CONSOLIDATED FINANCIAL STATEMENTS 161 4.1. Consolidated balance sheet 162 4.2. Consolidated statement of income 164 4.3. Consolidated statement of comprehensive income 165 4.4. Consolidated statement of cash flows 166 4.5. Consolidated statement of changes in shareholders’ equity 167 4.6. Notes to the consolidated financial statements 170 4.7. Information on holdings 244 4.8. Statutory Auditors 244 4.9. Auditing of historical consolidated financial information 245
NON-FINANCIAL PERFORMANCE STATEMENT 277 6.1. Business model 278 6.2. Social impact of SCOR’s activity 283 6.3. Business conduct and compliance 294 6.4. Considerations of environmental and social issues in the Group’s business activities 297 6.5. Adaptation to the digital economy 304 6.6. Note on methodology 306 6.7. Report by the independent third party, on the consolidated non-financial statement included in the management report 308
Appendice E Correspondence table – Delegated regulation (EC) of March 14, 2019 364
The Universal Registration Document may be used for the purpose of an offer to the public of securities or admission of securities to trading in a regulated market if supplemented by a securities note and, if applicable, a summary and any amendments to the Universal Registration Document. The whole is approved by the AMF in accordance with Regulation (EU) 2017/1129.
1.1.1. GROUP KEY FIGURES SCOR SE (“the Company”) and its consolidated subsidiaries (referred collectively as “SCOR” or the “Group”), form the world’s 4th largest reinsurer (1) serving more than 4,400 clients. The Group is organized in three business units, SCOR Global P&C, SCOR Global Life and SCOR Global Investments, and three regional management platforms (the “Hubs”): the EMEA Hub, the Americas Hub and the Asia-Pacific Hub.
Consolidated net income – Group share – before U.S. tax reform (1) 234 422 390
Return on equity – before U.S. tax reform (1) 3.8% 7.0% 6.6%
**** In September, 2020, SCOR issued fixed-term subordinated bonds for an amount of EUR 300 million. In October, 2020, SCOR proceeded to the early redemption of the CHF 125 million perpetual subordinated debt, already refinanced from the proceeds of the USD 125 million notes issued in 2019.
P&C segment Life segment 7, 5, 8, 6, 8, 9, 7, 9, 7.0%5.5%
UNIVERSAL REGISTRATION DOCUMENT SCOR 20206 01 SCOR GROUP Key figures and strategic plan
* The Life technical margin is calculated as the percentage of net technical result plus income from funds held by ceding companies and the net of gross and ceded earned premiums. The net technical result represents the result of the net reinsurance operations of SCOR Global Life business unit including income and expenses either implied in the reinsurance and retrocession arrangements or fully related to these arrangements.
1.1.3. DIVIDEND DISTRIBUTION POLICY A resolution will be presented at the Annual Shareholders’ Meeting held during the first half of 2021, to approve the financial statements for the 2020 financial year, proposing the distribution of a dividend of EUR 1.80 per share for the financial year 2020.
The Board of Directors of SCOR SE, at its meeting of February 26, 2020, had decided to propose to SCOR’s Shareholders’ Meeting scheduled to be held on April 17, 2020, that a gross dividend of EUR 1.80 per share be distributed for the 2019 fiscal year.
* In the context of Covid-19, no dividends have been distributed for 2019 fiscal year. The payout ratio amounts to 51% on the cumulative 2019 and 2020 earnings.
Across this strategic plan, SCOR also sets the following underlying assumptions: • SCOR Group: Gross written premium annual growth rate of ~4%
to 7%, financial leverage of ~25%, Value of New Business (2)
The Board of Directors’ proposal to SCOR SE shareholders’ Annual General Meeting will aim for a sustainable dividend per share from year to year by following the below steps: • Step 1: Ensure the projected solvency position is in the optimal range; • Step 2: Estimate and allocate capital to support future accretive growth; • Step 3: Define the amount of a sustainable regular dividend accordingly; • Step 4: Evaluate any excess capital for shareholder repatriation or future use.
In September 2020, SCOR announced that the Covid-19 pandemic was contributing to create the conditions for stronger growth with positive pricing dynamics. The exacerbation by Covid-19 of the increase in risk aversion lato sensu will drive higher demand for risk covers globally and therefore stronger growth for the reinsurance industry, on both the Life side and the P&C side. Furthermore, Covid-19 and the persisting low yield environment are expected to be acting as additional catalysts to an already hardening market on the P&C side.
(1) Ratio between the Eligible Own Funds (EOF) and the Solvency Capital Requirement (SCR). (2) After risk margin and taxes. (3) Annualized RoIA on average over “Quantum Leap” under Summer 2019 economic and financial environment.
01SCOR GROUP Information about the SCOR Group 1.2. INFORMATION ABOUT THE SCOR GROUP
Since then, SCOR has mainly carried out the following operations: • On November 21, 2006, SCOR completed the acquisition of
• In August 2007, SCOR acquired Converium (which became SCOR Holding Switzerland AG). SCOR’s shares were also admitted to trading in Swiss Francs on the SWX Swiss Exchange (which later became the SIX Swiss Exchange) in Zurich.
• Following the acquisition of Revios and Converium, SCOR restructured its operations around several regional management platforms, or “Hubs”, which were phased in gradually.
• On December 4, 2009, SCOR Global Life US Reinsurance Company, a wholly-owned subsidiary of the Group, acquired XL Re Life America Inc., a subsidiary of XL Capital Ltd, for an amount of EUR 31 million. The acquisition strengthened SCOR Global Life’s services in the mortality protection field and reinforced its position in the US Life reinsurance market.
• On October 1, 2013, SCOR acquired Generali’s life reinsurance operations in the US (Generali U.S. Holdings, Inc.) for total consideration of USD 774 million.
SCOR Global Investments, the third business unit of the Group, operates the asset management activities of the Group. It is responsible for defining, implementing and controlling the asset allocation of the Group’s legal entities investment portfolios in a centralized manner. It is organized around two areas: the Group’s functions and a portfolio management company regulated by the AMF, SCOR Investment Partners SE, which manages directly the assets of many SCOR Group subsidiaries and manages also investment vehicles on behalf of the Group and third- party clients.
SCOR SE also makes loans to its subsidiaries and issues them guarantees so that they can underwrite under favorable conditions, particularly by benefiting from its credit ratings. SCOR SE provides actuarial, accounting, legal, administrative, IT, internal audit, investment, and human resources support to Group subsidiaries. Finally, SCOR SE acts, as needed, as reinsurer/retrocessionaire for its operational subsidiaries through annually renewed proportional and non-proportional treaties which constitute the Group’s internal steering instrument through the annual allocation of capital to the operating subsidiaries based on the profitability expected from their underwriting activity. The contracts that formalize the relationships between SCOR SE and its subsidiaries are presented in Appendix B – 5.2.9 – Transactions with subsidiaries, affiliates and others.
The SCOR Global Life business unit is centered around nine macro markets. This structure enables the local teams to leverage global know-how while remaining well connected to the clients, in order to meet the diverse needs of their consumers.
SCOR has structured its operations around three regional management platforms, or Hubs: the EMEA Hub, the Americas Hub and the Asia-Pacific Hub.
01SCOR GROUP Information about the SCOR Group 1.2.3.2. LIST OF ISSUER’S SIGNIFICANT SUBSIDIARIES AND BRANCHES See: • Section 1.2.3 – Organizational structure of SCOR; • Section 1.2.3.1 – Brief description of the Group and of the position of the issuer (regarding the role of SCOR towards its subsidiaries); • Section 2.1.3 – Board of Directors (regarding the duties carried out in the subsidiaries by the managers of the Company); • Section 2.1.6 – Executive Committee (regarding the duties carried out in the subsidiaries by the managers of the Company); • Section 4.6 Note 3.1 – Significant subsidiaries, investments in associates and joint ventures; • Section 4.6 Note 4 – Acquisitions and disposals; • Section 4.6 Note 23 – Related party transactions; • Section 4.7 – Information on holdings; and • Appendix B – 5.2.1 – Investments.
At December 31, 2020, the relevant ratings for the Company were as follows (1): Financial Strength Senior Debt Subordinated Debt
On September 15, 2020, SCOR has been informed of Fitch’s decision to affirm the Group’s Financial Strength Rating of “AA-” (Very Strong) and Long-Term Issuer Default Rating (IDR) at “A+”. Fitch has also affirmed the ratings of SCOR’s core operating subsidiaries. The outlooks are stable.
On June 18, 2020, SCOR has been informed of Standard & Poor’s (S&P) decision to affirm the financial strength rating for the Group and its main subsidiaries at “AA-”, with a “stable outlook”.
On May 7, 2020, Moody’s affirmed SCOR’s “Aa3” insurance financial strength rating as well as its debt ratings and the ratings of its subsidiaries. The outlook has been changed to negative from stable.
Converium (in 2007), Transamerica Re (in 2011) and Generali US (in 2013), has contributed to the diversification strategy by balancing the proportion of the consolidated premiums written between its Non-Life and Life segments and has enabled the Group to preserve both its solvency and its profitability.
See Section 1.1.4 – Current strategic plan for a description of the “Quantum Leap” plan (2019-2021).
SCOR’s risk appetite framework SCOR’s risk appetite framework is an integral part of the Group’s strategic plan. It is approved by the Board of Directors upon the review of a new strategic plan, and continuously thereafter, based on recommendations from the Group’s Executive Committee and the Risk Committee of the Board of Directors. The Board of Directors may vary the amount and the composition of risk that the Group is prepared to take.
SCOR’s risk appetite framework is an integral part of each strategic plan. SCOR has not changed its risk appetite framework with the Covid-19 crisis, respecting an upper mid-level risk appetite.
Principles Reinsurance is a contract under which a company, the reinsurer, agrees to indemnify an insurance company, the ceding company, against all or part of the insurance risks underwritten by the ceding company under one or more insurance contracts. Reinsurance differs from insurance, primarily because of its higher level of mutualization by geography and by line of business.
Reinsurers, including SCOR, are usually compensated for the provision of such advisory services through the cedents’ reinsurance premiums, rather than through commissions or feebased compensation.
The Group organizes its operations around three regional management platforms, or “Hubs” named EMEA Hub, Asia-Pacific Hub and Americas Hub. Each main location of the Hubs has local, regional and Group responsibilities, with the managing directors of each Hub reporting to the Group Chief Operating Officer. Each Hub includes the following functions: Legal and Compliance, Information Technology support, Finance, Human Resources and General Services. Hub shared service costs are allocated to the segments based on allocation keys. For a description of the Hub structure, see Section 1.2.3 – Organizational structure of SCOR.
The SCOR Global P&C segment carries out its global operations through the subsidiaries and branches of its main global reinsurance entity SCOR SE that merged with SCOR Global P&C SE and SCOR Global Life SE in 2019. In November 2018, SCOR Global P&C announced the creation of SCOR Europe SE, a Paris-based P&C specialty insurance company to ensure the continuity of services provided to clients after the effective date of the Brexit. Its business purpose is mainly direct insurance of major industrial risks across Europe. This subsidiary started its activities on
SCOR Global P&C is represented in three business regions, EMEA, the Americas and Asia-Pacific and operates in three business areas: Specialties Insurance (large corporate accounts underwritten through facultative insurance contracts, direct insurance, SCOR Channel, for which SCOR is the sole capital provider and MGA business, a specialized type of insurance agent/broker vested with underwriting authority from an insurer), Reinsurance (including Property, Casualty, Motor, Credit and Surety, Decennial Insurance, Aviation, Marine, Engineering, and Agricultural risks) and P&C Partners (including Cyber and Alternative Solutions). For a description of products and services, see Section 1.2.5.2 – Non-Life reinsurance.
The SCOR Global Life segment operates worldwide through the subsidiaries and branches of SCOR SE. Via this network SCOR Global Life is represented in three business regions, EMEA, the Americas and Asia-Pacific, reinsuring Life and Health insurance risks along the three product lines Protection, Longevity and Financial Solutions with a strong focus on biometric risks. In order to achieve this, SCOR Global Life manages and optimizes the in-force book, deepens the franchise and aims at having the best team, organization and tools. The franchise strategy is composed of three elements, which are the expansion of the footprint in protection to defend and strengthen market presence around the world, the diversification of the risk profile by growing health and longevity, and growth of consumer demand by supporting clients with unique distribution solutions. SCOR Global Life aims to achieve diversification, both from a geographical and a product lines perspective. For a description of products and services, see Section 1.2.5.3 – Life reinsurance.
Both business units P&C and Life, through the legal entity SCOR SE and its subsidiaries and branches, are leading global reinsurers, executing an underwriting policy focused on profitability, developing value-added services and adhering to a cautious financial policy. During the year ended December 31, 2020, the Group served more than 4,400 clients throughout the world. SCOR’s strategy of offering both P&C and Life products provides it with the benefits of balanced diversification (in terms of risks, geography and markets), which is a cornerstone of its strategy.
1.2.5.2. NON-LIFE REINSURANCE SCOR’s Non-Life segment is divided into three business areas: • Reinsurance; • Specialties Insurance; and • P&C Partners.
Reinsurance SCOR’s P&C Reinsurance business area provides proportional and non-proportional reinsurance in many forms across: • Property: covering damage to underlying assets and direct or contingent business interruption losses caused by fire or other perils, including natural catastrophes.
• Motor: covering original risks of motor property damage and bodily injury.
SCOR has been a global leader reinsuring Credit, Surety and Political risks for more than 40 years, providing underwriting capacity for: • Domestic and Export Credit Insurance; • various surety lines, like market surety and professional surety; and
Committed to a consistent underwriting approach over the past 40 years, SCOR’s leading global position enables the team to be involved in most IDI (Inherent Defect Insurance) initiatives launched by insurers, governments, professional organizations and financial bodies across the world, and to keep up to date with and reinsure almost all new IDI schemes.
• additional extensions to IDI policies such as waiver of subrogation against builders and consequential third-party liability.
SCOR offers to its clients a global market vision on both established and emerging markets, from small residential to large industrial, as well as commercial buildings and public constructions such as hospitals, bridges, viaducts and tunnels.
SCOR’s dedicated Transport & Energy team combines local knowledge with global insights, in a line of business that requires constant monitoring of a rapidly changing global environment. SCOR offers flexible adequate solutions to its clients for all the segments of this sector, like hull and cargo as well as marine liability and energy.
With a consistent, long-term approach to underwriting and pricing, SCOR’s dedicated Agriculture team offers a broad and flexible range of reinsurance cover, underpinned by a strong natural catastrophe modeling and analytics infrastructure. SCOR P&C provides customized risk transfer solutions and innovative approaches in the field of crop/crop hail, aquaculture, forestry, greenhouse and livestock/bloodstock insurance.
Specialties Insurance Since 2018, the Specialties insurance division is composed by SCOR Business Solutions, SCOR Channel (SCOR’s Lloyd’s syndicate) and MGAs.
