is used to finance the Group’s head office in Paris, avenue Kléber. It bears floating-rate interest indexed to the 3-month Euribor rate plus 1.35% and matures in June 2018. SCOR entered into three interest rate swaps which cover its exposure to the variable interest rates whereas SCOR pays a fixed rate of 2.97% and receives interest at 3-month Euribor. The interest rate swaps have been accounted for as cash flow hedges (for further details, see Note 7 – Insurance business investments – Derivative instruments). The other real estate financing bears fixed-rate interest or interest indexed to 3-month Euribor covered by interest rate swaps and redeemable between 2017 and 2026. They are used to finance other property owned by the Group.
Certain real estate financing contracts contain accelerated repayment clauses and other debt covenants. Such covenants define certain ratios to comply with, among which loan to value (LTV) ratios, defined as the relation between the carrying amount of the financing and the market value of the real estate being financed, interest coverage rates (ICR), representing the percentage at which interest expenses are covered by rental income, and debt service coverage ratios (DSCR), representing the percentage at which debt amortization and interest expenses are covered by rental income. Under existing financing contracts LTV ratios vary between 55% and 70% and ICR/DSCR between 130% and 400%. As at December 31, 2016, the Group is in compliance with the LTV and ICR/DSCR covenants with respect to its banking partners.
In 2016, the sales of investment properties have generated the reimbursement of the related real estate financing for a total of EUR 80 million. The purchases of two own-use properties have been financed by two additional debts for a total of EUR 49 million.
The maturity profile of financial debt is included in Section 3.6.4 – Financial debt.
Defined benefit plans are those where a sum is paid to the employee upon retirement, which is dependent upon one or several factors such as age, years of service and salary. Defined benefit obligations and contributions are calculated annually by independent qualified actuaries using the projected unit credit method, taking into consideration actuarial assumptions, salary increase, retirement age, mortality, turnover and discount rates. Assumptions defined are based on the macroeconomic environment of each country in which the Group operates. Modifications to actuarial assumptions or differences between these assumptions and actual amounts give rise to actuarial differences which are recorded in other comprehensive income during the period in which they occur, in accordance with Group accounting principles. The obligation recognized on the balance sheet represents the present value of the defined benefit obligation at the reporting date, less the market value of any plan assets, where appropriate, both adjusted for actuarial gains and losses and unrecognized past service cost.
In some countries, the Group rewards employees for length of service by granting them a lump sum after certain periods of service. The primary country providing this benefit is France. For such benefits in France, the present value of the obligation is calculated annually by an independent actuary using the projected unit credit method and is recognized on the balance sheet.
Defined contribution plans include plans whereby an employer makes periodic contributions to an external plan which manages all administrative and financial aspects. These external plans relieve the employer of all future obligations and manage the payment to employees of all amounts which are due (e.g. National insurance pension scheme, complementary pension schemes (AGIRC/ARRCO in France), defined contribution retirement plans).
The amounts paid under defined contribution plans were EUR 32 million, EUR 29 million, and EUR 20 million for the years ended December 31, 2016, 2015, and 2014 respectively.
An increase in the discount rate of 0.25% would result in a decrease in the estimated defined benefit obligation of approximately
EUR 18 million (2015: EUR 14 million) with the offsetting impact recorded in other comprehensive income.
A decrease in the discount rate of 0.25% would result in an increase in the estimated defined benefit obligation of approximately EUR 16 million (2015: EUR 12 million) with the offsetting impact recorded in other comprehensive income.
The average duration of plans by geographical area is disclosed in the table below: Euro Zone Switzerland US UK Canada Global
Duration as at December 31, 2016 11 years 19 years 12 years 28 years 9 years 16 years
Duration as at December 31, 2015 9 years 19 years 13 years 30 years 9 years 15 years
In EUR million As at 12/31/2016 As at 12/31/2015 As at 12/31/2014
Asset gains/(losses) due to experience (1) 1 2 (4) - - 3 (3) 7 (1) 5 3
Fair value of assets as at December 31 238 28 148 62 243 29 137 77 209 27 111 71
TOTAL FUNDED STATUS AS AT DECEMBER 31 – DEFICIT 197 112 41 44 165 101 28 36 149 101 19 29
(1) In 2014, plan amendments to the defined benefit plan in Switzerland (reduction in the conversion rate, increase in the normal retirement age from 62 to 64 years and 1% increase in retirement contributions), the US (plans frozen or terminated) and France (termination of congés de fin de carrière on January 1, 2017 and termination of médailles du travail as at July 14, 2019. In addition, implementation of a temporary scheme called compte senior during the second quarter of 2014).
(3) Actuarial (gains)/losses due to changes in assumptions include for 2016 actuarial (gains)/losses due to changes in financial assumptions for EUR 35 million (EUR 4 million in 2015) and actuarial (gains)/losses due to change in demographic assumptions for EUR (7) million (EUR 5 million in 2015).
America Total 2015 Europe Switzerland North America Total 2014 Europe Switzerland North America
Funded or partially funded obligation as at December 31 371 90 181 100 354 89 158 107 303 84 124 95
Fair value of plan assets as at December 31 238 28 148 62 243 29 137 77 209 27 111 71
Funded status as at December 31 – deficit 133 62 33 38 111 60 21 30 94 57 13 24
Accrued/(Prepaid) as at January 1 165 101 28 36 149 101 19 29 118 78 18 22
Actuarial (gains)/ losses immediately recognized in other comprehensive income (OCI) 39 17 13 9 7 (1) 7 1 43 21 8 14
As at December 31, 2016, employer contributions for the year ahead were expected to amount to EUR 13 million (2015: EUR 20 million).
Claim reserves for losses and claims settlement expenses are recognized for payment obligations from reinsurance losses that have occurred but have not yet been settled. They are recognized under reserves for reinsurance losses reported before the reporting date and reserves for IBNR claims, and are calculated on the basis of their ultimate cost, undiscounted, except for workers’ compensation claims which are discounted in the US.
Mathematical reserves are calculated underwriting reserves relating to expected claims and benefit payments to ceding companies in Life reinsurance. Mathematical reserves are generally calculated as the present value of projected future payments to cedents less the present value of projected future premiums still payable. The calculation includes assumptions relating to expected future mortality, morbidity, longevity, disability, lapses, interest rates and expenses. The mathematical reserves are established on initial recognition of a contract on the basis of best estimate assumptions and allow for an adequate safety margin for the risks of change, error and random fluctuation.
Contract liabilities are subject to the use of estimates. Payments linked to these reserves are not usually fixed, neither by amount nor by due date. Liquidity information related to contract liabilities is included in Section 3.6 – Liquidity risks.
The table begins by showing the reported year-end gross and net reserves, including IBNR, recorded at the exchange rates applicable at each corresponding reporting date.
The “Cumulative redundancy/deficiency” line represents the cumulative change in estimates since the initial reserve was recorded. It is equal to the latest incurred claim amount less the initial reserve. The amounts in this line in the loss development tables are not a precise indication of the adequacy of the initial reserves that appear on the first and third lines of the table. Trends and conditions that have affected development of liabilities in the past may not be indicative of future developments. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on these tables.
A significant portion of SCOR Global P&C’s reserves relates to liabilities payable in currencies other than the Euro. The fluctuations in the Euro compared to those currencies are included in the data in the table below.
Net UPR – end of year 557 1,069 1,059 1,095 1,333 1,432 1,590 1,562 1,796 2,052 2,094
Gross DAC – end of year 108 230 227 238 278 325 359 379 441 536 551
Net claims reserves & estimates – end of year 5,301 8,727 8,660 8,683 9,284 9,837 10,167 10,062 10,469 11,116 11,124
The table below presents a reconciliation of the opening and closing liability for claims reserves and claims expenses of SCOR Global P&C for the years ended December 31, 2016 and 2015: In EUR million 2016 2015
GROSS CLAIMS RESERVES AND CLAIMS ESTIMATES AS AT JANUARY 1 11,750 11,088
Net claims reserves and claims estimates as at January 1 – revalued 10,868 11,015
Net claims incurred relating to the current calendar year 1,960 1,923
SCOR was notified after the year-end close that a man made claim (EUR 23 million) initially reported in 2012 is now likely to trigger a Facultative Casualty policy. This information does not affect the amounts recognized in the financial statements as the IBNR included in the year end claims reserves cover this development.
Gross reserves, including IBNR reserves (in EUR million) 88 96 16 15
Actual number of claims notified under non-proportional and facultative treaties (in EUR million) 10,727 10,661 8,468 8,447
Average cost per claim (in EUR) (1) 21,750 20,984 4,756 4,565
(1) Does not include claims which result in no ultimate cost and claims notified only for precautionary reasons for which the amount is not evaluated.
Change in reserves from portfolio movements and actuarial calculation 18 (58)
The liability adequacy test conducted at each closing date did not detect any deficiencies for either the Non-Life or Life segment.
An analysis of the share of retrocessionaires in the Group’s contract liabilities by rating of the retrocessionaires and collateral from retrocessionaires in favor of SCOR at December 31, 2016 and 2015 is as follows: In EUR million AAA AA A BBB < BBB Not rated Total as at 12/31/2016
Share of retrocessionaires contract liabilities net of collateral(1) - 175 269 (2) 1 (356) (2) 87
The Group offers stock option plans to certain of its employees. The fair value of the services received in exchange for the granting of options is recognized as an expense. The total amount that is recognized over the vesting period is established by reference to the fair value of options granted, excluding conditions of attribution that are not linked to market conditions (return on equity (ROE), for example). These conditions are taken into account when determining the probable number of options which will vest for the beneficiaries. At each reporting date, the Group reviews the estimated number of options which will vest.
Any impact is then recorded in the statement of income with the offsetting entry in shareholders’ equity over the remaining vesting period.
The dilutive effect of outstanding options is reflected in the calculation of diluted earnings per share.
The Group has established various free share allocation and stock option plans in favor of some of its employees and Corporate Executive Officers (the plans are equity settled only). The terms of these plans are defined, and approved or agreed by its Board of Directors at the grant date.
The share-based payment plans are described below. There have been no cancellations or modifications to any of the plans during 2016.
The table below presents the changes and the current stock option plans at the end of the year along with the average corresponding exercise price: Number of options
The average weighted remaining life of the options for 2016 and 2015 was 5.04 and 5.35 years respectively.
Fair value at grant date (in EUR) 2.61 1.98 1.94 1.94 1.40 1.80
(1) The historical volatility used to determine the fair value of stock options is based on the historical volatility over periods corresponding to the expected average maturity of the options granted, which is partially adjusted to eliminate extreme deviations and to better reflect long-term trends.
The terms and conditions of the performance share plans of February 23, 2016 and December 1, 2016, provide that after the vesting period of three years for all beneficiaries, the final vesting of these shares will be subject to the condition of presence of three years and to the satisfaction of performance conditions.
The terms and conditions of the performance share “LTIP” plan of February 23, 2016, provide that after the vesting period of six years for all beneficiaries, the final vesting of these shares will be subject to the condition of presence of six years and to the satisfaction of performance conditions.
French residents 3 years 3 years 6 years 3 years 6 years 2 years
The main temporary differences arise from tax losses carried forward and the revaluation of certain financial assets and liabilities including derivative contracts, certain insurance contract liabilities, provisions for pensions and other post-retirement benefits. In addition, temporary differences arise on acquisitions due to the difference between the fair values of the net assets acquired and their tax base. Deferred tax liabilities are recognized on taxable temporary differences arising from investments in subsidiaries, associates and joint ventures, except where it is probable that the difference will not reverse in the foreseeable future.
Theoretical corporate income tax at 34.43% (for 2016) and 38.00% (for 2015 and 2014) (264) (332) (259)
For the years 2014 and 2015 the temporary increase of the exceptional contribution on income tax (contribution exceptionnelle sur l’impôt sur les sociétés) led the effective French corporate income tax rate to 38.00%. From 2016 onwards exceptional contribution has expired and the effective French corporate income tax rate is 34.43% again.
Remeasurements of post-employment benefits (38) 8 (30) (7) 2 (5) (43) 7 (36)
Revaluation of available-for-sale assets (25) 12 (13) (112) 23 (89) 236 (56) 180
Net gains/(losses) on cash flow hedges 3 1 4 35 (12) 23 (8) 2 (6)
(1) The Group reviewed the analysis of deferred taxes by type of temporary difference in 2016 in a prospective manner. Previous years data is presented as in the 2015 and 2014 Reference documents.
Unrealized revaluations and temporary differences on investments (48) (94) (170) 48 22 16
Unrealized revaluations and temporary differences on investments 67 22 51 (43) (11) 25
Net operating losses for carry forward 505 631 671 (126) (69) 20
(1) The impact of tax rate changes is included in the analysis of deferred tax expense or benefit by type of temporary difference.
As at December 31, 2016, the operating tax losses available for carryforward expire as follows: In EUR million Available tax loss carryforwards
is recognized At 12/31/2016 Deferred tax assets recognized At 12/31/2015 Deferred tax assets recognized
The recognition of deferred tax assets on tax loss carryforwards is assessed based on the availability of sufficient future taxable income and local tax rules, e.g. unlimited carry forward in France and 20-year carryforward period in the United States. Under French Tax Law on tax loss carryforwards, the utilization of tax losses is capped at EUR 1 million plus 50% of the remaining current year’s taxable result.
Taxable income is forecast based on the main assumptions described in the accounting principles of this note. SCOR expects to utilize all recognized tax loss carryforwards before expiration.
Operating losses which have not been recognized as deferred tax assets relate primarily to the French Tax Group.
The tables below show the analysis by type of investment income and split by category of financial assets: NOTE 18.1. ANALYSIS BY TYpE
Interest income on funds withheld and contract deposit 194 196 193
Interest expense on funds withheld and contract deposit (12) (12) (13)
Other (including cash and cash equivalents), net of other investment expenses 93 (215) (15)
These expenses are further allocated into categories by function as follows: In EUR million 2016 2015 2014 in 2016 n●59% Acquisition and administrative expenses 482 484 414 n●7% Investment management expenses 62 52 40 n●7% Claims settlement expenses 54 51 42 n●27% Other current operating expenses 217 189 153
The Group audit fees for services rendered during the year are subject to a quarterly review and approval by the Audit Committee. All such audit fees presented in the table below have been approved in full by the Audit Committee.
(1) Statutory audit and certification of local and consolidated financial statements. (2) Other specific audit assignments related to the statutory audit engagement. Additional audit fees incurred were due mainly to review of actuarial disclosures, review of CSR report as well as mandatory procedures in conjunction with securities issued during the year. (3) Other services, provided by the Auditors to the fully consolidated companies and due diligence.
Net income attributable to ordinary shareholders and estimated conversions 603 188,275 3.20 642 190,153 3.38 512 188,566 2.72
The Group’s related parties include: ●● key management personnel, close family members of key management personnel, and all entities which are controlled, significantly influenced by, or for which significant voting power is held by key management personnel or their close family members; ●● associates.
(2) The total commitment of the Group for defined benefit retirement plans in France, Germany, the US and Switzerland for Executive Committee members (including the Chairman and Chief Executive Officer) amounts to EUR 53 million as at December 31, 2016 (EUR 49 million as at December 31, 2015 and EUR 47 million as at December 31, 2014), i.e. 12% of the total commitment of the Group for pension plans of EUR 435 million.
Rights and obligations, not recognized on the balance sheet, but which could modify the amount or the composition of the patrimony of the Group are disclosed as commitments.
The general reinsurance environment requires that underwriting liabilities be collateralized, either directly through the reinsurance treaty with the ceding company, or indirectly through the requirements of local regulators of the countries where SCOR’s entities operate. These collateral arrangements can take the form of cash deposits to ceding companies, which are booked on the balance sheet, of pledged assets which generate a commitment granted and are disclosed in the table below, or of letters of credit in which a financial institution provides the ceding company with a guarantee against the default of SCOR. Reciprocally, SCOR receives collaterals from its retrocessionaires which are booked as commitments received to the exception of deposits which are recognized on the balance sheet.
In addition to assets pledged on the reinsurance business, SCOR’s assets may be restricted when they are used as collateral to obtain letters of credit from banks or as securities for real estate debts or pensions liabilities. Those restricted assets are reported as pledged assets in the commitment disclosures.
(2) Accounting principles for investment commitments have been changed in 2016. Investment commitments are now considered as commitments given for a total amount of EUR 60 million as at December 31, 2016 (EUR 65 million as at December 31, 2015).
SCOR has pledged financial assets to ceding companies, regulators, financial institutions and pension plans for a total amount of EUR 4,540 million (EUR 4,342 million in 2015).
Letters of credits received from external retrocessionaires are recognized as a commitment received for EUR 159 million (EUR 158 million in 2015) and are detailed in Note 15 – Net contract liabilities.
SCOR is committed to realize loans and to invest in various investment funds for a total amount of EUR 60 million (EUR 65 million in 2015). Those amounts do not include the commitments taken by SCOR on behalf of third parties as part of its asset management activity.
Minimum payments under operating lease commitments, estimated minimum rental income amounts received by SCOR as part of its real estate investment activities and commitments to purchase or dispose real estate properties are not included in the table above but are disclosed within Note 9 – Miscellaneous assets and Note 7 – Insurance business investments.
Please see Section 3.3 – Underwriting risk related to the P&C and Life reinsurance businesses.
On December 21, 2009 SCOR filed an appeal to the sanctioning decision before the Administrative Chamber of the National Audience (Audiencia Nacional, or the ”AN“).
On December 28, 2012, the AN issued its judgment on the appeal, annulling the decision of the CNC. The AN accepted SCOR’s grounds and declared that the company had not infringed the Competition Act. Consequently, the economic sanction imposed on SCOR by the CNC was annulled. The State Attorney (Abogado del Estado) representing the CNC has appealed the AN judgment to the Supreme Court (Tribunal Supremo) in January 2013.
On June 2, 2015, SCOR received the decision from the Spanish Supreme Court on the State Attorney’s appeal. In its decision, the Supreme Court confirmed that SCOR and Asefa, together with certain other market participants, were part of an antitrust violation. However, the Supreme Court canceled the fine imposed by the Agency and requested it to be recalculated. On July 2, 2015, SCOR filed an action for annulment of the Supreme Court decision. On September 15, 2015, this action was dismissed by the Supreme Court. On November 3, 2015, SCOR filed an appeal against the Supreme Court’s decision in front of the Spanish Constitutional Court. This action was dismissed on February 26, 2016. 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. SCOR and its subsidiaries are involved in legal and arbitration proceedings from time to time in the ordinary course of their business.
CONSOLIDATED FINANCIAL STATEMENTS Information on holdings < #4 4.7. INFORMATION ON HOLDINGS
The holdings held directly by SCOR SE are detailed in the following sections: ●● Section 1.2.3 – Organizational structure of SCOR; ●● Appendix C – 5 – Notes to the corporate financial statements, Note 2 – Investments – Subsidiaries and affiliates.
As at December 31, 2016, SCOR SE held indirectly shares or units in the companies representing at least 10% of the consolidated net assets or generating at least 10% of the consolidated net income or loss. These holdings are listed below: Registered office Type of business % Capital
SCOR Global Life Reinsurance Ireland dac 4th Floor, Whitaker Court – Whitaker Square – Sir John Rogerson's Quay – Dublin 2 – D02 W529 – Ireland Reinsurance 100%
ERNST & YOUNG Audit Represented by Guillaume Fontaine Tour First – 1, Place des saisons 92037 Paris-La Défense Cedex, France CRCC of Versailles 05/13/1996
Pierre Planchon Tour First – 1, Place des saisons 92037 Paris-La Défense cedex, France CRCC of Versailles 05/06/2014
Date of the Shareholders’ Meeting called to approve the financial statements for the financial year ending 12/31/2019 4.8.3. RESIGNATION OR NON-RENEWAL OF AuDITORS
The date of the most recently audited financial information is December 31, 2016.
In application of EC Commission Regulation No. 809/2004, the following information is included by reference in this Registration Document: ●● The report of the Statutory Auditors on the consolidated financial statements for the financial year ended December 31, 2015 published on pages 232 to 233 of the Registration Document filed with the AMF on March 4, 2015 under Number D.16-0108 (and from pages 220 to 221 of the free translation into English of such Registration Document, such translation being available on SCOR’s website www.scor.com).
In compliance with the assignment entrusted to us by your Annual General Meeting, we hereby report to you, for the year ended December 31, 2016, on: ●● the audit of the accompanying consolidated financial statements of SCOR SE; ●● the justification of our assessments; ●● the specific verification required by law.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the group as at December 31, 2016 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
We have examined the valuation methods and the depreciation policies of these financial instruments on the one hand, and have, on the other hand, reviewed and tested the control processes implemented by management relating to the assessment of impairment. We have verified the appropriateness of the information provided in the notes to the consolidated financial statements.
●● Note 17 to the consolidated financial statements describes the principles and methods used to perform the valuation of deferred tax assets as well as the deferred tax assets impairment test.
We have no matters to report as to its fair presentation and its consistency with the consolidated financial statements, reminded that it is not our responsibility to conclude on the fair presentation and consistency with the consolidated financial statements of the solvency related information extracted from the Report provided for in article L. 356-23 of the French Insurance Code (Code des assurances).
The Report of the Chairman of the Board of Directors on the conditions for the preparation and organization of the work of the Board of Directors and on the internal control procedures in accordance with Article L. 225-37 of the French Commercial Code featured in Appendix A, is the subject of a report by the SCOR Statutory Auditors, which is also included in Appendix A.
The related party agreements executed in 2016 or continued during 2016, as defined by Articles L. 225-38 et seq of the French Commercial Code are the subject of a specific report by the Statutory Auditors in Section 2.3.3.
Notes 1, 2 and 3 in Appendix D of this Registration Document relate to the social and environmental impacts of SCOR’s business and the Group’s societal commitments. The information published in this section has been reviewed by one of the Statutory Auditors whose report is presented in Appendix D.
5.1.2. SuMMARY OF THE BYLAWS AND INTERNAL REGuLATIONS OF THE COMpANY CONCERNING THE MEMBERS OF ITS ADMINISTRATIVE, MANAGEMENT AND SupERVISORY BODIES
French corporate law and the Company’s bylaws provide for prior approval and verification of agreements, entered into directly or indirectly, between the Company and one of its directors, Chief Executive Officer, Chief Operating Officer, any of its shareholders holding more than 10% of the registered capital or of the voting rights or, if a legal entity, the company controlling it within the meaning of Article L. 233-3 of the French Commercial Code and, or any entity in which any of these persons is at the same time an owner, partner with unlimited liability, manager, director, member of the Supervisory Board or an executive officer, unless pursuant to the provisions set forth under Article L. 225-39 of the Commercial Code: (i) the agreement is entered into in the ordinary course of business and under normal terms and conditions; and/or (ii) those agreements reached between two companies, one of which holds, directly or indirectly, all of the other’s capital, where applicable, minus the minimum number of shares required to fulfil the requirements of Article 1832 of the Civil Code or Articles L. 225-1 and L. 226-1 of the Commercial Code,. Article L. 225-38 of the French Commercial Code, as amended by Order No. 2014-863 of July 31, 2014, now also provides that the prior approval of the Board of Directors must be justified by the interest for the Company of the agreement, in particular by specifying the financial conditions related thereto.