MGAs are a specialized type of insurance agent/broker vested with underwriting authority from an insurer. Accordingly, MGAs perform certain functions ordinarily handled only by insurers, such as underwriting, pricing and settling claims. MGAs are mainly involved with specialty lines of business in which specialized expertise is required.
Cyber insurance coverage; • Alternative Capital explores innovative retrocession facilities; • P&C Ventures and Strategic Partnership focuses on InsurTech investments, technical partnerships and expertise sharing.
1.2.5.5. CAPITAL SHIELD STRATEGY Once the Board has defined risk tolerances in line with the Group’s Strategic Plan, the Capital Shield Strategy sets mitigating mechanisms to ensure the protection of the Group’s capital in line with its risk appetite. The Capital Shield Strategy is a key part of SCOR’s ERM (Enterprise Risk Management) framework, forming one of the four cornerstones of SCOR Group’s strategy and one of the pillars protecting the solvency of the Group.
Investment philosophy and process In 2008, SCOR decided to internalize the management of its insurance business investment portfolio, in order to implement its investment strategy centrally and globally, with strict monitoring of the risk appetite and a dynamic positioning according to an enhanced asset liability management (ALM) process, integrating economic and market expectations.
Based on the expertise initially developed for the management of the SCOR Group’s invested assets, SCOR Investment Partners decided in 2012 to open some of its investment strategies to thirdparty investors. Third-party assets under management of SCOR Investment Partners and its subsidiaries stood at EUR 5.1 billion as at December 31, 2020 (including undrawn commitments).
SCOR Investment Partners benefits from third-party asset management through receipt of management fees on the assets under management. SCOR Investment Partners has seven investment strategies which are open to third parties with funds in key products such as High Yield, Private Debt (corporate, infrastructure and real estate loans) and ILS.
1.2.6. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Research and development activities In order to keep abreast of biometric trends and scientific developments, SCOR Global Life relies on five communities of expertise called chapters. In February 2019, the eight Research & Development (R&D) centers, which were designed to assess the key risks within mortality, longevity, morbidity and policyholder behavior, were replaced by chapters whose missions are aligned with those of the previous centers with a continuing focus on biometric risks such as mortality, longevity, disability and long-term care, which are at the heart of Life reinsurance, but more deliberately drawing on the full expertise of SCOR Global Life's employees while facilitating the dissemination of knowledge. These 5 chapters are: • a chapter on biometric risk modeling, which is at the heart of the calculation of "best estimates" for pricing, reserve calculation and risk modeling. This is the key expertise needed by a Life reinsurer. It provides the best knowledge (methods, tools, etc.) for current and future biometric risk assessments; • a chapter on medical expertise that is necessary to understand biometric risks and crucial for medical underwriting or claims assessment; • a chapter on Data Science that is critical to extracting information and knowledge from experience; • a chapter on Behavioral Science to better track policyholder behavior that is critical to achieving our goals of improving health status, simplifying underwriting and assisting in claims management, given that interactions with policyholders are growing exponentially (connected objects, applications, etc.); • an Agility chapter with coaches who are needed to help members of previous chapters achieve their goals by providing them with a toolbox of organizational approaches to carry out their projects.
The chapters are led by the Knowledge Department of SCOR Global Life. Their employees are based in Paris, Cologne, Dublin, Charlotte, Kansas City and Singapore and are active worldwide, responding to requests from the local teams in charge of business development and client relationships.
At the forefront of risk modeling, particularly extreme risks in Life and Non-Life businesses, the Group devotes considerable resources to fundamental research and the promotion of scientific risk management techniques in various disciplines. As well as internal research projects, conducted with the assistance of students from renowned schools and universities, the Group works to develop scientific research in the field of risk via corporate philanthropy operations supported by its corporate foundation (see Section 6.1.2 – Research and risk management), which has signed partnership agreements with the following institutions: • a Research Chair on Risk, in cooperation with the Risk Foundation and Toulouse School of Economics of Toulouse University is dedicated to the risk market and to value creation, with a research program specially focused on Long-Term Care. For SCOR, this implies costs of EUR 0.9 million spread over three years; • a Research Chair in Finance and Insurance, in cooperation with the Toulouse School of Economics of Toulouse University, focuses on risk management, long-term investment, corporate governance and the links between insurance and financial markets. For SCOR, the related cost is EUR 1.5 million spread over five years; and
SCOR Foundation for Science also supports research in key areas of risk analysis: climate risks and their insurability, the effect of climate risks on non-life insurers resilience, coastal flood forecasting, natural risks to crops, modeling risks in general, Alzheimer's disease, research on Covid-19 and pandemics, emerging infectious diseases, genetic treatment of tuberculosis, prevention of chickenpox, modeling of life expectancy and mortality, the risks of meteorites, car insurance, pension funds, best practices in risk management, predictability of earthquakes and the corresponding human behaviors following the event, biodiversity, mathematics of extreme events, building of economic and financial expectations, international financial imbalances. The Foundation also participates in the development of actuarial practice in Tunisia and within the CIMA (Conférence interafricaine des marchés d’assurance) zone. Finally, every year, it awards three prestigious prizes in Paris: the best young researcher in finance and insurance, the best young actuary and the best PhD in actuarial science.
Information technologies The investment in information technology is one of the key priorities of the “Quantum Leap” strategic plan. In this area, SCOR relies both on the strength and the consistency of its global information system, which is continuously enhanced through the development of an ambitious portfolio of projects, and on the transformation opportunities, enabled by the introduction of new technologies and especially the artificial intelligence, the big data, the multi-cloud, the development of e-business and Blockchain and the robotic process automation (RPA).
The Group’s Life and Non-Life reinsurance global back-office runs on a custom software package known as “Omega”. Omega was designed to manage the reinsurance contracts, including premiums and claims, analyze the technical profitability of contracts, and perform quarterly closings based on the latest estimated results. The unique Omega database reflects the reinsurance risk of SCOR Global P&C and SCOR Global Life’s portfolios worldwide. Fully modernized in 2016, OMEGA has since been enriched every year, especially by the addition of a global analytical solution “Reinsurance Analytics” and the integration with a cloud client management solution, Salesforce. OMEGA is currently being enhanced to comply with the new global accounting standard, IFRS 17. The preparation to IFRS 17 is a large effort impacting the entire information system, not only OMEGA but also upstream and downstream systems such as pricing, cash-flow modeling, general ledger, consolidation, reporting.
Since 2019, the first year of Quantum Leap, a focus was again put on strengthening SCOR’s front office applications to improve risk selection, anticipation and reactivity in markets and products. Several projects have been launched to develop Business Unit specific solutions fully integrated with the rest of the Information System.
Among these projects, to start with the P&C business unit, the ForePlan tool provides capability to build the underwriting plan and follow its execution. Non-Life pricing is closely managed using xAct, the global in-house standard P&C treaty pricing tool, which uses standardized models, and profitability analysis, to provide full visibility of proportional and non-proportional business. The underwriting and pricing process of large industrial or specialty risks is now supported by an in-house solution ForeWriter and specialized modules in different expertise fields such as space, agriculture, cybersecurity. Control of exposure to natural catastrophes and pricing is under improvement through the development of the SCOR Cat Platform which monitors all the liabilities and accumulations through use and calibration, or the model combination deemed as most efficient. The new platform to monitor the MGA book of business through automatic underwriting controls continued to be deployed in other regions in 2020 after its initial rollout to the US portfolio. Norma, the P&C internal model, combines the risk assessment produced by these front-office tools to provide an overall P&C risk measure.
The Covid-19 pandemic had numerous impacts on the non-life reinsurance market, combining elevated insured losses, uncertainty stemming from policy wording interpretation, and operational disruptions. These challenges have however acted as a catalyst for a reinforcement of the market hardening, with price increases which are expected to be significant and long-lasting, and have also demonstrated the resilience of SCOR’s operating model.
1.3.2. FINANCIAL MARKET DEVELOPMENTS 2020 has been a unique year in more ways than one. The spread of the Covid-19 pandemic around the globe led to drastic lockdown measures in most of the developed world. The impact on economic activity has been severe with an unprecedent shock on trade and double-digit impact on GDPs. A major economic crisis would have spread with skyrocketing corporate default rates and banking system failure. It has not been the case, thanks to governments and monetary authorities having followed a nearly unlimited monetary creation policy in compensating revenue decrease for household and any liquidity needs. As a result, budget deficits and central banks’ balance sheets have materially increased, with record amounts of asset purchase programs. With all developed countries adopting this strategy no material disequilibrium has been created.
In Europe the divorce between the United Kingdom and the European Union has been enacted by a very late stage agreement, avoiding a cliff-edge shock. Stronger restrictions on trade and movement of people and goods are expected in 2021.
In the United States, Joe Biden’s election has been reinforced by a Democrat majority in both the Senate and the House of Representatives. A Biden administration would be expected to have an accommodative budgetary policy but without the capacity to use aggressive tax increases for the financing.
Debts issued by most leveraged companies have suffered from high volatility linked to the high uncertainty surrounding future default rates. The different indices representing this sector are ending the year in positive territory with, for example, the US high yield market posting a 7% total return for the year.
01 SCOR GROUP Market and financial review 1.3.3. SIGNIFICANT EVENTS OF THE YEAR Covid-19 pandemic On March 11, 2020, the World Health Organization declared the Covid-19 outbreak a global pandemic. During 2020, SCOR has been successfully managing and absorbing the impact of the Covid-19 pandemic both operationally and financially.
A specific description of risks related to Covid-19 is included in Section 3.1 – Main risks.
2019 dividend proposal in the context of Covid‑19 pandemic The Board of Directors of SCOR SE, at its meeting of February 26, 2020, had decided to propose to SCOR’s Shareholders’ Meeting scheduled to be held on April 17, 2020, that a gross dividend of EUR 1.80 per share be distributed for the 2019 fiscal year.
Given the difficulties of holding Shareholders’ Meetings in the context of the Covid-19 pandemic, the Board of Directors of SCOR SE, at its meeting of March 27, 2020, decided to postpone its Annual Shareholders’ Meeting, which was held on June 16, 2020.
This transaction marks an important milestone in SCOR’s Specialty Insurance strategy.
New cat bond ATLAS Capital Reinsurance 2020 DAC SCOR has successfully sponsored a new catastrophe bond (“cat bond”), Atlas Capital Reinsurance 2020 DAC, which provides the Group with multi-year risk transfer capacity of USD 200 million to protect itself against storms in the U.S. and earthquakes in the U.S. and Canada. The risk period for Atlas Capital Reinsurance 2020 DAC runs from April 30, 2020, to May 31, 2024.
The issuance has received the approval of the Central Bank of Ireland (CBI) and the Irish regulatory authorities.
The Court also ruled that Covéa SGAM and Covéa Coopérations had participated and benefited in full knowledge of the misconduct committed by Thierry Derez, and that the public communication of their unsolicited takeover bid for SCOR had been wrongful.
As part of the rigorous work carried out since 2019 with the help of an international recruitment firm, the Nomination Committee has made every effort to identify the mode of governance and the people best able to ensure SCOR’s development over the coming years, while creating value for all its stakeholders.
As stated in the press release of December 16, 2020, the Board of Directors has unanimously chosen Benoît Ribadeau-Dumas as the next Chief Executive Officer of SCOR. Since January 1, 2021, Benoît Ribadeau-Dumas has become Deputy Chief Executive Officer of SCOR and as such has joined the Group’s Executive Committee. The Board of Directors will propose that he join the Board at the 2021 General Meeting, with a view to becoming Chief Executive Officer following the General Meeting in 2022.
1.3.4. INFORMATION ON SCOR’S COMPETITIVE POSITION SCOR competes for business in the European, American, Asian and other international markets with numerous international and domestic reinsurance and insurance companies, some of which have a larger market share than its own, greater financial resources and, in certain cases, higher ratings from the rating agencies. Competition in the types of reinsurance and insurance that the Group underwrites is based on many factors, including financial strength as perceived by the rating agencies, customers and their brokers, underwriting expertise, reputation and experience in the lines of reinsurance and insurance written, country of operation, premiums charged, the quality of the proposed reinsurance structures, the services offered and the speed at which claims are paid.
SCOR’s competitors include independent and state-owned reinsurance companies, subsidiaries or affiliates of established worldwide insurance companies, and reinsurance departments of certain primary insurance companies. Among the Group’s major competitors are European reinsurers (for example, Swiss Re, Munich Re and Hannover Re) and US/Bermudian reinsurers (for example, Partner Re, RGA, Berkshire Hathaway, Axis Capital, TransRe, Odyssey Re, Gen Re and Everest Re). Moreover, Lloyd’s syndicates (where SCOR is also present via its fully-owned syndicate SCOR Channel) are recognized as competitors.
In 2020, SCOR has been proactive in taking immediate actions to contribute in helping stop the spread of the pandemic. The Group adopted early and strict prevention measures to protect the health of its employees and was active in regularly sharing its knowledge on the pandemic.
— The main exposure arises in the United States, where SCOR estimates that Covid-19 related claims as at December 31, 2020 resulted in an impact for the year of EUR 283 million (net of retrocession and before tax).
— A further EUR 31 million of Covid-19 related claims (net of retrocession and before tax) have been booked in other markets in 2020.
• On the P&C side, SCOR estimates Covid-19 claims to be manageable with an impact booked in 2020 of EUR 284 million net of retrocession, reinstatement premium, and before tax (including reserves for potential claims), coming mainly from Credit, Surety & Political risks and from Property Business Interruption. Within this amount, the actual Covid-19 related claims received stand at EUR 104 million. The January 2021 renewals led to a clarification of terms and conditions, i.e. to exclude Covid-19 from the events insured.
• On the investment side, SCOR has benefited from the defensive nature and high quality of its investment portfolio when the Covid-19 pandemic started. The level of impairment charge on invested assets (1) is limited in 2020 at EUR 42 million before tax (excluding amounts attributable to non-controlling interest). The level of unrealized gains on invested assets has increased by EUR 179 million compared to December 31, 2019, in spite of EUR 197 million of realized gains in 2020.
Gross written premiums Gross written premiums for the financial year ended December 31, 2020 amounted to EUR 16,368 million, an increase of 0.2% compared to EUR 16,341 million in 2019. At constant exchange rates the growth is 1.8%. The overall increase in gross written premiums of EUR 27 million in 2020 is composed of an increase of EUR 13 million for SCOR Global P&C and of EUR 14 million for SCOR Global Life.
Gross written premiums for the financial year ended December 31, 2019 amounted to EUR 16,341 million, an increase of 7.1% compared to EUR 15,258 million in 2018. At constant exchange rates the growth is 4.1%. The overall increase in gross written premiums of EUR 1,083 million in 2019 is composed of an increase of EUR 972 million for SCOR Global P&C and of EUR 111 million for SCOR Global Life.
(1) For the calculation of invested assets please refer to 6.1.4 Invested Assets, Management Classification vs IFRS Classification.