The Company’s bylaws also stipulate that profits available for distribution can be allocated to one or more optional or statutory reserves or distributed as dividends, as determined by the Shareholders’ Meeting.
The payment of dividends is decided by the Shareholders’ Meeting at which the annual accounts are approved following the recommendation of the Board of Directors. If there are distributable profits (as shown on the interim balance sheet audited by the Statutory Auditors), the Board of Directors has the authority, subject to applicable French law and regulations, without prior shareholder approval, to distribute interim dividends.
Under French law, the Board of Directors is entitled to redeem a set number of shares as authorized by the Extraordinary Shareholders’ Meeting for the purpose of a capital reduction not motivated by losses. In the case of such an authorization, the shares redeemed must be cancelled within one month after the end of the offer to purchase such shares from shareholders.
The bylaws do not contain any share buy-back or conversion clauses.
Other Ordinary or Extraordinary Meetings may be convened at any time during the year. Shareholders’ Meetings may be convened by the Board of Directors or, if the Board of Directors fails to call such a meeting, by the Statutory Auditors, liquidators in bankruptcy cases, shareholders owning the majority of the ordinary shares or voting rights after having launched a public takeover bid or by an agent appointed by a court.
The court may be requested to appoint an agent either by shareholder(s) holding at least 5% of the share capital, or a duly authorized association of shareholders holding their ordinary shares in registered form for at least two years and jointly owning a certain percentage of voting rights (computed on the basis of a formula related to capitalization which on the basis of the Company’s outstanding share capital as at December 31, 2016, would represent approximately 1% of voting rights) or by any interested party, including the Works’ Council in urgent situations.
The notice calling such meetings must include the agenda for the meeting called.
One or several shareholder(s), holding a certain percentage of SCOR’s voting rights (computed on the basis of a formula related to capitalization which, on the basis of outstanding share capital as at December 31, 2016, would represent approximately 0.5% of voting rights), the Works’ Council or a duly authorized association of shareholders holding ordinary shares in registered form for at least two years and holding together a certain percentage of the voting rights (calculated on the basis of a formula relating to capitalization which on the basis of the outstanding share capital as at December 31, 2016, would represent approximately 1% of SCOR SE’s voting rights) may, within 10 days of such publication, propose resolutions to be submitted for approval by the shareholders at the meeting.
Attendance and exercise of voting rights at Ordinary Shareholders’ Meetings and Extraordinary Shareholders’ Meetings are subject to certain conditions. In accordance with French law and Company bylaws, the right to participate in Shareholders’ Meetings is subject to registration of shares in the shareholder’s name or in the name of the approved intermediary acting on his or her behalf, by T-0 (Paris time) on the second trading day prior to the Shareholders’ Meeting, either in the nominative share registers held on the Company’s behalf by the Company’s agent or in the bearer share accounts held by an authorized intermediary.
Shareholders’ Meetings shall be called and conducted in accordance with French law. They shall consist of all shareholders, regardless of the number of shares held.
5.1.6. pROVISIONS THAT COuLD DELAY, DEFER OR pREVENT A CHANGE IN CONTROL OR IN THE SHAREHOLDER STRuCTuRE
Pursuant to Articles L. 322-4 and R. 322-11-1 of the French Insurance Code, any transaction allowing a person acting alone or in concert with other persons, as defined by Article L. 233-10 of the French Commercial Code, to acquire, increase, decrease or cease holding, directly or indirectly, as defined by Article L. 233-4 of the French Commercial Code, an equity stake in an insurance or reinsurance company, shall be notified by such person(s) to the ACPR prior to its completion when any one of the following conditions is met: ●● the portion of voting rights or capital shares held by said person(s) exceeds or is below the tenth, fifth, third or half thresholds; or
●● the Company becomes or ceases to be a subsidiary of said person(s).
If these commitments are not met, and without prejudice to the provisions in Article L. 233-14 of the French Commercial Code, upon request from the ACPR, the District Attorney (procureur de la République) or any shareholder, the judge shall adjourn the exercise of the voting rights of those failing to meet their commitments until the situation returns to normal.
French law provides that any individual or legal entity, acting alone or in concert with others, that holds, directly or indirectly, more than 5%, 10%, 15%, 20%, 25%, 30%, 33 1/3%, 50%, 66 2/3%, 90%, or 95% of the shares or the voting rights attached to the shares, or whose holding decreases below any such thresholds, must notify the Company within four trading days of crossing that threshold, of the number of shares and voting rights it holds. An individual or a legal entity must also notify the AMF within four trading days of crossing these thresholds. Any shareholder who fails to comply with these requirements will have their voting rights in excess of such thresholds suspended for a period of two years from the date notification is served and may have all or part of their voting rights suspended for up to five years by the Commercial Court at the request of the Chairman, any of the shareholders or the AMF. In addition, every shareholder who, directly or indirectly, acting alone or in concert with others, acquires ownership of shares greater than or equal to 10%, 15%, 20% or 25% of the share capital must notify the Company and the AMF of its intentions for the six months following such an acquisition. Failure to comply with this requirement will result in the suspension of the voting rights attached to the shares exceeding the applicable threshold held by the shareholder for a period of two years from the date on which notice is served and, upon a decision of the Commercial Court, part or all the shares of said shareholder may be suspended for up to five years.
5.1.8. CONDITIONS GOVERNING MODIFICATIONS TO THE SHARE CApITAL (OTHER THAN LEGAL pROVISIONS)
> Third-party information and statements by experts and declarations of any interest
APPENDIX B – PERSON RESPONSIBLE FOR THE ANNUAL REPORT 248 1 Name and title of person responsible 248 2 Declaration by the person responsible 248
During its meeting on December 12, 2008, the Company’s Board of Directors designated the consolidated corporate governance code for listed corporations of the AFEP-MEDEF (Association Française des Entreprises Privées – Mouvement des Entreprises de
This report is subject to an internal review, including by the Group’s various bodies: the Executive Committee, the Audit Committee and the Board of Directors.
1 TERMS AND CONDITIONS FOR PREPARING AND ORGANIZING THE WORK OF THE BOARD OF DIRECTORS
For information on the Board of Directors’ Committees, see Section 2.1.3 – Board of Directors’ Committees.
The four general objectives sought through the application of a risk management system and, within it, of an internal control system are to: 1. Ensure that strategic objectives are properly implemented in the Group.
The risk management system covers the following components: 1. Defining the internal environment.
The Group is organized around three engines comprising two main reinsurance businesses and one asset-management activity: SCOR Global P&C division, SCOR Global Life and SCOR Global Investments.
• Human Resources • Group Project Office • Group Cost control & Budget
Development • Reserving 3 Market regions: Asia Pacific, EMEA and Americas 2 transversal lines: Global distribution solutions, Global financing solutions & longevity
– the SCOR Global P&C Chief Executive Officer (CEO) and his deputy,
– the SCOR Global Investments Chief Executive Officer (CEO); ●● established in 2011, the Group Risk Committee meets quarterly and is a dedicated body of the Executive Committee in charge of the monitoring of the internal control system and risk management framework. The Group Risk Committee is made up of the Executive Committee members and of one additional voting member, the Group Chief Economist. Other risk management and control functions of the divisions and the Director of the Group Internal Audit Department are regularly invited to Group Risk Committee meetings. The roles and responsibilities of the Group Risk Committee are set out in its internal charter; ●● monitoring of the internal control procedures falls under the remit of the Group’s Executive Management. The Group departments and functional or transversal departments of SCOR Global P&C, SCOR Global Life and SCOR Global Investments with a control responsibility have the task of defining and controlling the implementation of rules pertaining to the areas of their responsibility and applicable to all of the Group’s entities. These rules, and the participants, are described in detail in the paragraph 1.3 of this report on control activities; ●● the three divisions as well as the Hubs’ support departments must apply the rules defined above. They carry out all of the first-level controls related to business management and ensure compliance with regulatory, accounting and fiscal laws, at both local and Group levels; ●● the Head of the Group Internal Audit Department reports directly to the Chairman and Chief Executive Officer of SCOR SE and functionally to the Chairman of the Audit Committee of the Board of Directors of SCOR SE. This positioning gives the Head of the Group Internal Audit the necessary independence and objectivity, and allows for the largest possible room for investigation. The Group Internal Audit Department checks independently the effectiveness and relevance of the governance, risk management and internal control procedures for the Group’s entities following a methodical risk based approach, as promoted by the “International Standards for the Professional Practice of Internal Auditing” set out by the Institute of Internal Auditors and the Institute’s Code of Ethics. The SCOR Internal Audit Charter, approved by the Audit Committee, defines the position within the organization, the role and areas of activity, the principles and main operating procedures of the Group Internal Audit Department.
1 Based on a 5-year rolling average of 5-year risk-free rates. 2 This solvency target is unchanged from that under the previous strategic plan, Optimal Dynamics.
●● Similar to the previous strategic plan, the new plan has two equally weighted objectives: a return on equity (ROE) equal to or greater than 800 basis points above the 5-year risk-free rate over the cycle (1); and
Potential physical and transition climate change risks are monitored amongst other risks through this mechanism whilst the Group is gradually implementing “low carbon” initiatives as described in the Appendix D of the Registration Document. The scientific consensus is that a continued rise in global warming could account for an increasingly large share of natural catastrophe losses although the timing and severity of physical effects which may impact underwriting activities are difficult to estimate. As an institutional investor, the asset portfolio may also be exposed to potential physical and transition risk under different timeframe; ●● the ORSA (Own Risk Solvency Assessment), which provides the Group’s Board and those of the legal entities, the Group Executive Committee and senior management of legal entities with forward-looking information on SCOR’s risks and capital position;
REpORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS Internal control and risk management procedures < #A
Because of its activities, SCOR is exposed to many risks: reinsurance related risks, market risks and other risks (e.g. liquidity, rating). These risks are detailed in Section 3 – Risk factors and Risk Management Mechanisms of the Registration Document. These activities rely on the control mechanisms including adequate reporting mechanisms to the main governance bodies throughout the Group (see paragraph 1.1).
This report does not detail these risks, but aims to summarize the principal activities and participants of risk control for the following important areas: ●● Group functions; ●● activities related to reinsurance; ●● asset management; ●● accounting management.
The control activities described below are considered as the principal activities for controlling risks specific to those areas. In accordance with SCOR’s internal control system approach, these control activities are performed on Group or Company level, on core business and investment process level, or on support process level.
The Group’s functions are organized in three departments led by the Chief Operating Officer, Chief Financial Officer and Chief Risk Officers respectively. The operations area comprises information technology, human resources and other general service functions at Group level such as strategy and internal or corporate communications. The finance area comprises Treasury, Budget and Forecasting and other functions relating to consolidation, reporting, accounting, financial communications and tax issues. The risk management area comprises the actuarial function, the risk management function, various risk and actuarial modelling teams and is responsible for the Group’s prudential and regulatory affairs department. Further information is presented below, excluding the financial reporting and financial communication functions dealt with in Sections 2.5 and 2.7 hereafter.
●● The Group Project Office monitors the Group project portfolio and defines standard project methodology. It regularly provides reports to the management detailing key indicators and recommendations on the project portfolio for effective management. On the Executive Committee’s request, it can also manage strategic projects.
●● The Consolidation, Systems and Process and Pillar 3 Departments play a major role in both internal management reporting and external reporting, and the analysis thereof.
For further information on how the main underwriting risks related to the Non-Life and Life reinsurance business are managed, see Section 3.3 – Management of underwriting risks related to the Non-Life and Life reinsurance business.
While: ●● preserving the Group liquidity and level of solvency; ●● protecting the capital; ●● allowing the Group to operate on a day-to-day basis as well as over the long term horizon; ●● in compliance with: legal entities investment regulations, risk appetites and regulatory capital requirements (level of capital and type of admissible assets), and Group and local investment guidelines.
SCOR implements dedicated processes and tools to identify, assess and monitor its risk exposures on a regular basis. See Section 2.3 – Identification and assessment of risks.
In addition, SCOR implements dedicated risk management mechanisms in both the Life and P&C divisions in order to evaluate the appropriateness and effectiveness of controls and propose risk-management and mitigation measures. See Section 3.3 – Underwriting risks related to the Life and P&C reinsurance business for further details on these risk management mechanisms.
In addition, and in accordance with its risk-based audit plan and through its periodic assignment, Group Internal Audit provides independent and objective assessments on the adequacy, effectiveness and efficiency of the internal control system. Any finding and risk leads to recommendations and management remediation actions followed up by the Group Internal Audit Department.
The Group Internal Audit Department provides independent, objective assurance and consulting services designed to assess the adequacy, effectiveness and efficiency of SCOR’s governance, policies and guidelines, risk management and internal control system, as well as compliance of operations with applicable policies and guidelines, in order to ensure the safeguarding and integrity of SCOR’s assets (e.g. financial assets, human resources, systems and data), the effective use of resources and identify opportunities for process improvement.
The Group Internal Audit Department carries out a quarterly follow-up process to monitor and ensure that management actions agreed in the audit reports have been effectively implemented or that senior management has accepted the risk of not taking action. The follow-up results are provided to the Executive Committee and the Audit Committee.
Furthermore, the Finance Department manages the “internal management representation letters” process, detailed in Section 2.7 on financial reporting, which also incorporates certain points relative to internal control of accounting and financial reporting.
Regarding the processes of preparation of consolidation packages and consolidation of accounting data by the Group Consolidation, Systems & Process Department, and internal control is ensured by: ●● the definition by the Consolidation, Systems & Process Department 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 the systems or auxiliary accounting methods with the general and consolidation accounting systems;
●● at least three levels of control of the consistency and completeness of the consolidation packages, one by the entity in question, 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.
In addition, and without calling into question the implementation of internal control rules by SCOR and its managers, Executive Management requests, within the framework of the reporting and quarterly consolidation procedure, that all local managers of Group entities, as well as Senior Managers of SCOR Global P&C, of SCOR Global Life and of the Group Finance Department for certain Group functions such as tax and consolidation, prepare a specific quarterly statement for the Chairman and Chief Executive Officer, and for the Group Chief Financial Officer in internal management representation letters as to the reliability and fair presentation of the financial statements of the entities they manage and the effectiveness of the internal controls. Management of the SCOR Global P&C and SCOR Global Life divisions review the individual entity level internal representation letters and submit a divisional letter. The results of all internal management representation letters are analyzed and monitored by a committee including the General Secretary of SCOR, the Group General Counsel, the Group Chief Accounting Officer, and the Head of the IFRS Center of Excellence. The key points are communicated to the Group Chief Financial Officer and the Group Chief Executive Officer, and communicated to the Internal Audit Department.
SCOR believes that its risk management and internal control systems are appropriate and adapted to its activities and is engaged in an ongoing process to improve its internal control standards and their implementation. In 2016, the Group continued its efforts on compliance issues as briefly summarized in this report by releasing new Group policies, and by improving existing policies to align them with the Group’s developments.
3 STATUTORY AUDITORS’ REPORT, PREPARED IN ACCORDANCE WITH ARTICLE L. 225-235 OF THE COMMERCIAL CODE, ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF SCOR SE
On the basis of our work, we have no matters to report on the information relating to the Company’s internal control and risk management procedures relating to the preparation and processing of the accounting and financial information contained in the report prepared by the Chairman of the Board of Directors in accordance with Article L. 225-37 of the French Commercial Code (Code de commerce).
●● I declare that, having taken all reasonable care to ensure that such is the case, the information contained in this Registration Document is, to the best of my knowledge, in accordance with the facts and contains no omission likely to affect its import.
SCOR SE’s corporate financial statements for the financial year ended December 31, 2016 are presented below: 1 SIGNIFICANT EVENTS OF THE YEAR
During 2016, SCOR SE received EUR 550 million in dividends: EUR 277 million from SCOR Global P&C SE, EUR 200 million from SCOR Global Life SE, EUR 13 million from SCOR Auber SAS, EUR 21 million from SCOR Holding Switzerland AG, EUR 3 million from MRM SA, EUR 2 million from SCOR Investment Partners SE and USD 36 million from SCOR US (EUR 33 million).
May 27, 2028. The coupon was set at 3.625% (until May 27, 2028), and will be reset every 10 years at the prevailing 10-year EUR mid-swap rate +3.90%.
On July 28, 2016, SCOR SE fully redeemed the remaining balance of EUR 257 million of the subordinated bonds that were issued on July 2006 for an initial amount of EUR 350 million.
Redemption of the outstanding amount of the CHF 650 million undated subordinated note
On August 2, 2016, SCOR SE completed the call of the entire balance of its CHF 650 million perpetual subordinated notes placed in February and June 2011 in two tranches of CHF 400 million and CHF 250 million respectively.
> Balance sheet uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE #C
On July 29, 2016, SCOR SE granted a USD 40 million subordinated loan to SCOR Reinsurance Asia Pacific Pte Ltd. The interest rate of 4.65% is fixed until its term on July 29, 2031.
On September 27, 2016, SCOR SE has reduced its share in Asefa from 39,97% to 19,97% and holds options to sell the remaining share to the buyer.
In 2016, SCOR SE fully reversed the EUR 104 million impairment of its shares in SCOR U.S. Corporation.
Share of retrocessionaires in underwriting reserves Note 4 616 - 616 473
Accrued income and deferred expenses Note 4 251 - 251 326
uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE Balance sheet < #C
> Income statement uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE #C
uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE Income statement < #C
Other commitments on investment securities, assets or revenues 10 464 474 983
NOTE 9. ANALYSIS OF INVESTMENT INCOME AND EXPENSES BY NATURE 270
Intangible assets consist of: ●● software acquired or created by the Company which is capitalized and amortized over a period ranging from one to five years; ●● Goodwill depreciable over 10 years.
Equity securities and other variable-income securities are recorded at cost, excluding expenses. The realizable value as at the reporting date is determined according to Statement 2015-11 dated November 26, 2015 of the French standard-setter (Autorité des Normes Comptables – ANC). For listed securities, it corresponds to the share price at the reporting date. For unlisted securities, fair value is based on net assets.
Finite reinsurance treaties, as defined under Article L. 310-1-1 of the French Insurance Code, have to be accounted for under the provisions of Statement 2015-11 dated November 26, 2015 of the French standard-setter (Autorité des Normes Comptables – ANC).
Cash deposited with ceding companies (related and associated companies) 1,653 4 101 41 1,717
The valuation of SCOR US shares was performed using the following methodology and assumptions: The evaluation of enterprise value was carried out on the basis of the Net Asset Value, added to the creation of future value as determined by the discounted cash flow (DCF) method.
●● ASEFA: EUR 1 million in 2016 (EUR 6 million in 2015); ●● SGF: EUR 3 million in 2016 (3 million in 2015).
On July 29, 2016, SCOR SE granted a USD 40 million subordinated loan (EUR 37 million) to SCOR Reinsurance Asia Pacific Pte Ltd.
On November 10, 2016, SCOR SE granted a EUR 100 million cash advance to SCOR Global Life SE.
The cash advance to SCOR GIE Informatique increased by EUR 60 million and was partly reimbursed for EUR 39 million.
During the year, the cash advance with SCOR Auber SAS increased by EUR 47 million and was partly reimbursed for EUR 100 million.
During the year, the cash advance with SCOR Capital Partners SAS increased by EUR 6 million and was completely reimbursed.
The EUR 78 million cash advance to OPCI SCOR Properties II was reclassified to “Shares in and advances to land and real estate companies”.
●● investments valued according to Article R. 343-9 572 572 568 (4) ●● investments valued according to Article R. 343-10 8,461 8,455 11,496 3,041 ●● investments valued according to Article R. 343-13 - - - -
The breakdown of the EUR 2,039 million balance as of December 31, 2015 was as follows: ●● EUR 800 million with SCOR Global P&C SE; ●● EUR 731 million with SCOR Global Life SE; ●● EUR 141 million with SCOR Auber SAS; ●● EUR 124 million with SCOR GIE Informatique; ●● EUR 115 million with SCOR Holding Switzerland AG; ●● USD 125 million (EUR 115 million) with SCOR Reinsurance Company; ●● EUR 8 million with SCOR Capital Partners SAS.
For 2016, SCOR SE recognized EUR 76.7 million in financial income from loans with related companies and EUR 0.4 million in interest expenses on borrowings with related companies.
●● SCOR PERESTRAKHOVANIYE.O.O.O. 10 Nikolskaya Street, 109012, Moscou, Russian Federation RUB 800 717 100.00% 21 21 - 8 3 1,696 102 -
●● SCOR US CORPORATION 199 Water Street, NEW YORK, NY 10038-3526 USA USD 330 816 100.00% 1,315 1,315 - - - - 46 33
●● SCOR Holding (Switzerland) AG General Guisan-Quai 26, 8022 Zurich, Switzerland EUR 382 1,447 20.68% 399 399 115 - - - 117 21
> Notes to the corporate financial statements uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE #C
uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE Notes to the corporate financial statements < #C
Shares other than variable – income securities and bonds 3,912 - 907 4,819 3,917 - 344 4,261
Share of retrocessionaires in underwriting reserves 616 - - 616 473 - - 473
Deferred acquisition costs – assumed (Non-Life) 51 - 93 144 31 - 106 137
Deferred commissions received from reinsurers (Non-Life) 75 - - 75 63 - - 63
The list of material related party transactions required by French accounting standard CRC 2010-06 issued on October 7, 2010 is not applicable to SCOR SE as all related party transactions are with wholly-owned entities.
The balance includes EUR 39 million of accrued interest (as at December 31, 2015: EUR 39 million).
●● CHF 125 million in fixed rate perpetual subordinated notes was issued on October 20, 2014. The notes are redeemable by SCOR from October 20, 2020 on an annual basis on the interest payment dates. The coupon has been set at 3.375% until October 20, 2020 and will be reset every 6 years at the prevailing 6-year CHF mid-swap rate plus a margin of 3.0275% thereafter. The notes are not hedged by a cross-currency swap.
On August 2, 2016, SCOR SE fully redeemed the remaining balance of CHF 650 million in fixed rate perpetual subordinated notes issued in two pari-passu ranking placements on February 2 and June 3, 2011. The notes were redeemable by SCOR at interest payments dates as from August 2, 2016 with a first call date of August 2, 2016. The coupon had been set at 5.375% (until August 2, 2016) and at 3-month CHF LIBOR plus a margin of 3.7359% thereafter. The notes were hedged by a cross-currency swap detailed in Note 5.3.8 – Financial instruments received and given, in the analysis of commitments given and received.
●● On December 7, 2015, SCOR SE 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%.