Breakdown of Group gross written premiums by geographical area (in EUR millions)
Net investment income Net investment income (1) for the year ended December 31, 2020 amounted to EUR 665 million as compared to EUR 671 million for the year ended December 31, 2019 and EUR 615 million for the year ended December 31, 2018. The evolution of the net investment income in 2020 is driven by strong investment revenues, albeit impacted by the low yield environment and supported by the active portfolio management strategy implemented by SCOR Global Investments. This strong performance in 2020 has also been translated into substantial realized capital gains of EUR 197 million, significantly higher compared to 2019 (EUR 93 million) and mostly achieved on the fixed income and real estate portfolios. Impairment and amortization charge stands at EUR 54 million and increases in 2020 compared to 2019 (EUR 32 million) and 2018 (EUR 26 million), driven by equity impairments resulting from the volatility on equity markets which followed the Covid-19 pandemic outbreak.
The return on invested assets in 2020 was 2.8% as compared to
The impact of alternative retrocession coverage includes catastrophe bonds: Atlas IX Series 2015-1 (ended December 31, 2018), and 2016 (ended December 31, 2019), Atlas Capital UK 2019 PLC catastrophe bonds, and Atlas Capital Reinsurance 2020 DAC (SCOR Global P&C; see Section 3.2.3 – Retrocession and other risk mitigation techniques) that are not included in the net cost of retrocession as the products are accounted for as derivatives.
The total amount recorded under "other operating expenses" in 2020 is an expense of EUR 55 million (2019: EUR 61 million and 2018: EUR 35 million) mainly linked to the Atlas catastrophe bonds’ depreciation.
Expenses The Group cost ratio (1), calculated as the total of all management expenses less certain non-controllable expenses (e.g. bad debts), legal settlements, acquisition expenses and amortization, divided by gross written premiums, was 4.5% for the year ended December 31, 2020, and improved from 4.7% in 2019 and 5.0% in 2018. Management expenses for the years ended December 31, 2020, 2019 and 2018 were EUR 920 million, EUR 937 million, and EUR 893 million respectively, on a comparative basis.
Gross written premiums In 2020, gross written premiums increased by 0.2% compared to 2019 (from EUR 7,147 million to EUR 7,160 million) and by 2.4% at constant exchange rates. Gross written premiums were affected by the Covid-19 pandemic’s effects which triggered a reduction of expected gross premium income mainly on the Aviation, Marine, Credit, Surety and Political Risks lines of business. Excluding this impact of EUR (225) million the growth would have been of 3.3% (5.6% at constant exchange rate), in line with the “Quantum Leap” targets.
In 2019, gross written premiums increased by 15.8% compared to 2018, from EUR 6,175 million to EUR 7,147 million. At constant exchange rates the growth was 12.7%, supported by both Reinsurance (US Property and Casualty treaties) and Specialties Insurance (MGAs and SBS Property) activities.
Number of catastrophes occured during previous financial year 8 (4) 9 (6) 7 (8)
Losses and loss adjustment expenses due to catastrophes, gross 33 (4) 139 (6) 4 (8)
Losses due to catastrophes, net of retrocession 23 (4) 49 (6) (25) (8)
Number of catastrophes occured during current and previous financial years 40 33 31
Losses and loss adjustment expenses due to catastrophes, gross 483 918 906
(2) Net of retrocession and reinstatement premiums (assumed and retrocession). (3) Including Hurricane Laura, Midwest Derecho, Sally, Hanna, Delta, Zeta, Isaias and ETA, Hailstorms in New South Wales and Calgary, Tornadoes in the US,
(4) Including developments on Italian Storms, Typhoon Faxai and Hagibis and Hurricane Dorian. (5) Including Typhoons Hagibis, Faxai, Hurricane Dorian, US Cyclone Bomb CAT 1919, Dallas Tornado – CAT 1961, Various Italian Storms 2019 (five events),
Townsville flooding, Southern Peru flooding, Storm Eberhard, US Storm & Tornicadoes, Sao Paulo Flooding, Texas Hailstorm CAT, Cyclone Fani, US weather event cat, Nothern Peru Earthquake, Munich Hailstorm, Typhoon Lekima, India Floods and Luxembourg Tornado.
(6) Including developments on Italian Storms 2018, Typhoon Jebi and Trami, Hurricane Michael, Camp California Wildfire and Kuwait Flood. (7) Including Typhoons Jebi, Trami, Mangkhut and Yutu in Saipan and Tinian, Hurricanes Michael, Florence and Leslie, Camp Califnornia Fire and Woolsey
California Fire, Friederike storm, Papua New Guinea Earthquake, Ituango heavy rains, Italian Storms, Kilauea vulcanic eruption in Hawai, floods in Japan and Kerala, Cyclone Mekunu, Northern Osaka Earthquake, US storms in May and July, Carr Wildfire in California and Swedish wildfires, Ontatio windstorm and Sydney hailstorms.
(8) Including developments on Hurricane Harvey, Irma, Maria, Mexico Earthquakes, Northern and Southern California wildfires and Flash Flood N. Italia (Brescello).
In 2020, SCOR was affected by the following catastrophes which resulted in total net estimated losses of EUR 400 million as at December 31, 2020: In EUR millions Cat losses Date of loss
In 2019, SCOR was affected by the following catastrophes which resulted in total net estimated losses of EUR 616 million as at December 31, 2019: In EUR millions Cat losses Date of loss
In 2018, SCOR was affected by the following catastrophes which resulted in total net estimated losses of EUR 681 million as at December 31, 2018: In EUR millions Cat losses Date of loss
01SCOR GROUP Market and financial review 1.3.5.4. SCOR GLOBAL LIFE SCOR Global Life operates through its unified global organization with a macro market approach in three regions: Americas, EMEA (Europe, Middle East, Africa and Latin America) and Asia-Pacific. It underwrites Life reinsurance business in the following product lines: • Protection; • Financial Solutions; • Longevity.
Gross written premiums by product line SCOR Global Life ranks among the top tier life reinsurers worldwide (1) and has grown by 0.2% in gross written premiums from EUR 9,194 million in 2019 to EUR 9,208 million in 2020 (a 1.4% increase at constant exchange rates (2)). SCOR Global Life continued to strategically develop its business by managing growth carefully during the Covid-19 pandemic. Growth was recognized in the Protection product line mainly in Asia-Pacific, in the Financial Solutions product line in Americas and specific markets in AsiaPacific, and in the Longevity product line in EMEA.
The Protection business accounts for 82% of total gross written premiums in 2020 and remains the main driver for premium growth (2.7% growth in gross written premiums in 2020 at constant exchange rates (2)). SCOR Global Life has maintained its leadership in the US Life reinsurance market (3), the largest life reinsurance market in the world. In the EMEA region, SCOR Global Life strategically reinforced its franchises in key European markets.
Asia-Pacific remains a region with significant growth opportunities both in terms of premiums and profitability. Protection premium development in this region was driven by higher business volumes in China, South Asia and North Asia.
Within the Protection product line, mortality was the main risk underwritten.
• Medical represents a rather small portion of SCOR Global Life’s portfolio, with new business volumes mainly written in Asia.
Through its Global Distribution Solutions (GDS), SCOR Global Life has successfully deployed a number of innovative and tailored client services which aim to help insurers expand and develop their own client bases (ReMark, Velogica and SCOR Telemed). In this market segment SCOR Global Life has leadership positions in many markets in the EMEA and Asia-Pacific regions.
SCOR Global Life has established itself as a recognized provider for longevity reinsurance, focusing on longevity risk transfer transactions for large in-payment pension portfolios, creating a new business pipeline with growth opportunities. The Longevity product line accounts for 10% of SCOR Global Life’s gross written premiums in 2020 and is one of the drivers of premium growth (1.4% increase in gross written premiums in 2020 at constant exchange rate (2)). The main active market to date for SCOR Global Life is the UK.
Life technical margin Overall, the Life technical margin in 2020 was 5.8% compared to 7.5% in 2019 and 7.0% in 2018. The 2020 technical margin is impacted by -3.7 pts. due to Covid-19 claims.
1.3.5.5. NET INVESTMENT INCOME AND INVESTMENT INCOME ON INVESTED ASSETS Net investment income for the year ended December 31, 2020 amounted to EUR 665 million compared to EUR 671 million and EUR 615 million for the years ended December 31, 2019 and December 31, 2018, respectively.
During 2020, invested assets were stable despite the market turmoil, slightly decreasing to EUR 20,522 million from EUR 20,571 million at December 31, 2019, mainly as a result of positive income generated by the invested assets portfolio in 2020, positive mark-to-market development, offset by foreign currency exchange impacts.
SCOR announced its new investment strategy in September 2019, as part of its “Quantum Leap” strategic plan. During the thirtymonth period covered by the strategic plan SCOR Global Investments intends to provide a strong and recurring financial contribution from the invested assets portfolio. SCOR Global Investments’ roadmap is built around the following pillars: • acting as a sustainable investor to better manage risks and generate superior long-term returns; • enhancing portfolio diversification towards value-creation assets to increase portfolio returns; • maximizing value creation while safeguarding portfolio value; • fully leveraging SCOR’s positioning as a leading player in
Liquidity, defined as SCOR’s share of cash and cash equivalents and short-term government bonds (with maturities above three months and below twelve months) and bank overdrafts, is at 9% of invested assets as at December 31, 2020, increased by 3% compared with the level of 6% observed as at December 31, 2019.
SCOR’s exposure to loans remained stable at 5% of invested assets as at December 31, 2020 (as at December 31, 2019: 5% of invested assets).
The following table presents a reconciliation of these figures with the IFRS amounts as presented in Section 4 – Consolidated financial statements: As at December 31, 2020
Investments at fair value through income - - - 246 - 1,386 1,632 - 1,632 - - 1,632
TOTAL INSURANCE BUSINESS INVESTMENTS AND CASH AND CASH EQUIVALENTS 1,804 16,326 2,583 409 699 1,664 23,485 8,089 31,574 126 202 31,902
Direct real estate unrealized gains and losses (5) - - - - 125 - 125 - 125 - - -
(1) Including Atlas CAT bonds and foreign exchange derivatives. (2) Loans and receivables excluded from invested assets are certificates of deposit (CDs) maturing in more than three months and less than twelve months. (3) Assets invested by third parties in mutual funds and non-controlling real estate investments fully consolidated by SCOR. (4) Certain consolidated entities held for investment purposes have been included in the scope of Invested Assets. (5) Fair value less carrying amount of real estate investments excluding EUR 7 million attributable to third-party investors. (6) Real estate financing related to real estate investments (buildings held for investment purposes) excluding EUR 31 million attributable to third-party investors.
Direct real estate unrealized gains and losses (5) - - - - 141 - 142 - 142 - - -
On December 15, 2016, SCOR arranged a contingent capital facility with BNP Paribas. Under this EUR 300 million arrangement, SCOR raised its level of protection by EUR 100 million. On June 29, 2018 BNP Paribas transferred all the warrants to UBS in agreement with SCOR. UBS has thus fully substituted for BNP Paribas in relation to all the rights and obligations arising from the contingent capital facility. On December 2019, SCOR launched of a new 3-year contingent capital facility. This takes the form of a contingent equity line, providing the Group with EUR 300 million coverage in case of extreme natural catastrophe or life events impacting mortality. This equity line facility replaces, as of January 1, 2020, the contingent capital facility which comes to an end on December 31, 2019. For more information on contingent capital, see Section 4.6 – Notes to the consolidated financial statements, Note 13 – Information on share capital, capital management, regulatory framework and consolidated reserves.
Capital Shield Strategy The Group reconciles its strategic objectives with the protection of its capital via its “Capital Shield Strategy”, which articulates the Group’s risk appetite. This policy is based on an economic approach and aims to protect the Group against potential shocks. The policy is built on the following four concepts: traditional retrocession, capital market solutions, a solvency buffer and a contingent capital facility.
For more information on the Capital Shield Strategy, refer to Section 3.2.3 – Retrocession and other risk mitigation techniques.
For information on the Group’s solvency scale, refer to Section 1.3.7 – Solvency and Section 4.6 – Notes to the consolidated financial statements, Note 13 – Information on share capital, capital management, regulatory framework and consolidated reserves.
For information on the Atlas special purpose vehicles used in the Capital Shield Strategy, see Section 4.6 – Notes to the consolidated financial statements, Note 3 – Scope of consolidation.
The total level of financial liabilities which includes subordinated debt, real estate financing and other financial liabilities increased to EUR 3,210 million from EUR 3,027 million in 2019 (2018: EUR 2,831 million).
For information on financial liabilities, including their related covenants, see Section 4.6 – Notes to the consolidated financial statements, Note 14 – Financial liabilities.
For a description of the derivatives used to hedge the risks related to financial liabilities, see Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments.
On June 2, 2015, SCOR successfully placed a dated subordinated notes issue on the Euro market in the amount of EUR 250 million. SCOR also called the balance of the USD subordinated step-up floating-rate notes due 2029, and of the EUR subordinated step-up floating-rate notes due 2020, on June 25 and July 6, 2015 respectively. On December 2, 2015, SCOR successfully placed a dated subordinated notes issue on the Euro market in the amount of EUR 600 million.
On September 24, 2014, SCOR successfully placed perpetual subordinated notes on the Swiss franc market, with a first call date on October 20, 2020, for an amount of CHF 125 million. On September 25, 2014, SCOR successfully placed perpetual subordinated notes on the Euro market, with a first call date on October 1, 2025, for a total amount of EUR 250 million. The CHF 125 million undated subordinated note lines, issued on October 20, 2014, was called in October 20, 2020.
Credit facilities The Group has been granted credit facilities from several companies of the banking sector to guarantee the reinsurance activities of various subsidiaries for a global issued amount of USD 4.3 billion as at December 31, 2020. These credit facilities are stand-by letters of credit that the banking counterparty agrees to issue in the form acceptable to the American National Association of Insurance Commissioners (NAIC) or other appropriate regulatory body.
1.3.6.3. LIQUIDITY The Group’s total liquidity, defined as cash and cash equivalents (including cash and cash equivalents from third parties) (1), shortterm government bonds with maturities above three months and below twelve months and bank overdrafts, which is well diversified across a limited number of banks, stood at EUR 2.0 billion at the end of 2020 (2019: EUR 1.5 billion and 2018: EUR 1.2 billion) supported by strong operating cash flow generation.
See Section 4.6 – Notes to the consolidated financial statements, Note 12.1 – Cash and cash equivalents.
01 SCOR GROUP Market and financial review 1.3.7. SOLVENCY The European “Solvency II” Directive applies to the Group since January 1, 2016. For more details on solvency regulations, see Section 1.2.1 – Introduction.
Solvency ratio At year-end 2020, SCOR’s solvency ratio stood at 220% (1), at the upper end of the optimal solvency range of 185% - 220% defined in "Quantum Leap".
For further information on risk management mechanisms, see Section 3 – Risk factors and risk management mechanism.
1.3.8. CASH FLOWS Positive operating cash flows amounted to EUR 988 million in 2020 (2019: EUR 841 million and 2018: EUR 891 million, respectively). In 2020, SCOR Global P&C provided strong operating cash flows of EUR 1,006 million in increase compared to 2019 (EUR 740 million) following high received settlements on the US, APAC and retro payments, lower nat-cat events and limited Covid-19 impact in 2020. The decrease of technical operating cash flows in 2020 compared to 2019 for SCOR Global Life is mainly due the Covid-19 pandemic and US claims payments. In 2019, SCOR Global P&C provided strong operating cash flows globally in line with 2018. The decrease of technical operating cash flows for SCOR Global Life in 2019 compared to 2018 is mainly due to positive one-off impacts in 2018. In 2018, SCOR Global P&C provided strong cash flow in line with expectations, despite of having commenced payments on Q3 2017 cat events. SCOR Global Life showed elevated technical business cash flow in the last quarter of 2017 due to two large transactions.
See Section 4.4 – Consolidated statement of cash flows and Section 4.6 – Notes to the consolidated financial statements, Note 5 – Segment information for an analysis of the main cash flow statement items and Note 12.1 – Cash and cash equivalents, for a reconciliation between consolidated net income and operating cash flows, and between cash and cash equivalents and Group’s total liquidity.
(2) See Section 1.3.5.4 – Net investment income and investment income on invested assets.
Total expenses as per profit & loss account (1) (857) (874) (831)
01 SCOR GROUP Market and financial review 1.3.9.4. RETURN ON EQUITY Return on equity (ROE) is based on the Group’s share of net income divided by average shareholders’ equity (calculated as time weighted average shareholders’ equity).
Consolidated net income – Group share – before U.S. tax reform impact (1) 234 422 390
(1) Refer to the 2018 Registration Document, Section 1.3.3. – Significant event of the year 2018 on the U.S. tax reform (Tax Cuts and Jobs Act, the “TCJA”). (2) Pro-rata of 50%: linear acquisition throughout the period.
1.3.9.5. NET COMBINED RATIO The loss ratio is calculated by dividing Non-Life claims (including natural catastrophes) by Non-Life premiums earned. This ratio is net of retrocession.
1.3.11. DOCUMENTS ON DISPLAY Throughout the period of validity of the Universal Registration Document, the bylaws and any other document required by law may be consulted and are freely available upon request from the registered office of the Company at 5, avenue Kléber, 75116 Paris, France.
01 SCOR GROUP Market and financial review 40 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
2.1.1.1. GENERAL PRESENTATION SCOR SE’s shares are listed on the Eurolist of Euronext Paris SA and on the SIX Swiss Exchange (formerly the SWX Swiss Exchange) in Zurich since August 8, 2007.
The corporate governance provisions applicable to SCOR SE include French legal provisions, as well as rules laid down by the French financial market authorities. SCOR believes that its application of corporate governance principles is appropriate and in compliance with best corporate governance practices in effect in France as per the recommendations of the French financial markets authority (Autorité des marchés financiers – AMF).
The AFEP-MEDEF corporate governance code can be consulted on the Company’s website (www.scor.com) or on the AFEP website (www.afep.com).
This report was approved by the Board of Directors of SCOR SE held on February 23, 2021, following an in-depth preparation and review process that involved in particular the Audit Committee, the Risk Committee, the Compensation and Nomination Committee, the Corporate Social and Societal Responsibility and Environmental Sustainability Committee as well as the Legal Department of SCOR SE.
The Compensation and Nomination Committee was assisted in its work by a leading international recruitment firm. Moreover, the nonexecutive director sessions were kept regularly informed about the Compensation and Nomination Committee’s work. They were also consulted on the final choice made as part of the succession plan and interviewed the candidates selected by the Compensation and Nomination Committee.
For biographical information on Denis Kessler and Benoît RibadeauDumas, see Sections 2.1.3.2 – Information concerning the members of the Board of Directors and 2.1.6.1 – Biographical information on the members of the Executive Committee.
2.1.3.1. ROLE OF THE BOARD OF DIRECTORS In accordance with European law governing European companies and applicable French law, the principal responsibility of the Board of Directors is to define the strategic guidelines of the Company’s business activities and to ensure their implementation, in accordance with its corporate interest, taking into account the social and environmental aspects of its activity. It monitors management’s performance and ensures the sound and prudent management of the Company. The Chairman and Chief Executive Officer of SCOR SE has the authority to manage the business of the Company, subject to the prior authorization of the Board of Directors or the Shareholders’ Meeting for certain decisions as required by law and by the Company’s bylaws and subject to the French Insurance Code (Code des assurances) which prescribes that at least two persons shall effectively run the Company (“four-eyes” principle).
AUGUSTIN DE ROMANET Lead Independent Director Chairman of the Compensation and Nomination Committee and Crisis Management Committee Member of the Strategic Committee and Corporate Social and Societal Responsibility and Environmental Sustainability Committee
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Director and Vice-Chairman of the Board of Directors of TAV Havalimanlari Holding A.S. (TAV Airports) (Turkey) • Director and Vice-Chairman of the Board of Directors of TAV Yatirim Holding A.S. (TAV Investment) (Turkey) • Director and Vice-Chairman of the Board of Directors of TAV Tepe Akfen Yatirim Insaat ve Isletme A.S. (TAV Construction) (Turkey) • Chairman of the Board of Directors of ACI Europe (Belgium)
First appointed: Term of office expires: 2022 French – Age: 59 Palantir Technologies 5, rue Charlot 75003 Paris, FranceIndependent: Yes Board meeting attendance rate: 100%
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Chief Operating Officer of Airbus and Chairman of Airbus Commercial Aircraft (France)
Fabrice Brégier, a French citizen, is a graduate of École polytechnique and a Chief Engineer of the Corps des mines. He began his career at the DRIRE Alsace (Ministry of Industry and Trade) before being appointed Sub-Director of Economic, International and Financial Affairs at the Ministry of Agriculture (Directorate-General for Food) in 1989. After serving as an Advisor to several French Ministers from 1989 to 1993, Fabrice Brégier was appointed Chairman of Franco-German joint ventures at Matra Défense, Director of Standoff activities at Matra BAe Dynamics, and then Chief Executive Officer of MBD/MBDA. Before becoming a member of the Executive Committee of Airbus in 2005, he was Chairman and Chief Executive Officer of Eurocopter from 2003 to 2005. Fabrice Brégier has twenty years of experience in aerospace and defense. He has spent a large part of his professional career at Airbus Group, holding the position of Airbus COO between 2006 and 2012, then Airbus President and Chief Executive Officer between 2012 and 2017, and finally COO of Airbus and Chairman of Airbus Commercial Aircraft between 2017 and 2018. Fabrice Brégier has been Chairman of Palantir France since October 2018.
MAIN POSITION • Deputy Chief Communications Officer at the SCOR Group (France)
FIONA CAMARA Director representing employees Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee
MAIN POSITION • Chief Executive Officer of Aémagroup (following the merger between Macif and Aésio Mutuelle) (France)
Adrien Couret, a French citizen, graduated from HEC, is a member of the French Institute of Actuaries, and has been Chief Executive Officer of the Macif group since May 2019 (Aéma group since January 2021 following the merger between Macif and Aésio Mutuelle). He previously held various executive positions within this group since his arrival in January 2008. He is also Chairman of the Board of Directors of Ofi Asset Management and Vice-Chairman of the association des assureurs mutualistes.
VANESSA MARQUETTE Director Member of the Strategic Committee, Risk Committee, Audit Committee, Compensation and Nomination Committee and Corporate and Social Responsibility and Environmental Sustainability Committee
MAIN POSITION • Partner of the law firm Loyens & Loeff (Belgium)
Vanessa Marquette, a Belgian citizen, holds a law degree and an economic law degree from the université libre de Bruxelles. She also studied law at Davis University and Berkeley University and she holds an LLM degree from the University of Michigan Law School. She has practiced as a lawyer registered with the Brussels Bar since 1995,and specializes in banking law and financial law and she also has particular expertise in the areas of corporate law, insolvency law and security interests and private international law. She has taught international financial law at the université libre de Bruxelles since 2004 and is the author of several publications on banking and financial law. She has been a partner in the banking &finance department of the law firm Loyens & Loeff since March 2020, having been a partner at the business law firm Simont Braun from 2005 until February 2020 and having practiced law at the Brussels offices of Stibbe Simont Monahan Duhot and Freshfields Bruckhaus Deringer. Vanessa Marquette has been an independent director of Erasme Hospital since 2017.
OTHER POSITIONS • Chairman of the Board of Directors of Credit Suisse Asset Management (Switzerland) Ltd. (Switzerland) (1)
• Chairman of the Board of Directors of Assepro AG (Switzerland) • Chairman of the Board of Directors of Quintet Private Bank (Switzerland) AG (Switzerland) • Director of Assura (Switzerland)
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Director of Gottex Fund Management Holdings Limited (Guernsey) • Executive Chairman of the “Wealth Management & Trust” division of the Rothschild & Co group (Switzerland) • Chairman of the Board of Directors of Rothschild & Co Bank AG (Switzerland) (1)
(1) Company whose shares are listed on a regulated or organized market.
French – Age: 62 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: Yes Board meeting attendance rate: 100%
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Chief Executive Officer of the Macif group (France) • Chief Executive Officer of Macif SGAM (France) • Chief Executive Officer of UMG Macif Santé Prévoyance (France) • Chief Executive Officer of Macif SAM (France) • Chief Executive Officer of GIE Macif Finance Épargne (France) • Chairman and Director of Foncière de Lutèce (France) • Director of Compagnie Foncière de la Macif (permanent representative of Macif) (France) • Director of Macif Participations (France) • Member of the Supervisory Board of Ofi Asset Management (France) • Director of Ofi Holding (permanent representative of Macif) (France) • Member of the Supervisory Board of Inter Mutuelles Assistance (permanent representative of Macif) (France) • Non-voting director of Macifilia (France) • Non-voting director of Mutavie (France) • Non-voting director of Socram Banque (France) • Non-voting director of Ofivalmo Partenaires (France) • Member of the Executive Committee of Siem (France) • Member of the Advisory Board of Macifimo (France) • Ex officio member of the Board of Directors of Campus (GIE), as an observer (France) • Member of the Executive Board and Vice-Chairman of association des assureurs mutualistes (AAM) (France) • Vice-Chairman and member of the Supervisory Board of Macifimo ADB, formerly GPIM (France) • Member of the Executive Board and member of the Board of Macif and Vice-Chairman of Gema (France) • Chairman of Inter Mutuelles Solutions, formerly Macifilia Courtage (France) • Chief Executive Officer of Macifilia (France) • Chief Executive Officer of Sferen (France) • Member of the Management Board of Macifin’ (France) • Member of the Management Board of Mutavie (France) • Director of Sferen (France) • Director of Macif Mutavie Finance (GIE) (France) • Director of Socram Banque (France) • Director of BPCE Assurances (permanent representative of Macif) (France) • Director of Ofi Asset Management (France) • Director of Ofivalmo Partenaires (permanent representative of Macif) (France) • Member of the Executive Committee of Siil (France) • Member of the Advisory Board of Sipemi (permanent representative of Macif) (France) • Director of Thémis (permanent representative of Macifilia) (France) • Director of Euresa Holding (Luxembourg) • Manager of GEIE Euresa (Belgium) Jean-Marc Raby, a French citizen, holds a degree in economics as well as an MBA from HEC. He has spent his entire professional career at Macif. He became Regional Director of Macif Centre (a regional Macif entity) in 2000 and was subsequently appointed Deputy Chief Executive Officer of the Macif Group, in charge of Economic Management, alongside the Chief Executive Officer, Roger Iseli. In 2012, he was appointed Chief Executive Officer of the Macif group and will hold this position until May 2019.
HOLDING MALAKOFF HUMANIS Represented by Thomas Saunier Director Member of the Strategic Committee
First appointed: Term of office expires: 2023 French – Age: 54 Malakoff Humanis 21, rue Laffitte 75317 Paris Cedex 09, FranceIndependent: Yes Board meeting attendance rate: 100%
MAIN POSITION • Chief Executive Officer of Malakoff Humanis group (France)
• Chief Executive Officer of Humanis Prévoyance (France) • Chief Executive Officer of Humanis Retraite AGIRC (France) • Chief Executive Officer of Malakoff Médéric AGIRC (France) • Chief Executive Officer of Institution de retraite des cadres et assimilés de France et de l’extérieur (IRCAFEX) (France) • Permanent representative of Malakoff Médéric Assurances on the Supervisory Board of la Foncière Hospi Grand Ouest (France)
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Member of the Supervisory Board of Château Mondot (France) (2)
CLAUDE TENDIL Director Member of the Strategic Committee, Risk Committee, Compensation and Nomination Committee and Corporate and Social Responsibility and Environmental Sustainability Committee
MAIN POSITION • Chairman of the Board of Directors of Generali IARD (France)
OTHER POSITIONS • Director of Europ Assistance Holding (France) • Director of Generali France (France) • Director of Generali Vie (France) • Director of Generali IARD (France) • Director of Eramet (France) (1)
• Chairman of RVS (association) (France) • Member of the Executive Committee of MEDEF (France) • Chairman of the l'institut pour l’innovation économique et sociale (2IES) (France) • Chairman of Fondation ARC pour la recherche sur le cancer (France)
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Chairman of the Board of Directors of Generali Vie (France) • Chairman of the Board of Directors of Generali France Assurances (France) • Chairman of the Board of Directors of Generali France (France) • Chairman of the Board of Directors of Europ Assistance Holding (France) • Chief Executive Officer of Generali France (France) • Chief Executive Officer of Generali Vie (France) • Chief Executive Officer of Generali IARD (France) • Director of Assicurazioni Generali SpA (Italy) (1)
Claude Tendil, a French citizen, began his career at the Union des assurances de Paris (UAP) in 1972. He joined the Drouot group in 1980 as Chief Operating Officer. He was promoted in 1987 to Chief Executive Officer, before being appointed Chairman and Chief Executive Officer of Présence Assurances, a subsidiary of the AXA group. He was appointed Director and Chief Executive Officer of AXA-Midi Assurances in 1989, Chief Executive Officer of AXA from 1991 to 2000, then Vice-Chairman of the Management Board of the AXA group until November 2001. During the same period, he was also Chairman and Chief Executive Officer of the AXA group’s French insurance and assistance companies. Claude Tendil was appointed Chairman and Chief Executive Officer of the Generali group in France in April 2002 until October 2013, when he became the Chairman of the Board of Directors, holding this position until June 2016.
NATACHA VALLA Director Member of the Strategic Committee and Audit Committee
MAIN POSITION • Dean of the Sciences Po Paris School of Management and Innovation (France)
ZHEN WANG Director Member of the Strategic Committee and Risk Committee
First appointed: Term of office expires: 2023 Chinese – Age: 64 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: Yes Board meeting attendance rate: 75%
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Director of Munich Re Greater China Advisory Board (China)
Zhen Wang, a Chinese citizen, holds a bachelor’s degree from the Beijing Normal University, and is a Fellow of the Chartered Insurance Institute (FCII). She began her insurance career in 1982 by joining PICC, the insurance monopoly then, and became the General Manager of International Department in 1996 upon PICC becoming PICC group. From 1997 to 2016, she worked for Munich Re, was the Chief Representative of MR Beijing, the Chief Executive of MR Beijing Branch, the Board member of MR Greater China Advisory Board respectively. Zhen Wang has been an independent director of Bank of China Insurance Company since 2014, of Trust Mutual Life Insurance Company in China since 2017 and of PICC Re since 2020.