●● On May 27, 2016, SCOR SE issued EUR 500 million in dated subordinated notes, redeemable as at interest payment dates from May 27, 2028. The coupon was set at 3.625% (until May 27, 2028), and will be reset every 10 years at the prevailing 10-year EUR mid-swap rate +3.90%.
The maturity of financial liabilities at December 31, 2016 is as follows: In EUR million Less than 1 year 1 to 5 years More than 5 years Total
The item “Reinsurance estimates – assumed” is reclassified to “Accounts receivable from reinsurance transactions”, whereas the item “Reinsurance estimates – ceded” is reclassified to “Liabilities arising from reinsurance operations”.
●● The EUR 844 million net income for 2015 was allocated to dividends for EUR 278 million, to the legal reserve for EUR 42 million and to the retained earnings for EUR 524 million.
●● The remaining balance of the capitalization reserves as at December 31, 2015 of EUR 3 million has been transferred to the other reserves, under Section 19 of the French Decree No.2015-513 of May 7, 2015.
●● During 2016, the Board decided upon a share capital reduction by cancellation of a total of 672,638 treasury shares for a total amount of EUR 5.3 million.
An amendment to the early retirement (“congés de fin de carrière”) and the long-service awards (“médailles du travail”) systems in France occurred in the second quarter of 2014. The amendments concern the termination of the early retirement system on January 1, 2017 and of the long-service awards system as at July 14, 2019. In addition, a temporary scheme called “compte senior” was implemented during the second quarter of 2014 until December 31, 2020. This scheme aims to provide, under conditions, a premium to employees going into retirement. The plan amendment resulted in a reduction retirement provisions.
Dividends received from subsidiaries amount to EUR 550 million and include: SCOR Global P&C SE (EUR 277 million), SCOR Global Life SE (EUR 200 million), SCOR Holding Switzerland AG (EUR 21 million), SCOR Auber SAS (EUR 13 million), MRM SA (EUR 3 million), SCOR Investment Partners SE (EUR 2 million), and SCOR US (USD 36 million or EUR 33 million).
Foreign currency loss amounts to a EUR 13.8 million loss in 2016 compared to a EUR 1.7 million gain in 2015.
The corporate financial statements are prepared in original currencies and converted into Euros. Fluctuations in the exchange rates used to convert the accounts might generate a significant foreign exchange impact. To limit the exchange rate fluctuation risk, forward foreign currency transactions are entered into at the end of the year to hedge the main currency surpluses in the balance sheet at the beginning of the year and adjusted during the year for material arbitrage transactions involving currencies. Hedges include spot trades of foreign currencies, forward trades of foreign currencies and option strategies.
NOTE 10. ANALYSIS OF GENERAL ExpENSES BY TYpE AND NON RECuRRING INCOME OR LOSS
The non-recurring loss amounted to EUR (4) million mainly due to the following items: ●● impairment of EUR (2.8) million; ●● French tax depreciation on acquisition costs of EUR (0.7) million; ●● accrued payables of (0.6) million; ●● reversal of tax-related provisions of EUR 0.1 million.
The SCOR Group in France is consolidated for tax purposes and is composed of SCOR SE as the parent company of the Group, SCOR Global P&C SE, SCOR Global Life SE, SCOR Investment Partners SE, SGF SAS, SCOR Auber SAS, SAS DB Caravelle, ReMark France SAS and Rehalto SA as subsidiaries. Under the tax agreement, SCOR SE benefits from the tax loss carry-forwards of its subsidiaries, and tax benefits are transferred back to the individual subsidiary concerned in the case of future profits.
In application of Articles L. 225-181 and R. 225-137 of the French Commercial Code, the Company adjusted the price of the shares corresponding to options granted and the number of shares linked to options following the capital increases of December 31, 2002, of January 7, 2004 and December 12, 2006. Thus, according to the provisions of Article R. 228 91 of the French Commercial Code, the adjustment applied equalizes, to the nearest hundredth of a share, the value of shares that will be received if the rights attached to stock subscription and purchase options are exercised after the capital increase, with pre-emptive subscription rights, of the Company decided on November 13, 2006 and the value of the shares that would have been obtained has those rights been exercised prior to the capital increase.
The stock option plans for the years 2003 to 2011 are stock subscription plans that may give rise to a share capital increase. The other plans are stock purchase options.
In 2015, 1,221,843 options were exercised: 175,920 options exercised under the stock option plan of September 16, 2005 vested on September 16, 2009, 141,771 options exercised under the stock option plan of September 14, 2006 vested on September 14, 2010, 20,993 options exercised under the stock option plan of December 14, 2006 vested on December 14, 2010, 234,549 options exercised under the stock option plan of September 13, 2007 vested on September 13, 2011, 123,900 options exercised under the stock option plan of September 10, 2008
Directors meeting Number of options open to subscription Of which to
Number of options oustanding as of vested on September 10, 2012, 142,320 options exercised under the stock option plan of March 23, 2009 vested on March 23, 2013, 6,000 options exercised under the stock option plan of November 25, 2009 vested on November 25, 2013, 169,690 options exercised under the stock option plan of March 18, 2010 vested on March 18, 2014, 9,700 options exercised under the stock option plan of October 12, 2010 vested on October 12, 2014, 93,500 options exercised under the stock option plan of March 22, 2011 vested on March 22, 2015 and 103,500 options exercised under the stock option plan of September 1, 2011 vested on September 1, 2015.
In 2016, 554,112 options were exercised: 193,526 options exercised under the stock option plan of September 14, 2006 vested on September 14, 2010, 78,507 options exercised under the stock option plan of December 14, 2006 vested on December 14, 2010, 40,739 options exercised under the stock option plan of September 13, 2007 vested on September 13, 2011, 7,000 options exercised under the Stock option of May 22, 2008 vested on May 22, 2012, 38,800 options exercised under the stock option plan of September 10, 2008 vested on September 10, 2012, 33,530 options exercised under the stock option plan of March 23, 2009 vested on March 23, 2013, 2,000 options exercised under the stock option plan of November 25, 2009 vested on November 25, 2013, 44,510 options exercised under the stock option plan of March 18, 2010 vested on March 18, 2014, 500 options exercised under the stock option plan of October 12, 2010 vested on October 12, 2014, 34,000 options exercised under the stock option plan of March 22, 2011 vested on March 22, 2015, 2,000 options exercised under the stock option plan of September 1, 2011 vested on September 1, 2015 and 79,000 options exercised under the stock option plan of March 23, 2012 vested on March 23, 2016.
Amount distributed under the profit-sharing plan 1,216 1,055 1,247 1,153 815
(1) Paid out in the financial year for the previous financial year. (2) The voluntary payments shown include payments to all corporate mutual funds (FCPE), including PERCO since 2015. (3) Including PERCO.
The following table presents the gross cash compensation paid in 2015 and 2016 to the Group Chairman and Chief Executive Officer: Chairman and Chief Executive Officer
In 2016, currency forward purchases and sales generated unrealized gain of EUR 1 million.
The guarantee given in consideration for underwriting commitments with the cedent ACE was USD 13 million (EUR 12 million). This guarantee was in the form of securities pledged to ceding companies.
uNCONSOLIDATED CORpORATE FINANCIAL STATEMENTS OF SCOR SE Certification of audit of historical financial information < #C
This is a free translation into English of the Statutory Auditors’ report on the financial statements issued in French and it is provided solely for the convenience of English-speaking users.
The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the audit opinion on the financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions or disclosures.
These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.
In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as at December 31, 2016 and of the results of its operations for the year then ended in accordance with French accounting principles.
In accordance with the requirements of Article L. 823-9 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we bring to your attention the following matters: ●● As stated in Notes 1.7 to 1.9 to the financial statements, the technical accounts specific to reinsurance are estimated on the basis of reinsurance commitments or on statistical and actuarial bases, particularly the technical estimates accounted for under receivable from reinsurance transactions, gross and ceded technical reserves, and deferred acquisition costs. The methods used to calculate these estimates are described in the notes to the financial statements.
●● Notes 1.2, 1.10, 1.12, Note 2 and Note 15 to the financial statements describe the principles and methods used to estimate the valuation and impairment of investments and derivative instruments.
We have examined the valuation and impairment of these financial instruments. On the one hand, we assured ourselves of the appropriateness of the valuation scheme for financial instruments and, on the other hand, reviewed and tested the control processes set up by management to assess impairment. We have obtained assurance that the information provided in the aforementioned notes is appropriate.
●● Note 6 and Note 17 to the financial statements describe the uncertainties relating to the potential litigation encountered by your Company.
We examined the Company’s procedures to identify these risks, to evaluate and reflect them in the annual 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 documents addressed to the shareholders with respect to the financial position and the financial statements reminded that it is not our responsibility to conclude on the fair presentation and consistency with the financial statements of the solvency related information extracted from the Report provided for in article L. 355-5 of the French Insurance Code (Code des assurances).
Concerning the information given in accordance with the requirements of Article L. 225-102-1 of the French Commercial Code (Code de commerce) relating to remunerations and benefits received by the directors and any other commitments made in their favor, we have verified its consistency with the financial statements, or with the underlying information used to prepare these financial statements and, where applicable, with the information obtained by your Company from companies controlling your Company or controlled by it. Based on this work, we attest the accuracy and fair presentation of this information.
In accordance with French law, we have verified that the required information concerning the controlling interests and the identity of the shareholders or holders of the voting rights has been properly disclosed in the management report.
This appendix has been prepared in accordance with the regulations referred to in Article 225 of the law on the national commitment to the environment. The presentation also takes into account Recommendation No. 2013-18 of the AMF published on November 5, 2013 and available on the AMF’s website. It describes how the Group (“SCOR” or the “Group”) accounts for the direct effects of its activity on its employees and outlines the policies, actions and programs it has implemented in response, both at SCOR SE and its subsidiaries in France and abroad.
The items mentioned in the document pertain to the entire Group except ReMark (149 employees, fully consolidated entity), MRM (5 employees, fully consolidated entity), Telemed (27 employees), Réhalto (32 employees) and the Lloyd’s Channel Syndicate (122 employees). ReMark, Telemed and Réhalto are wholly-owned by SCOR Global Life SE. The Lloyd’s Channel Syndicate is a subsidiary of SCOR Global P&C SE. MRM is a subsidiary of SCOR SE. They are all managed independently from the Group in terms of human resources (HR policies, processes, rules and frameworks, etc.).
(3) SCOR Global Life SE holds 100% of the capital of ReMark. Due to its specific activity, business model and organization, ReMark’s human resources are managed independently from the Group.
(4) From 2014 to 2016, the Lloyd’s Channel Syndicate (122 employees at December 31, 2016) is a subsidiary of SCOR Global P&C SE, managed independently from the Group in terms of human resources and not aggregated financially (or from an HR perspective) at the level of the division.
(1) SCOR considers all employees paid and under a tripartite relationship between the Company, the school and the student as trainees SCOR had 118 trainees as at December 31, 2016 (41 in France, 15 in Switzerland, 19 in Germany, 2 in the US, 17 in the United Kingdom, 1 in Russia, 3 in Spain, 1 in Brazil, 7 in China, 2 in Hong Kong, 1 in Korea, 8 in Singapore, 1 in Taiwan). The trainees’ working contracts differ depending on the country and training objectives. All trainee programs aim to introduce the students to the world of work, whether through work-study programs or vocational training courses for specific professions.
(1) The Group had no particular difficulties in hiring in 2016.
(1) The corporate officer is not included. Total compensation is calculated on the basis of 2,652 employees as at December 31, 2016.
SCOR maintains a holistic approach to compensation. Compensation for both Partners and employees comprises several components: a fixed and a variable portion, an immediate and a deferred portion, an individual and a collective portion. The components include a base cash salary, an annual cash bonus, shares and options where applicable, pension schemes and any other benefits.
SCOR has established a “Partners” program. This program, which aims to involve the Partners in the capital of the Group, applies to approximately 25% of the total number of employees. It is a specific and selective program in terms of information sharing, career development and compensation schemes.
* 2016 Group staff turnover: number of departures in 2016 (excluding dismissals, deaths, Company transfers and trainees)/headcount as at December 31, 2015.
In addition, the Group pursues a policy of employee share ownership, which resulted in 221,160 shares being allocated to non-Partners in 2010, 141,020 shares in 2011, 168,440 shares notified in 2013, 199,750 shares in 2014, 154,425 shares in 2015.
The length of absence(1) within the Group is 9,584 days in France, 91 days in Belgium, 2 days in the Netherlands, 467 days in Spain, 291 days in Italy, 489 days in Russia, 66 days in South Africa, 1,215 days in Ireland, 1,654 days in the UK, 231 days in Sweden, 2,436 days in Switzerland, 15 days in Israel, 2,957 days in Germany, 2,848 days in the USA, 132 days in Brazil, 54 days in Argentina, 203 days in Canada, 5 days in Mexico, 45 days in Colombia, 8 days in Chile, 247 days in Australia, 230 days in China, 104 days in Hong Kong, 1 day in India, 2 days in Malaysia, 17 days in South Korea, 1,263 days in Singapore, 23 days in Japan, and 3 days in Taiwan.
The Common European Companies Committee (Comité Commun des Sociétés Européennes – CCSE) met two times (in Paris) on June 16, 2016 and October 6, 2016.
Organization of employee / management dialogue 6 collective agreements were signed within the Group in 2016.
(1) For France, this figure includes work councils meetings and employee representative meetings (“délégués du personnel”).
Health and safety 12 occupational accidents (2) at the workplace with sick leave were recorded as at December 31, 2016 (7 in France, 1 in Spain, 3 in United-Kingdom, 1 in Switzerland)(3).
Due to its geographical locations and applicable local laws, SCOR complies with all the provisions of the International Organization. The themes related to “Elimination of discrimination in respect of employment and occupation” and “Freedom of association and the effective recognition of the right to collective bargaining” are described, in particular, in Section 1.3.5 Diversity and equal opportunities and in Section 1.3.2 Labor relations. Labor relations within the Group can be considered as good. A good social dialogue exists in each Hub and at the European level.
●● In France, the document for the evaluation of occupational risks is reviewed by an external expert and updated to prevent all occupational risks by job type with the SCOR joint works committee (UES), regular medical appointments are organized for employees by the occupational health department, support is provided for stress management especially through the sports association (a fitness room is located in the Kléber site), support is provided to employees experiencing difficulties at work: counselling (Réhalto).
●● In Spain, employees are offered an annual medical check-up (general medical examination and occupational risk prevention).
(1) Due to its non-materiality within the Group, information related to occupational diseases is not reported. (2) Number of occurrences in the course of work which leads to physical or mental harm and absence. (3) The frequency rate and the severity rate of accidents are not calculated as these indicators are not significant within the Group. However, SCOR has identified the number of occupational accidents within the Group to provide basic information on this subject.
The strategic objectives of the training policy are to: ●● have a consistent SCOR-wide training approach to ensure career development for all employees; ●● maintain and develop employees’ technical and transversal skills, thus contributing to the Group’s performance; ●● apply a stringent process for analyzing, controlling and monitoring SCOR’s strategic needs; ●● make the training policy a powerful means of developing and retaining staff while adhering to local legal requirements.
●● At the Compensation and Nomination Committee meeting on July 25, 2012, it was noted that SCOR had made progress towards achieving equality between women and men at work and that the initiatives must continue. This objective is part of the initiatives supported by SCOR to facilitate the access of female employees to key positions within the Group and enhance the talent pool. This approach is also consistent with the internal policy of equality when increasing salaries, performing appraisals or promoting to Partner status (a reminder of this principle is sent to the managers with the guidelines) and with the recruitment process, which is designed to eliminate any risk of discrimination.
●● A European charter for gender equality was signed on January 29, 2015 at the European level by the Management and members of the European Committee. It offers innovative features and actions to promote diversity.
●● SCOR promotes its female talent, notably through the Group’s participation in the Women in Insurance Awards (Trophée de la Femme dans l’Assurance) in France in 2014, 2015 and 2016.
In parallel, the following commitments (resulting from the agreement) have been made at the Paris site: 1. Develop and maintain diversity in employment and recruitment, especially via the participation in the “Financi’Elles” network.
2. Promote and ensure equal treatment in terms of pay and training between women and men working in equivalent fields and similar functions with the same skills, experience, responsibilities, performance and education.
3. Ensure that absences related to maternity do not affect career development and salary.
4. Promote compatibility between work and family life, especially through teleworking. ●● In the United Kingdom, several partnerships have been implemented: corporate membership with the City parents (professional network promoting balancing family life with a progressive career), corporate membership with TWIN (The Women’s Insurance Network), partnerships with various training agencies for mentoring and coaching men and women in leadership. Moreover, a gender diversity committee has been set up.
●● In Ireland, the meeting rooms have been renamed to reflect Irish female authors. ●● In Sweden, a company Code of Conduct on diversity and equal opportunities is in place, as required for all companies with 25 employees or more.
●● In the US, the Equal Employment Opportunity report is completed annually as required by the law.
●● Non-discriminatory measures for older employees are applied in certain Hubs, especially in Paris where an agreement was signed in 2009 on non-discrimination and equal treatment, recruitment and job retention, career planning, skills management for seniors.
●● In Germany: “Learning over Lunch” events continue to take place, with objectives such as the ways to help parents manage specific parental situations; there is one woman on the local Management Committee; parttime or flexible working arrangements are discussed to alleviate the difficulties faced by certain employees; paternity leave and child/parent care leave are promoted, teleworking is being considered (implementation of a pilot scheme), personal coaching and support and assistance for older employees are also in place, along with a pension scheme adaptable according to the employee’s personal circumstances. During the Global diversity week, a presentation was made by an external stakeholder to raise awareness of the employees on the questions of the communication between the different generations.
●● In the Singapore, a lunchtime talk was held for employees in the office to learn a few tips on how to strike a balance between work and family lives. Moreover, a week of activities promoting the cultures diversity has been organized in May. A Global “Potluck” Day was proposed. The employees brought dishes that were representative to their culture/country for a tasting session and participated to activities that were representative to the cultures in Asia. At last, several on-site and remote presentations have been proposed to better understand the different cultures across Asia Pacific.
In the United-Kingdom, evac chairs in stairwell made available for persons who are wheelchair bound.
●● Average fixed compensation is calculated on the basis of the annual compensation of reference paid to employees, prorated to actual hours worked. The average bonus includes the profit sharing scheme for France and takes into account bonuses equal to 0 for unsatisfactory performance. The average granted shares takes into account persons who have not been granted shares.
●● The length of absence includes sick leave, accident, maternity/ paternity leave, sabbatical leave and exceptional leave.
In accordance with the recommendations of the Autoritié des Marchés Financiers, this report also includes information on the methodology used as well as on its potential limitations. This section of the report also includes the information deemed as ancillary as well as the categories for which SCOR applies the “comply or explain” principle.
SCOR’s environmental policy is guided by the international initiatives to which it has subscribed. Signatory of the United Nations Global Compact since 2003 and the Kyoto Protocol under the aegis of the Geneva Association since 2009, since 2012 SCOR is also a founding signatory of the Principles for Sustainable Insurance, a global initiative placed under the umbrella of the United Nations Environment Program – Finance Initiative (UNEP-FI). These initiatives form the framework in which SCOR SE (the “Company”) and its main subsidiaries implement the Group’s environmental policy (“SCOR”).
Although reinsurance is not an industrial activity with a significant impact on the environment, SCOR strives to conduct its global operation in accordance with the environmental principles which are set out by the United Nations Global Compact with regards to prevention, protection and precaution. Therefore, the environmental policy aims to reduce the environmental impacts directly linked to SCOR’s activity and whose main source is derived from office management (energy consumption, water consumption, etc.), business travel (in particular air travel due to the global nature of its activity) and to a lesser extent office equipment (furniture, information technology equipment, paper, etc.). The Group focuses on greenhouse gas emissions for which an indicative target of reduction by 2020 has been set in terms of intensity when it joined the French Business Climate Pledge in November 2015. This initiative is one of the measure taken by the Group to contributing in its own way to climate change mitigation and to transitioning to a low carbon economy.
SCOR conducts its operations from offices of varying size in forty countries. The Group either owns or rents them.
The roll-out of such system may notably improves the environmental profile of the office premises. For instance, the rating of the environmental profile of SCOR’s headquarters in Paris has been further increased following the 2016 audit of certification. Since the adoption of the HQE operation standard, the rating of the environmental profile of SCOR’s headquarter has been upgraded three times.
The Group consumed 17.8 GWh in 2016 to operate the premises occupied by our staff (lighting, heating, cooling – including data center (1) – power for operating various equipment). Most of the energy consumed in the Group’s premises surveyed comes from electricity (67%). The share of renewable energies has significantly increased, notably thanks to the headquarters shift in its supply of electricity to a 100% renewable sources. Renewable energy sources account for 48% of electricity purchases in 2016 whereas this share accounted for 31% in 2015.
Due to the global nature of SCOR’s activities, business trips, and particularly air travel, account for a significant share of the Group’s greenhouse gas emissions. In 2016, almost 45 million kilometers were travelled either by plane (95%) or by train (5%).
The Group has implemented proportionate processes both in terms of reduction and recovery of its waste production on its main locations. In this respect, the Group selectively monitors its waste, particularly the most toxic products for the environment (electronic and computer waste, batteries, ink cartridges and toners, etc.). The production of paper and cardboard waste is also monitored and consolidated throughout the Group, although the reinsurance industry uses less paper than the insurance industry due to less desktop publishing.
Although SCOR’s offices are located in urban areas not subject to particular water stress, SCOR includes water consumption to its environmental reporting process. Group’s total water consumption (1) was 45,149 m3 in 2016. Water consumption mainly stems from employees own consumption and in a few cases from the maintenance of green spaces.
Other sources of emissions may be significant in the context of the Group’s activities but since the Group has adopted a pragmatic approach it focuses on the sources providing an immediate lever. Information on these other significant sources of emissions are available in the Section 2.4 of this report (“methodology”).
In 2016, the Group’s emissions calculated as outlined in the Section 2.4 of this environmental report amounted to 22,627 tons of CO2 equivalent or 8.2 tons of CO2 equivalent per employee. Whilst the measured emissions include the ones produced by the providers and other tenants hosted on some of SCOR’s locations, emissions are divided by SCOR’s employees only. This tends to overestimate the carbon intensity of the Group. Therefore the latter cannot be compared with the ratio published in 2015 since the method has changed. This ratio includes both the emissions generated by Channel Syndicate and its employees as it was already the case in 2015.
2.2.7. MAIN INDICATORS AND COVERAGE RATIO AS A pERCENTAGE OF SCOR’S TOTAL WORKFORCE
(2) Of which electricity (67%), fuel and gas (11%), other heating sources (5%) and other cooling sources (17%).
When the new strategic plan “Vision in Action“ was presented, SCOR announced its intention to further integrate environmental, social and governance considerations in its investment policy. Climate change mitigation and adaptation aspects are an important theme of the environmental pillar.