Fields Wicker-Miurin, an American and British citizen, studied in France at the Institut d'Études Politiques de Paris, in the United States and Italy. She graduated from the University of Virginia (BA) and the School of Advanced International Studies of Johns Hopkins University (MA). Fields Wicker-Miurin began her career in banking, before joining Strategic Planning Associates (now Oliver Wyman Consulting) as a senior partner where she was the main advisor to Lloyd’s of London. In 1994, she became Chief Financial Officer and Head of Strategy of the London Stock Exchange, where she led both the strategic and structural aspects of its complete restructuring. She was a member of the Nasdaq Technology Advisory Council and advised the European Parliament on financial markets harmonization. In 2002, she was one of the founders of Leaders' Quest, a social enterprise that works with leaders from all sectors and across the globe who want to make a responsible, positive difference through their leadership. In 2007 she received an OBE (Officer of the British Empire) and in 2011 she was appointed Fellow of King’s College London. She is also a director of BNP Paribas and of Prudential plc.
59 Male French 1,897 1 Yes April 30, 2023 5 years • Chairman of the Compensation and Nomination Committee
37 Male French 0 0 Yes November 6, 2023 <1 year • Member of the Strategic Committee
Bruno PFISTER 61 Male Swiss 1,587 1 Yes April 27, 2021 4 years • Chairman of the Risk Committee
Novem ber 5, 5 years • Member of the Strategic Committee
52 Female British 4,087 3 Yes April 25, 2023 7 years • Chair of the Audit Committee
(1) Adrien Couret has been a director since November 6, 2020. (2) Jean-Marc Raby resigned from his duties with effect from November 5, 2020.
As at December 31, 2020, the expertise represented on the Board of Directors was as follows: Insurance and reinsurance market
Number of directors SCOR SE’s bylaws provide that the Board of Directors shall comprise no fewer than nine and no more than eighteen members.
Under SCOR SE’s bylaws, each director must own at least one ordinary share for the duration of his or her entire term of office, and under the Internal Charter of the Board of Directors, each director shall agree to acquire shares with a value of at least EUR 10,000 and to hold them throughout his or her term as director. Under French law, a director may be a natural person or a corporate entity for which an individual is appointed as permanent representative, except for the Chairman, who must be an individual. Pursuant to Article L. 225-20 of the French Commercial Code, the permanent representative of a corporate entity is subject to the same conditions, obligations and civil and criminal liabilities as if he or she was director in his or her own name, without prejudice to the joint and several liability of the corporate entity he or she represents.
Of the fourteen members of the Board of Directors, thirteen are natural persons and one, Holding Malakoff Humanis, is a corporate entity (represented by Thomas Saunier as permanent representative).
The Audit Committee is fully composed of independent directors, the Risk Committee is composed of 85.7% of independent directors and the Compensation and Nomination Committee is composed of 80% of independent directors such as the Corporate Social and Societal Responsibility and Environmental Sustainability Committee (excluding the directors representing employees.
OF DIRECTORS HAVE PRIOR EXPERIENCE IN THE INSURANCE OR REINSURANCE INDUSTRY
With directors who are of American, British, Belgian, Swiss and Chinese nationality.
The composition of the Board of Directors is therefore compliant with applicable law.
Since the Ordinary and Extraordinary Shareholders’ Meeting held on April 27, 2017, the directors representing employees have been elected by the employees of SCOR SE and its direct and indirect subsidiaries whose registered office is in France. Under French law, one of the two directors representing employees must belong to the “cadre” (executive) category, and the other to the “non-cadre” (non-executive) category. In the interest of instating a wholly democratic process for the election of the directors representing employees, while complying with the applicable legal provisions, the Company wishes to continue to involve all employees worldwide, by holding a “primary”, which will give them a chance to express their preference before the actual vote.
The terms of office of the two directors representing employees expiring at the 2020 Shareholders' Meeting, a “primary” was held in January 2020 after which the actual election of the two directors representing employees took place end February 2020. The terms of office of the two newly elected directors representing employees, Lauren Burns Carraud for the “cadre” category and Fiona Camara for the “non-cadre” category, were effective as from the end of the 2020 Shareholders' Meeting.
Vincent Foucart April 26, 2018 June 16, 2020 M French End of term of office
Jean-Marc Raby April 30, 2015 April 26, 2019 November 5, 2020 M French Resignation
Zhen Wang April 26, 2018 June 16, 2020 F Chinese Renewal * Represented by Thomas Saunier.
Terms of office On appointment or renewal, the term of office of directors, as set forth in SCOR SE's bylaws, shall not exceed four years. Pursuant to SCOR SE’s bylaws, directors may hold the office of director until the age of 77. A director who reaches the age of 77 while in office must retire on expiration of his or her term of office, as determined at the Shareholders’ Meeting. With the exception of directors representing employees, directors are elected by shareholders and serve until the expiration of their respective term of office, or until their resignation, death or dismissal, with or without cause, by the shareholders. Vacancies on the Board of
Directors are required to comply with applicable law and SCOR SE’s bylaws. Under French law, directors may be held responsible in the event of violations of French legal or regulatory provisions applicable to European Companies (Societas Europaea), violations of company bylaws or mismanagement. Directors may be held responsible for such violations both individually and jointly with other directors.
Internal Charter of the Board of Directors The Board of Directors’ meeting held on March 31, 2004 adopted an Internal Charter in order to enhance and specify the rules governing the Board’s operating procedures. The Internal Charter was amended by successive decisions of the Board of Directors with the most recent one issued on February 23, 2021. This charter is available on the Company’s website (www.scor.com), and its main provisions are provided below.
Beyond the cases provided by law, some operations are subject to the prior approval of the Board: • any major organic growth investments or internal restructuring operations; • any significant operation falling outside of the strategy announced by the Group; • and any project regarding a sale or acquisition, merger or cash and asset contribution higher than one hundred million euros (EUR 100 million).
Assessment of the independence of the directors by the Board of Directors, on the proposal of the Compensation and Nomination Committee 1 Shall not currently be or have been within the five preceding years, an employee or an executive corporate officer of SCOR, or an employee, a director or an executive corporate officer of a company consolidated within the Company. However, a director who has been, during the five preceding years, director of a subsidiary which is consolidated by the Company can be qualified as an independent director of the Company if the term of office in the subsidiary was terminated before April 15, 2020.
Denis Kessler is the executive corporate officer of SCOR SE and Fiona Camara and Lauren Burns Carraud are employees of the Company.
The Board of Directors has ensured that the directors of SCOR SE have not received, in any form, except for compensation received as a director of one of the companies in the SCOR Group, compensation greater than EUR 100,000 within the last five years.
The Board of Directors has ensured that no director of SCOR SE holds an executive corporate office in a company in which SCOR SE directly or indirectly holds a directorship or in which an employee designated as such or an executive corporate officer of SCOR SE (currently or in the last five years) holds a directorship.
Aéroports de Paris; • Claude Tendil, Chairman of the Board of Directors of Generali
The Board of Directors noted that none of the companies had business relationships with SCOR that generate revenues higher than the threshold indicated in the Internal Charter of the Board of Directors of SCOR SE and that the business relationships were not significant for SCOR SE or for the third-party company with which SCOR SE had business relationships. In its analysis, the Board of Directors also considered the criteria of length, continuity, economic dependence and exclusivity of the business relationships.
To SCOR's knowledge, there are no other direct or indirect business relationships between the directors of SCOR and third parties having a significant business relationship with the Company.
Assessment of the independence of the directors by the Board of Directors, on the proposal of the Compensation and Nomination Committee 5 Shall have no close family ties with one of SCOR’s corporate officers.
The Board of Directors confirmed that no director has any close family relationships with a corporate officer of SCOR SE.
6 Shall not have been a Statutory Auditor of the Company over the five preceding years.
7 Shall not have been a director of the Company for more than twelve (12) years (the loss of independent director status in this regard will occur on the date at which this period of twelve years is reached).
The Board of Directors has ensured whether the directors represent a significant shareholder of the Company. It noted that the five directors below are either a shareholder (Holding Malakoff Humanis) or directly related to shareholders of SCOR SE: • Adrien Couret, Chief Executive Officer of Aéma group; • Bruno Pfister, Chairman of the Board of Directors of Crédit
Suisse Asset Management; • Holding Malakoff Humanis, represented by its Chief Executive
Officer Thomas Saunier; • Claude Tendil, Chairman of the Board of Directors of Generali
As the interests of these companies in the share capital and voting rights of SCOR SE is significantly below the 5% threshold set by the Internal Charter of the Board of Directors of SCOR SE, the Board of Directors noted that Adrien Couret, Bruno Pfister, Holding Malakoff Humanis (represented by Thomas Saunier), Claude Tendil and Fields Wicker-Miurin can be deemed independent with regards to this criterion.
Lauren Burns Carraud No No Yes Yes Yes Yes Yes Yes Yes No
Fiona Camara No No Yes Yes Yes Yes Yes Yes Yes No
Adrien Couret * Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Bruno Pfister Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Kory Sorenson Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Role of the Lead Independent Director The Lead Independent Director is appointed from among the independent directors by the Board of Directors on the proposal of the Compensation and Nomination Committee. He assists the Chairman and Chief Executive Officer in his duties, in particular in organizing the Board and its Committees and ensuring they operate properly, and in supervising corporate governance.
With the approval of the Chairman and Chief Executive Officer, he may represent the Company. In particular, he can answer questions from shareholders, on behalf of the Board of Directors, on corporate governance matters. These meetings or contacts will be conducted in close coordination with the General Secretariat which will be informed beforehand. The Lead Independent Director reports on his work to the Board of Directors.
Directors’ rights and duties Directors may receive training, if they feel it is necessary, on the specific aspects of the Company, its lines of business, its business area and its social and environmental responsibility challenges. They agree to regularly attend meetings of the Board of Directors, of Committees of which they are members, and Shareholders’ Meetings. Lastly, they have the obligation to express their opposition when they believe that a decision of the Board of Directors is likely to be harmful to the Company.
Firstly, the Internal Charter of the Board of Directors sets out the legal and regulatory provisions requiring confidentiality with regard to inside information of which directors may become aware in the course of their duties.
• first, directors are prohibited from trading in SCOR securities while in possession of information that, when made public, is likely to have a significant influence on the share price. In this regard, directors must refrain from (a) engaging in or attempting to engage in insider trading, in particular by acquiring or disposing of, on their own behalf or on behalf of a third party, directly or indirectly, financial instruments to which that information relates, or by cancelling or amending orders already placed concerning a financial instrument to which the information relates; (b) recommending, encouraging or attempting to recommend or encourage another person to engage in insider trading on the basis of inside information; (c) unlawfully disclosing or attempting to disclose inside information to another person, except when the information is disclosed in the normal course of their work, profession or duties; • in addition, directors are prohibited from directly or indirectly engaging in any transaction with regard to SCOR’s securities during certain sensitive periods of which they have been notified by the Group or during any period preceding an important event affecting SCOR and likely to influence the share price. In all cases, the following periods are considered sensitive: the thirty (30) calendar days before the publication of half-year and annual financial statements; the fifteen (15) calendar days before the publication of quarterly results and the announcement of the dividend.
2.1.3.5. PREVENTION OF RISKS OF CONFLICT OF INTEREST Each director has a duty of loyalty towards the Company. He or she shall in no case act in his or her own interests against that of the Company and must avoid any situations with risks of conflict of interest.
Pursuant to the Internal Charter, each director agrees not to seek or accept, either from the Company, the Group or third party, either directly or indirectly any functions, benefits or situations that could jeopardize his or her independent analysis, judgment or action in the performance of his or her duties as director. He or she will also not allow himself or herself to be directly or indirectly pressured by other directors, specific groups of shareholders, creditors, suppliers or other third parties in general.
Should there be any doubt as to the existence of a conflict of interest, directors may consult with the Lead Independent Director, the Chairman of the Compensation and Nomination Committee or the General Secretary, who shall advise them.
In the event that a characterized punctual conflict of interest should arise on a specific topic submitted for discussion at a Board of Directors’ meeting, the director in question shall (i) disclose the conflict to the Board prior to the meeting and (ii) abstain from taking part in the Board's debate or decision on the topic (in this case, he/she shall be excluded from quorum and voting calculations); it being specified that any director who is also a director of a consolidated company must abstain from taking part in the decisions of the Board in the event of a conflict of interest given his/her directorship with the subsidiary concerned (1).
In the event that a general conflict of interest should arise, directors must immediately notify the Chairman of the Compensation and Nomination Committee and, if the situation has not been resolved within one (1) month following the notification, resign from the Board of Directors.
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.3.6. MEETINGS OF THE BOARD OF DIRECTORS The Company’s Board of Directors held eight meetings in 2020 and they lasted on average two hours and a half.
Governance and Human Resources Corporate Social and Societal Responsibility and Environmental Sustainability
• Review of the Chairman and Chief Executive Officer compensation for 2019
• Review and approval of the Group compensation policy • Review and approval of the stock option and performance share allocation plans • Annual review of the human resources briefing and outlook • Review of the results of the assessment of the Board of Directors • Annual review of the independence, fitness and properness of the directors and persons effectively running SCOR SE and the Group • Review of the composition of the Board of Directors and of its
Committees • Review of the results of the Global Employee Survey
• Convening of the Annual General Meeting • Determination of the dividend to be paid on the 2019 results • Review and approval of the reports to be presented at the Annual
Fields Wicker-Miurin 100 * SCOR SE director until June 16, 2020. ** SCOR SE director since June 16, 2020. *** SCOR SE director since November 6, 2020. **** SCOR SE director until November 5, 2020.
In addition, one training session was held in 2020 for the Board members on the actuarial function, its role and responsibilities. Due to the health crisis, no further training sessions were organized in 2020.
The findings of the assessment were presented by Vanessa Marquette during the meeting of the Compensation and Nomination Committee on February 22, 2021, the non-executive directors’ session on February 23, 2021 and the Board of Directors meeting held on the same day.
In addition to the assessment of the operation of the Board and its Committees, an assessment of each director’s effective contribution to the Board's work was conducted, led by Augustin de Romanet, Lead Independent Director and Chairman of the Compensation and Nomination Committee. The Lead Independent Director then provided individual feedback to each director.
The directors expressed a consistently high level of satisfaction with the overall quality and functioning of SCOR’s governance, particularly in the context of the global health crisis. They commended the responsiveness of Management, who took the appropriate measures to protect the Group's employees right from the beginning of the pandemic.