As announced during the presentation of its strategic plan, the Group has initiated works to further analyzing climate challenges related to its asset portfolio. Several aspects are being investigated such as the so-called “stranded assets”, the portfolio positioning with a 2 degrees scenario, and the measure of the asset portfolio carbon footprint. The general approach, the type of analysis carried out, and their preliminary conclusions will be unveiled in a report dedicated to the integration of environmental, social and governance considerations so as to be in conformance with the provisions that apply to institutional investors pursuant to the article 173 of the law on the energy transition for the green growth.
This institutional engagement on adapting to climate change is backed at the highest level of the Group. SCOR’s Chairman and Chief Executive Officer co-chairs the Geneva Association’s Extreme Events and Climate Risks working group since May 2015. The work plan of this working group includes the coordination of several initiatives in the field of modelling, in particular of climate risks modelling.
The SCOR’s Corporate Foundation for Science is also involved in the promotion of climate research. In 2015, the Foundation organized a scientific conference combining a range of disciplines (climate, economy, actuarial, with a keynote speech delivered by Jean Tirole, Nobel Prize for Economics). This seminar was awarded the COP 21 label. In collaboration with the Geneva Association and with the technical support of the Group’s teams, the SCOR’s corporate Foundation for Science has decided to organize a second event on risk modelling, including climate risks, and how it can contribute to the development of risk transfer mechanisms. This conference, which will be hosted in the premises of the Group in March 2017, will explore what has been learnt from 25 years of developing and utilizing catastrophe risk models. It will also look at the next generation of the risks models being currently developed. The conference will also debate/consider how the latest developments/advances in climate and earth observations could be harnessed for designing the next generation of forward-looking models and how these models could stimulate the expansion of insurance coverage to the overall population.
This environmental report covers the parent company (SCOR SE) and the main locations of its subsidiaries in France and abroad which are fully consolidated in the financial statements with the exception of Remark Group (149 employees) and MRM (5 employees). These companies account for 5.5% of employees fully consolidated in the financial statements. Although Channel Syndicate (122 employees, 4.3% of employees fully consolidated in the financial statements) is not fully consolidated in the financial statements, SCOR includes this entity in its environmental reporting process. Associates and affiliates are excluded from the scope (see Section 4.6 – Notes to the consolidated financial statements, Note 22 – Related party transactions).
As the requested data were not available for all the legal entities covered by the environmental reporting protocol, a table has been included providing an overview of the rate of coverage for a selection of indicators.
Consolidated data covers a 12-month period, generally from November 1, 2015 to October 31, 2016.
Due to the unavailability of data for the full year for some of the locations included in the environmental report, an extrapolation has been carried out to estimate missing consumption data. Moreover, depending on the surface area occupied, the information collected entails different parameters, in particular with regards to the consolidation or not of the energy consumption derived from the use of services located in shared areas of the building. Where SCOR is the sole or main tenant (i.e. more than 50% of the surface area is occupied by SCOR’s staff), the data includes SCOR’s share of the energy consumption for the shared area. Below this threshold, this share is not included in the data collected.
for some sites, such as Paris, from urban cooling systems. For the calculation of the greenhouse emissions SCOR does not use a discounted factor for renewable energy if a certificate with the discounted rate to be applied is not provided by the energy supplier. Indeed, as the sources of renewable energy purchased are not always known, SCOR adopts a precautionary approach, using the emission factor resulting from the energy mix of a given country. Hence this approach tends to slightly overestimate the measured carbon footprint of the Group.
With regards to the source of emissions (to be distinguished from the volume of emissions) within each Scope, the rate of coverage is estimated at around 100% for Scope 1 (within this scope refrigerant fluid may be a significant source of greenhouse gas emissions; volumes are not estimated) and at 100% for Scope 2. The rate of coverage for Scope 3 is limited to approximately 10% since the Group has adopted a pragmatic approach with a clear focus on business transportation which has an important environmental footprint. Within this Scope, the main sources excluded are commuting as well as the so-called depreciation of equipment, property and services, such as data center outsourcing. The main sources of greenhouse gas emissions of the Group may also include emissions stemming from investment and asset management activities. Methodological standards being developed to quantify these emissions are still in their infancy with a lot of limitations. A reflection on their assessment has been launched by the Group.
Categories of the article R. 225-105-1 deemed as ancillary or excluded from the environmental report
Quantitative information is not itemized in our control and budget monitoring system. However, besides compliance with local standards and regulations as well as the roll-out of a travel policy calling for moderate use of transport, SCOR devotes proportionate means and resources to the prevention of environmental risk and pollution. As described in the Section 2.1.2 of this report, the Group’s affiliates deploy environmental management systems on most of their premises where the Group is the sole or main operator/manager.
Description of the measures taken to prevent sound pollution or any other form of pollution specifically concerning the Company
Financial services activities do not directly consume raw materials, but indirectly through their procurement of furniture, office equipment, and information technology (IT) and office equipment. In areas where the Group has a centralized function dedicated to the purchase of office supplies such as IT equipment, environmental standards have largely taken into account in the selection of equipment. This holds true for the acquisition of commercial property, where a clear focus has been put on green credentials (i.e. environmental certification of the design and construction phases).
Otherwise, furniture and office equipment are managed locally and green standards are progressively integrated in various areas such as paper ream purchases (1) which came to 68.2 tons in 2016. Recycled paper and paper carrying the FSC or PEFC label represented around 87% of these purchases.
The information below, which relates to the Group’s societal commitments in support of sustainable development, are presented in accordance with the regulatory provisions set out in Article 225 of France’s national law on its commitment to protect the environment. The sections are presented in the same order as Decree No. 2012-557 of April 24, 2012 relating to corporate transparency requirements in social and environmental terms. Unless otherwise specified, the information below applies to the Group and its direct impact.
SCOR employs more than 2,653 staff worldwide (excluding Remark, MRM, Rehalto, Channel Syndicate and SCOR Telemed), including 739 in the greater Paris region (France).
Not applicable given the location and nature of the sites used by SCOR SE and its subsidiaries in France and abroad.
Aside from its employees, for whom the conditions for dialogue are set out in Note 1.3.2 – Labor relations, SCOR maintains relationships with a broad range of stakeholders directly affected by our business. These stakeholders include: ●● shareholders and investors notably with the launch of the SCOR’s Shareholder Club in April 2016; ●● clients and reinsurance brokers; ●● financial and non-financial rating agencies; ●● national supervisory authorities for the insurance and reinsurance industries in countries in which the Group has subsidiaries (e.g. Autorité de Contrôle Prudentiel et de Résolution – France, Prudential Regulation Authority – United Kingdom, Monetary Authority of Singapore – Singapore, Central Bank of Ireland – Ireland, Autorité Fédérale de Surveillance des Marchés Financiers – Switzerland, as well as the insurance commissioners of the States in which the Group’s American subsidiaries are registered in the United States of America);
●● trade associations representing the interests of the insurance and reinsurance industry (e.g. Fédération Française des Sociétés d’Assurance, Association professionnelle de la réassurance in France, Insurance Europe, The Geneva Association, American Council of Life Insurers, Reinsurance Association of America, Chief Financial Officers Forum, Chief Risk Officers Forum, Chief Compliance Officers Forum, Reinsurance Advisory Board, Global Reinsurance Forum); ●● non-governmental institutions such as the United Nations Program for the Environment via its financial initiative, the United Nations Global Compact as well as the Insurance Development Forum (IFD), a multi stakeholders initiative gathering the UnitedNations, the World Bank Group, other international institutions and the (re)insurance industry.
SCOR has implemented a number of different methods for communicating with the stakeholders mentioned above, which are tailored to each type of relationship (e.g. regular meetings, participation in working groups, client events on various different topics including the technical aspects of reinsurance, transfer of information on demand, production of regulatory reports). Generally speaking, when such practices are not subject to regulatory provisions, the Group does its utmost to adopt the best practices identified in the corresponding countries.
SCOR follows an active policy of partnership and sponsorship, notably at Group level in the field of scientific promotion and locally through its commitment to local communities and its support for the arts and culture.
The Group or its Foundation as appropriate also contribute to the promotion of actuarial science by helping to fund actuarial awards in cooperation with local actuarial institutes both in Europe (Germany, Spain, Portugal, France, Italy, the UK, Sweden and Switzerland) and Asia (Singapore). Besides the actuarial prizes, the Group organizes research seminars in cooperation with similar institutes. The topic “Scientific laws and modelling in mathematics: from physics to actuarial science” was thus at the heart of the seminar jointly organized by SCOR and the French Actuarial Institute in 2016. In 2015 this seminar was devoted to “Big Data and Actuarial Science”.
In France, SCOR has launched significant research partnerships in the field of economics and finance, notably in collaboration with the Foundation Jean-Jacques Laffont – Toulouse School of Economics (TSE) chaired by the 2014 Nobel Prize winner, Jean Tirole. The two chairs financed by SCOR, “Market Risk and Value Creation” (since 2008) and “Finance” (since 2009), have enabled Jean Tirole and the researchers at TSE to conduct outstanding theoretical and empirical research into risk, which may be consulted on SCOR’s website. This collaboration gives SCOR real-time access to the most recent academic risk research results, and furthers “the art and science of risk” constituting its comparative advantage.
> Information related to societal commitments in support of sustainable development
Apart from the involvement described above in the development and diffusion of scientific knowledge, SCOR runs a number of sponsorship programs throughout the world which involve its offices and teams in the life of the local population. Steered locally in order to be as close as possible to the needs of the communities in question, the Group’s offices strive to develop and roll out their own program of commitment to society, taking account of the specific cultural and/or regulatory features of the countries from which they conduct their activities.
Moreover, SCOR employees, notably in the United States and Great Britain as well as in Asia, are also very active in terms of fundraising for various different causes. These funds, collected on the initiative of employees, may also be topped up by an equivalent contribution by the Company. In 2016, SCOR Global Life staff in collaboration with MSH China and the Yang Jing community foundation, joined forces to financially support the publishing and the editing of a book promoting awareness of Alzheimer’s disease and outlining the benefits of prevention and early detection of this pathology.
At the crossroads between research and support for the arts and culture, SCOR is partnering the Louvre museum in a research and exhibition program on the topic of catastrophe and how it is represented. Launched in 2013, this program culminated with a temporary monographic exhibition on the topic of ruins and entitled “Hubert Robert (1733-1808) – A visionary painter”. Other research seminars and exhibitions were held over the period. From November 2015 to January 2016, an exhibition dedicated to Maarten van Heemskerck was held at the Institut national d’histoire de l’art (INHA) on destroyed cities and religious conflicts in the Netherlands in the 16th century. In 2014, the overarching theme of the program was the representation of prophecies in ancient and modern times.
With regard to its worldwide activities, SCOR endeavors to adopt best practices in each of its locations.
Any employee who deals with a supplier must, before concluding a contractual partnership, ensure that said supplier gives an undertaking to comply with the requirements of the Code of Conduct established by the SCOR Group (or a commitment from the Company that it respects equivalent requirements). The framework agreement developed by the Group’s Legal Department, which must be used by the Group’s various different components, thus contains a specific section on the Code of Conduct. This framework agreement also contains an appendix, the sustainable development charter, which begins with a reminder of SCOR’s adherence to the principles of the United Nations Global
SCOR’s procurement chain is not complex. Assistance from external service providers mainly consists of IT development and maintenance as well as maintenance and operations of the buildings from which SCOR conduct its business. The diligences stated above are applied to these outsourcing contracts.
SCOR has implemented a group zero-tolerance anti-bribery policy, including making illegal facilitation payments, and gives guidance on banned activities, key principles and requirements regarding (i) gifts, entertainment and hospitality; (ii) dealing with business partners; (iii) interacting with public officials; (iv) charitable and political contributions and sponsorships; (v) payments and financial controls. The policy in question also highlights do’s and don’ts and red flags indicating that the General Counsel or Compliance Officer must be contacted in case such red flags are identified, and also outlines the roles and responsibilities of SCOR’s control functions to combat bribery.
Aside from the processing of personal data relating to its employees, SCOR’s activities may lead to the processing of other personal data, which notably implies compliance with European Directive 2005/68/EC and with the French Data Protection and Freedoms Act.
Pending the European Regulation 2016/679 on data privacy due to come into force in 2018, the Group set up a action plan and since 2011 has notably appointed a Data Protection Officer (DPO) in charge of personal data protection. The Group’s four European Companies (SCOR SE, SCOR Global P&C SE, SCOR Global Life SE and SCOR Global Investments SE) have designated this DPO as an expert correspondent with the French
Data Protection Authority (Commission nationale de l’informatique et des libertés – CNIL). This interlocutor is responsible for the relations of the Group with the French Data Protection Authority, as well as for the implementation of data processing within the Group; it independently monitors compliance with the law and is responsible for: ●● providing information to, advising and making recommendations to those responsible for data processing; ●● updating a list of processed data and the accessibility of this list; ●● spreading a culture of data protection; ●● sounding any alarms as necessary; ●● mediation and coordination in terms of informing people of their rights regarding access, rectification and opposition.
This is a free English translation of the Statutory Auditors’ report issued in French and is provided solely for the convenience of Englishspeaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
In our capacity as independent third party, certified by COFRAC Inspection under number 3-1058 (1) and member of Mazars’ network, SCOR SE’s Statutory Auditor, we hereby report to you on the consolidated CSR information for the year ended December 31, 2016, included in the management report (hereinafter named “CSR Information”), pursuant to article L. 225-102-1 of the French Commercial Code (Code de commerce).
Our independence is defined by regulatory texts, the French Code of Ethics (Code de déontologie) of our profession and the requirements of article L. 822-11 of the French Commercial Code. In addition, we have implemented a system of quality control including documented policies and procedures regarding compliance with the ethical requirements, professional standards and applicable legal and regulatory requirements.
Our work involved 7 persons and was conducted between end of mid-November 2016 and end of January 2017 during a 5-week intervention period.
We compared the CSR Information presented in the management report with the list provided in article R. 225-105-1 of the French Commercial Code.
For any consolidated information that is not disclosed, we verified that explanations were provided in accordance with article R. 225-105, paragraph 3 of the French Commercial Code.
> Statutory Auditor’s report on the reviewof selected SCOR SE environmentaland social indicators
We verified that the CSR Information covers the scope of consolidation, i.e., the Company, its subsidiaries as defined by article L. 233-1 and the controlled entities as defined by article L. 233-3 of the French Commercial Code within the limitations set out in the methodological note, presented in the sections “Methodological note” of the management report.
We also assessed the relevance of explanations provided for any information that was not disclosed, either in whole or in part.
Based on the work performed, no material misstatement has come to our attention that causes us to believe that the CSR Information, taken as a whole, is not presented fairly in accordance with the Guidelines.
SCOR defines a natural catastrophe as events involving several natural risks including but not limited to flood, windstorm, earthquake, hurricane, tsunami, that give rise to an insurable loss. For reporting purposes, the Group separately considers catastrophes as events causing pre-tax losses, net of retrocession, totaling at least EUR 3 million.
Amount of capital which is available and eligible to cover the Solvency II capital requirements (SCR). It is made of the addition of the IFRS shareholder’s equity, the eligible hybrid debt and the impact of economic adjustments on the economic balance sheet. It is the numerator of the solvency ratio.
Reinsurance on an item-by-item or risk-by-risk basis. Facultative reinsurance is usually written for very large-line risks. It may be either proportional or non-proportional.
Financial instruments whose values are driven by insurance loss events. Such instruments that are linked to property losses due to natural catastrophes represent a unique asset class, whose return is uncorrelated with the returns of the general financial markets.
Collective term for the lines of business in connection with the insurance of people, i.e. life, pension, health, critical illness, long-term care and personal accident insurance.
The probability that an individual in a given group develop a certain disease or disorder.
The relative incidence of death of Life insureds or annuitants holding a Life insurance policy.
Solvency Capital Requirement, i.e. required capital, under the Solvency II framework, calculated by SCOR’s internal model, ensuring the Group can meet its obligation over the following 12 months with a 99.5% probability. It is the denominator of the solvency ratio.
For Lloyd’s, amount of gross written premiums net of acquisition costs underwritten by the Group through its investments in Lloyd’s Syndicates.
The technical result of SCOR SE as at December 31, 2016 was EUR 98,867,187 while the financial result was EUR 643,659,288.
For additional information on the operating and financial situation of SCOR SE and its subsidiaries, as well as on the development of their business in 2016, see Section 1.3, Section 4 and Appendix C of the Registration Document.
Operating and financial review of SCOR SE < #F ADDITIONAL INFORMATION RELATING TO THE MANAGEMENT REpORT
In application of paragraph 5 of Article 39 of the French general tax Code, EUR 3,596,316 of expenses are considered as non-deductible for tax income 2016. The related amount of taxation due by the Company adds up to EUR 1,238,212.
Pursuant to the provisions of Article R. 225-102 of the French Commercial Code, the following table presents a summary of SCOR SE’s operating results for each of the last five financial years: I. Financial position at the end of the year a) Social Capital (in EUR million) 1,517 1,518 1,518 1,518 1,515 c) Number of convertible bonds to shares - - - - -
II. Global Profit and loss of effectives transactions (in EUR million)
IV. Salaries: c) Amount of paid employees benefits (Healthy contribution, others benefits, etc. 29 27 26 29 22
1.2.2. DIVIDENDS DISTRIBuTED BY SCOR SE OVER THE LAST THREE FINANCIAL YEARS
(2) For natural persons only: the dividend paid in 2014, 2015 and 2016 for the financial years 2013, 2014 and 2015 gave entitlement to a 40% deduction (except where the beneficiary opted for fixed-rate taxation on dividends (prélèvement libératoire forfaitaire, where applicable)).
The following information and statements are fully incorporated into this Report, of which they are an integral part, in the various sections of the Registration Document referred to in the correspondence table below: Management report Registration Document
Indications on the use of financial instruments, and the Company’s objectives and policy in terms of financial risk management and market risks Sections 3.4 et 3.5
STATEMENTS DEALING WITH THE MANAGEMENT OF SCOR SE IN 2016: Company’s securities: ●● Amount of issued capital, capital increase and additional information Sections 2.3.1, 5.2 and Appendix C – Note 5
●● Issuance of bonds and similar securities Appendix C – 5 Note 4 and Section 4.6 Note 13
●● Adjustment of the conversion basis for securities granting access to the share capital Section 2.3.1.5
Compensation and benefits granted to SCOR SE’s corporate officers in 2016 Sections 2.2.1, 2.2.2 and 2.2.3
(1) The Company did not hold any cross shareholdings in 2016.
Amount of dividends distributed in the last 3 years and dividends eligible for the 40% tax rebate Appendix F – 1.2.2
Transfer or disposal of shares undertaken to regularize cross shareholdings - (1)
Purchase of shareholdings in 2016 Sections 4.6 Note 3 and 3.2.1.5 Appendix C – 5 Note 2
REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS APPENDIX A
5.2 Investments 1.2.6 SCOR investments in tangible and intangible assets 6 Business overview 6.1 Primary activities 1.2.5 Business overview 15 to 22 6.2 Principal markets 1.3.1 & 1.3.2 Reinsurance market developments & financial market developments 6.3 Extraordinary events influencing the principal business and markets 1.3.3 Significant events of the year 26 6.4 Dependency of the issuer with respect to patents or licenses, industrial, commercial or financial contracts and new manufacturing processes 1.2.6.2 Research and development, patents and licenses 6.5 Information on SCOR’s competitive position 1.3.4 Information on SCOR’s competitive position
Headings as listed in Appendix 1 of European Commission Regulation N° 809/2004 Paragraph Pages 7 Organizational structure 7.1 Brief description of the Group and of the position of the issuer 1.2.3 Organizational structure of SCOR 12 7.2 List of issuer’s significant subsidiaries 1.2.3 Organizational structure of SCOR 12 8 Property, plant and equipment 8.1 Major existing or planned property, plant and equipment 1.2.6 SCOR investments in tangible and intangible assets 8.2 Environmental issues that may affect the utilization of property, plant and equipment 1.2.6 SCOR investments in tangible and intangible assets 9 Operating and financial review 9.1 Financial position 1.3.6 Financial position, liquidity and capital resources 9.2 Operating results 1.3.5 Revenues & earnings summary 27 to 37 10 Capital resources 10.1 Capital 1.3.6 Financial position, liquidity and capital resources 10.2 Cash flow 1.3.8 Cash flows 40 10.3 Borrowing conditions and financing structure 1.3.6 Financial position, liquidity and capital resources 10.4 Restrictions on the use of capital 1.3.6 Financial position, liquidity and capital resources 10.5 Sources of financing relating to the future investments by the Company and to its property, plant and equipment 1.3.6 Financial position, liquidity and capital resources 11 Research and development, patents and licenses 11.1 Research and development activities 1.2.6 SCOR investments in tangible and intangible assets 11.2 Information technologies 1.2.6 SCOR investments in tangible and intangible assets 12 Trend information 12.1 Most significant trends in production, sales, inventory, costs, and selling prices since the end of the last financial year 1.3.4 & 1.3.5 Information on SCOR’s competitive position & revenues and earnings summary 12.2 Known trends, uncertainties, demands, commitments and events reasonably likely to have a material effect on the issuer’s prospects 1.3.4 & 1.3.5 Information on SCOR’s competitive position & revenues and earnings summary 13 Profit forecasts or estimates N/A N/A N/A
14 Administrative and management bodies 14.1 Information on the members of the Board of Directors and Senior Management 2.1.2 & 2.1.4 Board of Directors & Executive Committee to 67 14.2 Administrative, management, and supervisory bodies and Senior Management conflicts of interest 2.1.2 Board of Directors 45 to 62 15 Compensation and benefits 15.1 Amount of compensation paid and benefits in-kind 2.2.1 to 2.2.3
Compensation of the executive corporate officer and directors in the form of stock options and performance shares 15.2 Total amounts set aside or accrued to provide pension, retirement, or similar benefits for financial year 2015 2.2.1 Compensation of the executive corporate officer and directors 16 Board practices 16.1 Date of expiration of the current term of office 2.1.2 Board of Directors 45 to 62 16.2 Information on service contracts of members of administrative and management bodies 2.1.2 Board of Directors 45 to 62 16.3 Information on the Audit Committee and the Compensation and Nomination Committee 2.1.3 Board of Directors’ Committees 62 to 66 16.4 Corporate governance regime 2.1.1 Corporate governance principles 44 to 45
20.3 Financial statements 4 Consolidated financial statements 143 to 224 20.4 Auditing of historical consolidated financial information 4.9 Auditing of historical consolidated financial information 20.5 Date of most recently audited financial information 4.9 Auditing of historical consolidated financial information 20.6 Interim and other financial information N/A N/A N/A
Statutory Auditors’ report prepared in accordance with article L. 225-235 of the French Commercial Code
Statutory Auditors’ report on the financial statements Appendix C – 6