In particular, the assessment of the Board highlighted the quality of communication regarding key Company developments outside of Board meetings, as well as the improvement in the quality and 70 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code speed of the distribution of meeting minutes. The directors expressed their satisfaction regarding the feedback they received on their contribution to the Board's work.
Among the areas for improvement identified in the assessment, the directors, aware that the ever-increasing volume of documents results from legislative and regulatory developments, noted the efforts made by Management to provide summaries but nevertheless consider that the volume of documents provided could still be reduced, the quality of the summaries improved and the duration of the meetings adjusted accordingly. While acknowledging the quality of the technology used by the Group during the pandemic in order to enable Board of Directors' meetings to take place, the directors nevertheless note that the lack of in-person meetings hindered the quality of discussions regarding the Group’s strategic challenges.
2.1.3.8. NEGATIVE DISCLOSURES REGARDING MEMBERS OF THE BOARD OF DIRECTORS AND THE EXECUTIVE COMMITTEE
To SCOR’s knowledge, in the last five years: • no director and no member of the Executive Committee has been convicted of fraud; • no director and no member of the Executive Committee has been associated with the bankruptcy, sequestration, liquidation or placing under administration of a company; • no director and no member of the Executive Committee has ever been stripped by a court of the right to act as a member of the administrative, management, or supervisory body of an issuer or the right to be involved in the management or business of an issuer.
No director and no member of the Executive Committee has been subject to an accusation by and/or received an official public sanction from statutory or regulatory authorities, with the exception of the accusation against Augustin de Romanet in his capacity as former Chief Executive Officer of Caisse des Dépôts et Consignations, in the proceedings currently ongoing before France’s Court of Budgetary and Financial Discipline regarding the implementation of a free share plan for employees within CDC Entreprises (a Caisse des Dépôts et Consignations subsidiary). Augustin de Romanet informed SCOR that he had set up an incentive compensation plan, the legality of which is not disputed, had not received any shares under the plan, and had requested that the Court release him from all charges.
2.1.3.9. BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE CONFLICTS OF INTEREST No loans or guarantees have been granted or established in favor of the directors by SCOR or by any other Group company.
There is no arrangement or agreement entered into with shareholders, clients, suppliers or others pursuant to which any member of the Board of Directors or any member of the Executive Committee has been appointed.
The non-executive directors’ session is composed of all directors, with the exception of the Chairman and Chief Executive Officer and the directors representing employees.
The following table presents the changes in the composition of the Committees and the non-executive directors’ session, during the year: Committee Appointment Reappointment Departure
The average attendance rate of the Committee members as of December 31, 2020 was 88%. The following table presents the attendance rates of Strategic Committee members in 2020: Board members Attendance rate (%)
Due to the experience and positions held by its members during their career, the Committee has a high level of financial expertise (for further detail, see Section 2.1.3.2 – Information concerning the members of the Board of Directors).
The Audit Committee met on four occasions in 2020, each meeting lasting on average two and a half hours. The Chairman and Chief Executive Officer attended all the meetings in 2020.Four joint sessions of the Audit Committee and Risk Committee were also held in 2020.
• Review of the quarterly, half-year and annual financial statements, with a particular focus of the impact of Covid-19 on the Group’s results
• Review of the 2020 compliance plan and follow-up on the 2019 compliance plan actions
• Annual review of related party agreements • Annual review of the work of the Audit Committees of the main
Group subsidiaries • Review of the main ongoing litigations • Review of the quarterly legal and compliance dashboard • Examination of the results of the review of ordinary agreements entered into at arm’s length conditions
The average attendance rate of the Committee Members as of December 31, 2020 was 96%. The following table presents the attendance rate of the members of the Risk Committee in 2020: Board members Attendance rate (%)
(1) Attendance rate based on Commitee members as of December 31, 2020.
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.4.4. THE COMPENSATION AND NOMINATION COMMITTEE
The Compensation and Nomination Committee is composed of Augustin de Romanet (Chairman), Lauren Burns Carraud (director representing employees), Vanessa Marquette, Bruno Pfister, Claude Tendil and Fields Wicker-Miurin.
Except for the director representing employees and Claude Tendil, the Committee members are independent.
The Committee presents to the Board of Directors recommendations related to the compensation of the executive corporate officer and of the corporate officers, to free share allocation plans and stock option plans, and examines proposals related to the composition, organization and operating procedures of the Board of Directors and its Committees.
The Compensation and Nomination Committee met on eleven occasions in 2020, each meeting lasting two to three hours.
• Work on a possible change in SCOR SE's governance, such as a separation of the functions of Chairman and Chief Executive Officer
• Annual review of the independence, fitness and properness of the directors and of the persons effectively running SCOR SE
In particular, the Compensation and Nomination Committee devoted a significant portion of its time in 2020 to the succession of the Chairman and Chief Executive Officer. A leading recruitment firm was appointed in 2019 to assist the Committee. As part of its work, the Committee focused in particular on defining the expected profile with regard to the challenges facing the Company and the reinsurance industry over the next few years and on identifying candidates likely to match this profile. The Committee also discussed the possibility of separating the functions of Chairman and Chief Executive Officer.
These topics were also discussed during the non-executive directors’ session, chaired by the Lead Independent Director.
The average attendance rate of the Committee members as of December 31, 2020 was 98%. The following table presents the attendance rate of the members of the Compensation and Nomination Committee in 2020: Board members Attendance rate (%)
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.4.5. THE CORPORATE SOCIAL AND SOCIETAL RESPONSIBILITY AND ENVIRONMENTAL SUSTAINABILITY COMMITTEE
The Corporate Social and Societal Responsibility and Environmental Sustainability Committee is composed of Fields Wicker-Miurin (Chairperson), Fiona Camara (director representing employees), Vanessa Marquette, Bruno Pfister, Augustin de Romanet and Claude Tendil.
Except the director representing employees and Claude Tendil, the other members are independent.
The Corporate Social and Societal Responsibility and Environmental Sustainability Committee met on three occasions in 2020, each meeting lasting approximately two hours.
MAIN ACTIVITIES OF THE CORPORATE SOCIAL AND SOCIETAL RESPONSIBILITY AND ENVIRONMENTAL SUSTAINABILITY COMMITTEE IN 2020
• Review of the fossil fuels divestment strategy • Follow-up on the project to develop agroforestry in an emerging country • Information on the methodology for calculating the carbon footprint of the underwriting portfolios following the publication of the CRO Forum report on this matter
• Approval of the CSR action plan for 2020 and quarterly review of its implementation • Review and approval of the various Group CSR reports, such as the Non-Financial Performance Declaration, included in the 2019
Universal Registration Document, the 2019 Activity and CSR report and the 2019 climate report • Information on CSR issues and expectations of investors and NGOs • Follow-up on the Group's non-financial ratings • Discussions on the consequences from Covid-19 on SCOR’s raison d’être
The average attendance rate of the Committee members as of December 31, 2020 was 100%. The following table presents the attendance rate of the members of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee in 2020: Board members Attendance rate (%)
Claude Tendil 100 * Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee since June 16, 2020. ** Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee until June 16, 2020.
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.4.6. THE CRISIS MANAGEMENT COMMITTEE
The Crisis Management Committee met once in 2020, and the meeting lasted approximately two hours.
Fields Wicker-Miurin 100 2.1.4.7. NON-EXECUTIVE DIRECTORS’ SESSIONS Non-executive directors’ sessions involve all the directors, with the exception of the directors representing employees and the executive corporate officer of the Company.
They bring together the non-executive directors so that they can exchange ideas outside the Board of Directors’ meetings. A session may be called to address conflicts between the Board and
• Discussions on the various measures envisaged by the Compensation and Nomination Committee to meet the expectations expressed regarding the compensation policy
• Interviews with the candidates selected by the Compensation and Nomination Committee for the position of Chief Executive Officer
2.1.5.1. CORPORATE OFFICERS At its meeting on April 18, 2002 and in compliance with Article L. 225-51-1 of the French Commercial Code and Article 16 of SCOR’s bylaws (“Executive Management”), the Board of Directors of the Company decided that the management of the Company would be carried out under its responsibility by the Chairman of the Board of Directors, with the title of Chairman and Chief Executive Officer, who may be assisted by a Deputy Chief Executive Officer.
The Chairman and Chief Executive Officer has executive authority to manage SCOR’s business, subject to prior authorization of the Board of Directors or the Shareholders’ Meeting for certain decisions as required by law and by the Company’s bylaws, and subject to compliance with the French Insurance Code according to which SCOR must be effectively run by at least two persons. The Chairman and Chief Executive Officer has the authority to act on behalf of and in the name of SCOR and to represent SCOR in dealings with third parties, subject to those powers expressly reserved by law to the Board of Directors or the shareholders. The Chairman and Chief Executive Officer determines, and is responsible for, the implementation of SCOR’s goals, strategies and budgets, which are submitted to the Board of Directors.
For more details on the new governance structure of SCOR SE, see Section 2.1.1.2 – Evolution of SCOR’s governance.
Furthermore, according to the Internal Charter of the Board of Directors, the directors may ask that the Company’s senior executives attend meetings of the Board of Directors in order to question them, if necessary, on matters related to the performance of their functions in the absence of the Chairman and Chief Executive Officer.
Frieder Knüpling Frieder Knüpling, a German citizen, has been Group Chief Risk Officer of SCOR since January 2014, responsible for risk management, actuarial, risk modeling, and prudential and regulatory affairs. He became a member of SCOR’s Group Executive Committee in 2010, after having held various actuarial, finance and risk management roles at Gerling Global Re, Revios and SCOR. Frieder Knüpling holds degrees in mathematics and physics, and a PhD in Economics. He is a fellow of the Deutsche Aktuarvereinigung (DAV), a Chartered Enterprise Risk Analyst (CERA).
Romain Launay Romain Launay, a French citizen, is a graduate of École polytechnique, Corps des mines and the Centre des hautes études de l’assurance. Having held various positions at the French Ministry for the Economy and Finance between 2004 and 2009, he became Technical Advisor to the Prime Minister’s Office in 2009. He joined SCOR in February 2012 as Senior Advisor to the Chairman and Chief Executive Officer, before being appointed Group General Secretary in May 2014. In February 2016, he became Group Chief Operating Officer.
Brona Magee Brona Magee, an Irish citizen, holds a bachelor’s degree in Actuarial and Financial Studies from University College Dublin. She is also a Fellow of the Society of Actuaries in Ireland. From 2006 to 2011, she was General Manager for Transamerica International Reinsurance Ireland, which was acquired by SCOR in 2011. She became Chief Financial Officer for SCOR Global Life Reinsurance Ireland from 2011 to 2013. In 2013, Brona moved to the United States to become Chief Financial Officer of SCOR Global Life Americas and in 2015, she was promoted to Deputy Chief Executive Officer, SCOR Global Life Americas where she oversaw all technical aspects of the business, including finance, actuarial reserving, pricing, risk management and medical underwriting. In February 2017, she returned to Ireland and became Chief Actuary for SCOR Global Life and was responsible for reserving, pricing and risk management, and for the Irish entities. In November 2017, Brona took the position of Head of Client Solutions for SCOR Global Life, focused on the development of a suite of innovative solutions for clients around the world. In September 2018, Brona was appointed Deputy CEO of SCOR Global Life and joined the Group’s Executive Committee. In her role she is responsible for Global Markets, overseeing the implementation of SCOR Global Life’s strategy across all regions and continues to maintain responsibility for Client Solutions.
François de Varenne François de Varenne, a French citizen, is a graduate of the École polytechnique and a civil engineer of the ponts et chaussées. He holds a PhD in finance and graduated as an actuary from the Institut de science financière et d’assurances (ISFA). François de Varenne joined the Fédération française des sociétés d’assurances (FFSA) in 1993 as Manager of Economic and Financial Affairs. In London, from 1998, he served successively as Insurance Strategist with Lehman Brothers, Vice-President for asset management solutions and structured transactions specialist in insurance and reinsurance companies at Merrill Lynch and then at Deutsche Bank. In 2003, he became Managing Partner of Gimar Finance & Cie. He joined the Group in 2005 as Director of Corporate Finance and Asset Management. On September 3, 2007, he was named Group Chief Operating Officer. On October 29, 2008, he was appointed Chief Executive Officer of SCOR Global Investments and Chief Executive Officer of SCOR Investment Partners.
By the end of 2020, women held about 19% of the 10% of positions with the highest responsibilities (based on the highest levels of the Partners program). The policy to build a more mixed talent pool as well as the related 2020 achievements, are described in Section 6.2.1 – Human capital as a key success factor for the Group.
In accordance with Article L. 22-10-9 of the French Commercial Code, the components of the total compensation and benefits paid or awarded to Denis Kessler as Chairman and Chief Executive Officer for the financial year ended December 31, 2020 are presented below. These compensation components are compliant with the principles and rules set for the determination of the compensation and benefits of Denis Kessler as Chairman and Chief Executive Officer for 2020 approved by the 2020 Shareholders’ Meeting.
In accordance with Article L. 22-10-34, I of the French Commercial Code, at the 2021 Shareholders' Meeting, the shareholders will vote on the aforementioned compensation components (fixed, variable and exceptional) paid or awarded to Denis Kessler for the financial year ended December 31, 2020.
The following table presents a summary of the total compensation including gross compensation, shares and stock options of the executive corporate officer for 2020, 2019 and 2018: Amount due Amount paid Amount due Amount paid Amount due Amount paid
(2) It should be noted that the figures stated above do not represent paid compensation but correspond to actuarial estimates in line with the AFEP-MEDEF corporate governance code. The value is calculated according to the same assumptions as those used for the Group financial statements (IFRS 2). All of the shares and stock options allocated to the Chairman and Chief Executive Officer are subject to performance conditions.
(3) On the proposal of the Chairman and Chief Executive Officer, and based on the recommendation of the Compensation and Nomination Committee, at its meeting on May 25, 2020, the Board of Directors approved a 30% reduction in the Chief Executive Officer’s variable annual compensation for 2019. As a result, the amount of variable annual compensation paid to the Chairman and Chief Executive Officer for 2019 is EUR 758,940, compared to EUR 1,084,200 as presented in the 2019 URD.
These compensation components are compliant with the principles and rules set for the determination of the compensation and benefits of Denis Kessler as Chairman and Chief Executive Officer for 2020 as approved by the 2020 Shareholders’ Meeting.
In accordance with Article L. 22-10-34 of the French Commercial Code, the fixed, variable and exceptional components comprising the total compensation and benefits paid or awarded to the Chairman and Chief Executive Officer for the past financial year are subject to approval by the Shareholders' Meeting.
Compensation components due or awarded for the financial year ended December 31, 2020
EUR 1,200,000 Following the recommendation of the Compensation and Nomination Committee at its February 25, 2020 meeting, the Board of Directors decided at its February 26, 2020 meeting that the Chairman and Chief Executive Officer would receive fixed gross annual compensation of EUR 1,200,000, payable in 12 monthly instalments. The fixed compensation of the Chairman and Chief Executive Officer has not changed since January 1, 2008.
This variable annual compensation is determined as follows: • 50% on the basis of the achievement of a financial objective, set at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee; and
The Board of Directors determined, on the proposal of the Compensation and Nomination Committee, a percentage of achievement for the objectives of 62.25%.
The objectives, along with their respective assessments and achievement rates, are detailed in the table below.
The Board of Directors, on the proposal of the Compensation and Nomination Committee, decided not to award to the Chairman and Chief Executive Officer any Exceptional Contribution Bonus (ECB).
EUR 0 No exceptional compensation was awarded during the year, as in previous years.
Stock option and free share allocation plans or other longterm compensation
Stock options EUR 259,000 Shares EUR 2,748,750 (accounting value under IFRS)
In accordance with the authorization by the Shareholders' Meeting of April 26, 2019 in its 23rd resolution, the Board of Directors decided at its April 28, 2020 meeting, on a proposal of the Compensation and Nomination Committee at its April 24, 2020 meeting, to allocate stock options to the Chairman and Chief Executive Officer and to the other members of the Executive Committee on April 28, 2020. Under the plan, 100,000 stock options were allocated to the Chairman and Chief Executive Officer. All of the stock options are subject to performance conditions. The performance conditions are defined as follows and are assessed and validated annually by the Compensation and Nomination Committee: The stock options will be exercisable from April 29, 2024, provided: (1) that the general conditions set out in the plan of April 28, 2020 are met and in particular that the beneficiary remains a corporate officer of the SCOR Group until April 28, 2024 inclusive, except as otherwise stated by the plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected. In the event of a breach of the Code of Conduct, for instance in the event of fraud, the beneficiary will lose all of his stock options (clawback policy); (3) that the corporate social responsibility (CSR) training obligation is met; In addition to mandatory conditions (1), (2) and (3), the exercise of all the stock options allocated is subject to the fulfilment of performance conditions. Half of the options will be exercisable provided that SCOR’s average ROE over three years (from January 1, 2020 to December 31, 2022) is equal to the average of SCOR’s strategic target ROE (the “Target ROE”) over the same period.
If the observed average ROE is lower or higher than the Target ROE, the options will be exercisable according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE
Proportion of the options that can be exercised under this criterion
In any case, if the observed average ROE is lower than 5%, the proportion of the options that could be exercised under this criterion will be 0%.
The remaining half of the options will be exercisable from April 29, 2024, provided that SCOR’s average solvency ratio over three years (from January 1, 2020 to December 31, 2022) is at least equal to the average of SCOR's strategic target solvency ratio over the same period (the "Target Solvency Ratio").
The achievement of the performance conditions is assessed by the Compensation and Nomination Committee.
In accordance with the authorization by the Shareholders' Meeting of April 26, 2019 in its 24th resolution, the Board of Directors decided at its April 28, 2020 meeting, on a proposal of the Compensation and Nomination Committee at its April 24, 2020 meeting, to allocate performance shares to the Chairman and Chief Executive Officer and to the other members of the Executive Committee. Under the plan, the Chairman and Chief Executive Officer was allocated 125,000 performance shares.
The performance shares will vest as from April 29, 2023, provided that the beneficiary remains a corporate officer of the SCOR Group until April 28, 2023 inclusive, except as otherwise stated by the plan. All of the shares are subject to the same conditions as those for the stock options.
The stock options and performance shares allocated to the executive corporate officer in 2020 represent 0.120% of the share capital, 9.53% of the total allocations in 2020, and 60% of his overall compensation.
SCOR strives to ensure that each stock option and performance share allocation has a neutral impact in terms of dilution. In particular, its policy is to systematically neutralize, as far as possible, the potential dilutive impact that could result from the issuance of new ordinary shares following the exercise of stock options, by covering the exposure resulting from the issuance of stock options through the purchase of ordinary shares under its share buy-back program and by cancelling the treasury shares thus acquired as the options are exercised. Moreover, the shares allocated under the performance share plans are existing shares held in treasury by the Company as part of its share buy-back program and not newly created shares. Thus, there is no capital dilution due to the allocation of stock options and performance shares. Lastly, in compliance with the recommendations of the AFEP-MEDEF corporate governance code applicable to the executive corporate officer, the Chairman and Chief Executive Officer has made a formal commitment not to use hedging instruments on the stock options (including the shares resulting from the exercise thereof) and/or performance shares allocated to him, for the entire term of his office.
EUR 64,000 In 2020, the Chairman and Chief Executive Officer received compensation for his office as Chairman of the Board of Directors in the form of a fixed portion in the amount of EUR 28,000 and a variable portion equal to EUR 3,000 per meeting of the Board of Directors and per meeting of the Committees of which he is a member.
In 2020, he took part in eight meetings of the Board of Directors, three meetings of the Strategic Committee and one meeting of the Crisis Management Committee, for a variable portion of EUR 36,000.
Moreover, the Chairman and Chief Executive Officer benefits from a death or permanent disability insurance in case of an accident, also taken out for the senior executives of the Company and applicable since January 1, 2006. This collective insurance is renewed or renegotiated on an annual basis so that the Chairman and Chief Executive Officer will benefit from any policies that may replace the existing one.
In its 5th resolution and in accordance with the provisions of Article L. 225-42-1 of the French Commercial Code, the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2018 approved the commitments made by the Board of Directors to the Chairman and Chief Executive Officer.
No retirement benefit (or commitment) has been paid to the Chairman and Chief Executive Officer in 2020.
The provision recognized in respect of the commitment to the Chairman and Chief Executive Officer under the supplementary pension plan totals EUR 26.3 million. This amount breaks down as follows: EUR 21.2 million excluding employer social security contributions and EUR 5.1 million corresponding to employer social security contributions. The EUR 1.6 million increase in the provision versus December 31, 2019 notably reflects the recognition of an additional year of supplementary rights pursuant to the IAS 19 rules.
* Components of compensation due or awarded in respect of the financial year which are or have been submitted to the Shareholders’ Meeting in accordance to the rules applicable to related party agreements and commitments.
Achieving profitability in line with the objective set out in the strategic plan
Maintaining a solvency ratio equal to or higher than the lower limit of the optimal range defined in the strategic plan
The solvency ratio, as defined by the internal model, is estimated at 220% at end-2020, or 35 percentage points above the lower limit of the strategic plan (185%), giving an achievement rate of 135% under the pre-defined formula.
The Quantum Leap strategic plan was launched in mid-2019, before the start of the Covid-19 pandemic. Above all, the health crisis has been a human tragedy because of the number of victims all over the world. Economically, the reinsurance sector has been heavily impacted. Excess mortality, particularly in the United States, has resulted in high claims in life reinsurance. In damages and liability reinsurance, several lines of business have been affected, such as those that cover the cancellation of events, credit and surety, and operating losses. The effects of the pandemic on financial markets have also been very marked, with in particular a decline in interest rates that is weighing on the return on invested assets.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership
From a qualitative perspective, the Board of Directors noted the progress made by the Group in implementing the strategic plan's ambitions, particularly in terms of technology, even beyond the plan's objectives. For example, the Group had 61 robotized processes at end-2020, compared to 13 at the launch of Quantum Leap. Significant progress was also made in automating the processing of the information exchanged with clients and brokers (e-processing), with 61% of all eprocessed messages now automated from start to finish. The Board of Directors noted that SCOR's migration strategy to the public cloud was proceeding on schedule, with larger gains than originally envisaged. SCOR's use of artificial intelligence continues to grow, and it now incorporates services provided to clients, such as Vitae, an innovative biometric risk assessment tool that improves the medical underwriting process and facilitates access to insurance for people with increased medical risks. SCOR also took a significant step forward in its cyber risk management by integrating CyberCube into its Cat Platform, as well as in the granular management of its life reinsurance portfolio with the deployment of the hELIOS tool.
Assessment of global warming-related risks for SCOR (outside-in analysis) and publication of the results in a climate report aligned with the recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD)
SCOR released its first climate report, aligned with the recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD), on May 25, 2020. The report reflects the extensive work carried out by SCOR in recent months to assess global warming-related risks. The Board of Directors noted the quality of the report and considered that the objective had been achieved.
Beyond the information in these two reports, SCOR conducted a large-scale study, mobilizing dozens of natural disaster modelling experts in its teams and involving the review of several thousand scientific publications, to assess the impacts of global warming on the probability and intensity of different types of natural disasters, and the impact on its portfolio in terms of damages and agricultural risk coverage over 5 to 10 years. The Board of Directors highlighted the strong interest in this work.
The Board of Directors also noted that the “Insuring Our Future: 2020 Scorecard on Insurance, Fossil Fuels and Climate Change” report, published by 19 organizations from 11 countries and ranking 30 leading insurers, identifies SCOR, alongside a large insurance group, as a leader in divestment from the coal insurance industry.
Based on all of the above, the Board of Directors found that the objective had been significantly exceeded, justifying the maximum achievement rate.
In 2020, SCOR pursued a dynamic training and active careers and skills management policy.
The Board of Directors praised the resilience and exemplary engagement of all the teams during the crisis, as well as the actions taken by management to protect and develop the Group's talent pool, and considered that the initial objective, which did not take the context into account, had been significantly exceeded, justifying the maximum achievement rate.
Stock options allocated to the executive corporate officer during the financial year by the issuer or by another company of the Group
Performance shares that became available for the executive corporate officer during the year
Number of shares that became available during the period Plan date Vesting conditions
Difference between the average solvency ratio over 2017-2019 and the average of the target solvency ratio
In 2020, the Compensation and Nomination Committee acknowledged the achievement of the performance conditions attached to the March 10, 2017 stock option plan, bringing the vesting rate to 75%. In addition to the performance conditions described below, the presence of the beneficiary in the Group until March 10, 2021 and compliance with the Group’s ethical principles as described in the Code of Conduct of the SCOR Group are required.
Compensation ratios The table below shows the changes in the compensation paid or awarded to the executive corporate officer, the average compensation paid or awarded on a full-time equivalent basis to Group employees other than the executive corporate officer, the median compensation paid or awarded on a full-time equivalent basis to Group employees other than the executive corporate officer, and the performance of the Group over the past five years.
Compensation (3) of the executive corporate officer (1) 8,222,750 6,619,600 6,456,770 6,800,900 5,027,690
Average compensation (3) paid or awarded on a full-time equivalent basis to Group employees other than the executive corporate officer (2) 144,111 139,146 141,608 145,085 133,500
Average compensation (3) paid or awarded on a full-time equivalent basis to employees of SCOR SE and its branches (1) other than the executive corporate officer (4) 121,001 125,426 127,704 128,044 117,106
(1) Following the nomenclature of SCOR SE companies and its branches as of December 31, 2020. The scope of SCOR SE and its branches, which employ 616 employees in France and 369 employees internationally, is representative of SCOR's various trades, workforce and payroll in France.
(2) Estimated ratio. (3) The components of the compensation are the fixed compensation, the variable compensation paid in year Y in respect of year Y-1, the exceptional compensation paid in year Y, and the long-term incentives (LTIs) (stock options, performance shares and other long-term compensation instruments awarded during year Y). The valuations of the LTIs correspond to actuarial estimates of the free share and stock option allocations made during the reference year, in line with the AFEP-MEDEF code, and not to paid compensation. The value is calculated according to the same assumptions as those used in the Group's financial statements (IFRS 2).
In accordance with the AFEP-MEDEF corporate governance code, the directors should be shareholders themselves and hold a significant number of shares in relation to the compensation awarded. According to the Board’s Internal Charter, a significant number of shares corresponds to an amount of EUR 10,000 at the time of purchase of the shares. The latter provisions do not apply to the directors representing employees.
Moreover, the non-executive members of the Board of Directors, who are individuals, except for the directors representing employees, received an amount of EUR 10,000 on September 3, 2020, which they invested in SCOR shares.
Directors’ Compensation The compensation paid to the directors for 2019 and 2020 breaks down as follows: In EUR
Amounts awarded in 2020 Amounts paid in 2020 Amounts awarded in 2019 Amounts paid in 2019
The amount of compensation paid to the directors for 2020 and the amount of compensation awarded to them for 2020 differs due to exceptional meetings held in December 2020.
Moreover, some of the directors are, or have been, members of the Boards of Directors of Group subsidiaries and received compensation for 2020 and/or 2019 as follows: SCOR UK COMPANY LTD
Number of shares held by directors Article 10 (“Administration”) of SCOR SE’s bylaws requires that directors own at least one share of the Company during the term of their directorship. In addition, the Board of Directors’ Internal Charter states that for reasons of good corporate governance and to ensure that their interests are aligned with those of the Company, each director is invited to personally hold a significant number of shares. Except for the directors representing employees, each director therefore undertakes to hold a number of shares with a value of at least EUR 10,000 by the end of the first year of their directorship.
2.2.1.4. CORPORATE OFFICERS’ COMPENSATION POLICY In accordance with Article L. 22-10-8 of the French Commercial Code, the following paragraphs present the components of the compensation policy applicable to all of the Group's corporate officers (directors and the Chairman and Chief Executive Officer), which will be submitted for approval by the Shareholders’ Meeting held to approve the financial statements for the financial year ended December 31, 2020.
This compensation policy is based on the principles described below, which are consistent with the principles set forth in the overall compensation policy in force within the SCOR Group. This policy is rigorously applied by the Compensation and Nomination Committee as part of its work.
In addition, the review of the corporate officers’ compensation policy takes into account the opinions expressed by shareholders through their votes at Shareholders’ Meetings as well as via the active dialogue maintained with them by the Company, including discussions in the presence of the Lead Director. The compensation and employment conditions of the Company's employees are also an integral part of the process of determining and reviewing the compensation policy. They are considered as part of the analysis of the consistency of the compensation structure implemented by the Company. The compensation policy is established in accordance with the measures implemented by the Company to prevent conflicts of interest. Therefore, the Chairman and Chief Executive Officer is not a member of the Compensation and Nomination Committee and does not attend the discussions of the Board of Directors relating to his compensation.
2.2.1.4.1. Directors’ compensation policy The Shareholders’ Meeting sets the maximum aggregate amount of the compensation for the directors.
February 23, 2021 set the terms and conditions for the allocation of the compensation so as to encourage the attendance of the directors and to be compliant with the AFEP-MEDEF corporate governance code which stipulates that directors’ compensation should consist primarily of a variable portion.
The directors’ individual compensation is allocated as follows, within the limit of the annual maximum aggregate amount set by the Shareholders’ Meeting: • a fixed portion in an annual amount of EUR 28,000, payable at the end of each quarter. For non-French resident directors, an additional EUR 10,000 per year is allocated. It should be noted that the Board of Directors at its meeting on February 23, 2021, decided, given the health crisis, to suspend this allocation to nonFrench resident directors for the financial year 2021; • a variable portion based on the effective presence of the directors at meetings of the Board of Directors and its Committees, in an amount equal to EUR 3,000 per Board or Committee meeting they attend, except for the Chairs of the Audit Committee, Risk Committee, Compensation and Nomination Committee, Corporate Social and Societal Responsibility and Environmental Sustainability Committee, Crisis Management Committee and Non-Executive Directors’ Sessions, who receive an amount equal to EUR 6,000 for each meeting they chair.
Except for the Chairman and Chief Executive Officer and the directors representing employees, the members of the Board of Directors are not entitled to Company stock option plans or free share allocation plans, nor to any variable compensation other than the compensation related to their attendance at meetings.
No pension contributions (or commitments) are made on behalf of the directors, except for the Chairman and Chief Executive Officer, in the exercise of their duties.
Lastly, the directors representing employees have an employment contract under which they receive compensation in accordance with the principles of the Group's overall compensation policy. They also fall under the policy presented above as part of their duties as directors representing employees.
It is also reminded that, as stated in the press release of December 16, 2020, the Board of Directors will propose to the 2021 Shareholders’ Meeting to appoint Benoît Ribadeau-Dumas as a director (see section 2.1.1.2 above). Since January 1st, 2021, Benoît Ribadeau-Dumas has been Deputy Chief Executive Officer of SCOR SE and, as such, has joined the Group's Executive Committee. As Deputy Chief Executive Officer, he has a permanent employment contract with the Company, whose compensation (variable portion) has been set in accordance with the principles of the Group's compensation policy and is eligible for the Company stock option plans and free share allocation plans. His employment contract is subject to the legal requirements regarding notice and termination, it being specified that, like all other members of the Group's Executive Committee (other than the Chairman and Chief Executive Officer), Benoît Ribadeau-Dumas benefits from the severance pay described in section 2.2.2.1. As of his appointment as a director, he will also, in this capacity, be subject to the compensation policy set out above.
2.2.1.4.2. Compensation policy for Denis Kessler as Chairman and Chief Executive Officer for 2021
Set out below is the compensation policy for the Chairman and Chief Executive Officer of SCOR SE for 2021, which will be submitted for approval by the shareholders in accordance with the provisions of Article L. 22-10-8 II of the French Commercial Code.
For information on the duration of the term of office of Denis Kessler and his conditions of dismissal, please see Section 2.1.5.1 – Corporate officers.
Governance The Board of Directors of SCOR SE decided, at its December 12, 2008 meeting, to apply the recommendations of the AFEP (Association Française des Entreprises Privées, the French association of large companies) and MEDEF (Mouvement des Entreprises de France, the French business confederation) to the compensation of the executive corporate officer of SCOR, considering that they are in line with SCOR’s corporate governance principles.
In a context marked by a dispute with Covéa (see Section 4.6.25 – Litigation of the 2019 URD) as well as by an activist opposition, the approval rates for the resolutions relating to the total compensation and benefits of the Chairman and Chief Executive Officer were 78.04% for the resolution relating to the previous financial year and 68.94% for the resolution relating to the compensation policy.
Taking note of these results, and while considering the particular circumstances that led to them, the Compensation and Nomination Committee carried out an in-depth review of the compensation policy, based on a detailed presentation by the General Secretariat and the Lead Independent Director of the opinions expressed by the shareholders before and after the Shareholders' Meeting. This presentation was submitted to the Committee at its July 2020 meeting and was then updated for its November 2020 and February 2021 meetings.
Each component comprising the compensation and benefits is analyzed individually and then collectively, in order to reach an appropriate balance between fixed and variable, individual and collective and short- and long-term components, including the benefits payable at the end of his term of office under the supplementary pension plan.
The compensation policy was established in accordance with the recommendations of the AFEP-MEDEF corporate governance code as revised in January 2020.
The compensation policy constitutes a tool that enables the Group to attract, motivate and retain talents at the highest level, and to meet the expectations of shareholders and other stakeholders, notably in terms of transparency and the link between compensation and performance.
The individual objectives for the Chairman and Chief Executive Officer are proposed each year by the Compensation and Nomination Committee and set by the Board of Directors with the ambition of guaranteeing the resilience of the Company and the creation of value for shareholders. Individual objectives related to corporate social responsibility are also set for the Chairman and Chief Executive Officer.
According to a decision by the Board of Directors, changes to the Chairman and Chief Executive Officer’s compensation are determined in the light of benchmark analyses.
The target variable annual portion of the Chairman and Chief Executive Officer’s compensation is based on transparent and demanding objectives tailored to the Group’s sector of activity.
In order to take into account the shareholder votes on the compensation policy as well as the opinions expressed by certain shareholders, the Board of Directors has decided in 2020 to make the calculation of the portion of variable annual compensation related to the financial objective more demanding, and to pay it in accordance with the table below: Ratio between the observed ROE and the Target ROE Proportion of the target paid
The Board of Directors has decided that, in the event that a new Chief Executive Officer is appointed, these same principles will apply, it being specified that if the appointment is made during the current year, the amount due will be prorated based on new Chief Executive Officer’s presence within the Group. Nevertheless, if an appointment is made during the second half of the year, performance will be assessed at the discretion of the Board of Directors on the proposal of the Compensation and Nomination Committee.
Moreover, the Board of Directors may also decide to allocate an amount designed to compensate the new Chief Executive Officer – if hired from a company outside the Group – for any loss of variable annual compensation due to their departure from their previous employer, it being specified that the payment of such compensation is subject to the approval of shareholders, in accordance with Article L. 22-10-34 of the French Commercial Code.
Exceptional compensation No exceptional compensation has been paid by the Company over the past few years.
Long-term variable compensation The Board of Directors considers that long-term variable compensation, which is a significant component of the compensation of all the Group’s Partners (around 25% of the workforce), is particularly well suited to the office of Chairman and Chief Executive Officer, given the expected level of his direct contribution to the long-term, overall performance of the Company. This compensation policy favors stock options and performance shares over variable cash compensation, thereby promoting a strong alignment of the interests of the beneficiaries with those of the shareholders, both during the performance measurement period and beyond, through the holding of the shares.
The performance shares would vest three years after the allocation date (provided the beneficiary is still with the Group) and would be subject to performance conditions over three calendar years, i.e. 2021, 2022 and 2023 for the plans allocated in 2021.
The stock options would be exercisable at the earliest four years after the allocation date (provided the beneficiary is still with the Group) and would be subject to performance conditions over three calendar years, i.e. 2021, 2022 and 2023 for the plans allocated in 2021.
The Board of Directors has decided that all stock option and performance share allocations made to the Chairman and Chief
Executive Officer should be subject to performance conditions that are aligned with the main strategic objectives of SCOR as set out below.
These performance conditions are identical to those applicable to other Group beneficiaries and depend on demanding levels and full transparency, with the results measured based on public data.
Proportion of the shares that will vest/the options that can be exercised under this criterion
For the remaining 20% of the allocation: • SCOR’s ranking within a panel of peers (2) based on the average Total Shareholder Return (TSR) (3) (assuming that dividends are reinvested)
of each company over three years (from January 1, 2021 to December 31, 2023).
The shares will vest/the stock options will be exercisable according to the table below: SCOR’s ranking within a panel of peers based on the TSR achieved over the reference period
(1) If the strategic plan sets a target or “optimal” range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio. (2) The peers in the panel include: Allianz, Aviva, Axa, Generali, Hannover Re, Munich Re, Swiss Re, Zurich Insurance Group. In the event that one of the peers is no longer listed, the Board of Directors will define an appropriate substitute that will replace the outgoing peer for the entire reference period. (3) In order to limit the impact of currency movements on share prices, the TSR will be measured in euros for all of the companies in the panel.
In addition, notwithstanding the total or partial achievement of the performance conditions described above, the vesting of the shares and the right to exercise all or some of the options would be subject, in any event, to the fulfilment of the corporate social responsibility (CSR) training obligation.
In order to take into account the shareholder votes on the compensation policy as well as the opinions expressed by certain shareholders, the Board of Directors, on the proposal of the Compensation and Nomination Committee, has decided to abolish the full waiver of the presence condition in the event of forced departure for reasons other than misconduct or underperformance, and to apply a prorata calculation (see “Severance pay” below).
In accordance with the authorizations by the Shareholders’ Meeting, the stock options and performance shares allocated to the Chairman and Chief Executive Officer cannot exceed 10% of the total allocations.
The maximum allocations for 2021 decided by the Board of Directors at its meeting on February 23, 2021 comply with this ceiling: • the allocation of 125,000 performance shares represents 4.2%
The Board of Directors has decided that the Chairman and Chief Executive Officer must hold as registered shares at least 10% of the shares resulting from the exercise of his stock options and at least 10% of his performance shares throughout his term of office.
Moreover, the Chairman and Chief Executive Officer has made a formal commitment not to use hedging instruments on the stock options and/or performance shares, or shares from exercised options, that have been allocated to him, throughout his term of office.
Nevertheless, such a system may be envisaged if regulatory developments or any other circumstance make it too restrictive or impossible for the Company to use share-based instruments.
This rule, which is more restrictive than that approved by the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2018, was decided by the Board of Directors in order to take into account the shareholder votes on the compensation policy as well as the opinions expressed by certain shareholders.
The performance condition (C_n), approved by the Board of Directors on the recommendation of the Compensation and Nomination Committee, will be met if both criteria below are fulfilled: • (A) SCOR's average ROE for the three financial years preceding the date of departure of the Chief Executive Officer exceeds 50% of the average of SCOR’s strategic target ROE (as defined in the strategic plan) calculated over the same period (the "Target ROE"); • (B) SCOR’s average solvency ratio for the three financial years preceding the date of departure of the Chief Executive Officer exceeds the average of SCOR’s strategic target solvency ratio (as defined in the strategic plan) calculated over the same period (the "Target Solvency Ratio"), it being specified that, if the strategic plan sets a target or "optimal" range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio.
The purpose of these criteria is to ensure alignment with successive strategic plans, particularly the "Quantum Leap" strategic plan, by incorporating their objectives and thus being representative of the Chairman and Chief Executive Officer’s impact on the Group's performance.
The Board of Directors, on the recommendation of the Compensation and Nomination Committee, will assess whether or not the performance condition (C_n) has been met.
Lastly, in the event of the termination of his duties, no noncompetition clause applies to the Chairman and Chief Executive Officer.
The Board of Directors has decided that, in the event of the appointment of a new Chief Executive Officer, the conditions of his/her severance pay will not be more favorable than those currently in force.
Moreover, the Chairman and Chief Executive Officer benefits from death or permanent disability insurance in case of an accident, also taken out for the senior executives of the Company and applicable since January 1, 2006. This collective insurance is renewed or renegotiated on an annual basis so that the Chairman and Chief Executive Officer will benefit from any policies that may replace the existing one.
Deputy Chief Executive Officer In the event of the appointment of one or more Deputy Chief Executive Officers, the compensation components, principles and criteria set out in the compensation policy and the benefits granted to the Chairman and Chief Executive Officer would also apply to the Deputy Chief Executive Officers. It would be the responsibility of the Board of Directors, on the recommendation of the Compensation and Nomination Committee, to adapt the objectives, performance levels, parameters and structure, it being specified that the target amounts expressed as percentages of the fixed compensation may not be higher than those of the Chairman and Chief Executive Officer.
2.2.2.1. PRINCIPLES AND RULES SET FOR THE DETERMINATION OF THE COMPENSATION AND BENEFITS OF THE EXECUTIVE COMMITTEE MEMBERS (OTHER THAN THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER)
The Compensation and Nomination Committee is informed about the compensation policy the Executive Committee members and makes proposals to the Board of Directors about the conditions and amount of the stock options and performance shares allocated to the members of the Executive Committee.
If a member of the Executive Committee were dismissed (except for serious or gross misconduct) or decided to resign within a 12month period following a change of control, he/she would receive an indemnity equal to the sum of the fixed and variable compensation and non-exceptional cash benefits paid by the Group during the two years preceding his/her departure. However, this indemnity will not be payable if SCOR’s average solvency ratio over the three financial years preceding the date of departure is less than the average of SCOR’s strategic target solvency ratio (as defined in the strategic plan) calculated over the same period (the “Target Solvency Ratio”) (it being specified that, if the strategic plan defines a target or “optimal” range, the lower end of this range will be considered for calculation purposes as the Target Solvency Ratio). The concept of “change of control” referred to above includes any significant capital change in SCOR, in particular one that may lead to a change in the composition of the Board of Directors or a change in the Chief Executive Officer of SCOR.
Pension benefits As is the case for all senior executives employed in France, the members of the Executive Committee who joined SCOR before June 30, 2008 and are employed in France, are entitled to a guaranteed pension plan that is notable conditional on a minimum of five years of service with the Group. The amount of the guaranteed pension is calculated based on their average compensation over the last five years. The plan was closed to employees hired after June 30, 2008.
Executive Committee members that are not employed in France benefit from the collective pension schemes in place in their entity and do not have any specific plan except for the member with a Swiss contract who benefits from a specific guaranteed pension plan similar to the one granted to the Executive Committee members employed in France and hired before June 30, 2008.
For Executive Committee members under French contracts and hired before June 30, 2008 or under a Swiss contract, the amount of the additional pension guaranteed by the Group varies from 5% to 50% (with maximum growth of 5% per year) of their average compensation over the last five years, depending on their seniority in the Group at retirement, less any pension benefits acquired under other mandatory collective pension plans. Moreover, the additional pension may under no circumstances exceed 45% of the average compensation over the last five years.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.2.2. COMPENSATION OF THE EXECUTIVE COMMITTEE MEMBERS (OTHER THAN THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER) FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2020
Amount due Amount paid Amount due Amount paid Amount due Amount paid
(1) Executive Committee members include Laurent Rousseau and Brona Magee since 2018, Jean-Paul Conoscente since 2019 and Ian Kelly since 2020. Benjamin Gentsch and Simon Pearson left the Executive Committee in 2018, Victor Peignet left the Executive Committee in 2019 and Mark Kociancic in 2020.
The table below presents the stock option plans allocated to the Executive Committee members and the executive corporate officer in office as at December 31, 2020: Number of stock options allocated Plan date
The table below presents the free share allocation plans allocated to the Executive Committee members and the executive corporate officer in office as at December 31, 2020: Plan
Frieder Knüpling 2013-2021 Long-Term Incentive Plan 40,000 - - 03/06/2021 2019-2025 Long-Term Incentive Plan 30,000 - - 02/20/2025
Jean-Paul Conoscente 2016-2022 Long-Term Incentive Plan 4,000 - - 02/24/2022 2019-2025 Long-Term Incentive Plan 25,000 - - 02/20/2025
Romain Launay 2014-2022 Long-Term Incentive Plan 5,000 - - 03/05/2022 2019-2025 Long-Term Incentive Plan 20,000 - - 02/20/2025
Brona Magee 2014-2022 Long-Term Incentive Plan 6,000 - - 03/05/2022 2019-2025 Long-Term Incentive Plan 20,000 - - 02/20/2025
The Registration Documents published by the Company in previous years show the information related to the plans covering shares delivered before 2020.
On April 26, 2019, the Shareholders’ Meeting authorized the Company's Board of Directors, in its 23rd resolution, under the provisions of Articles L. 225-177 to L. 225-186-1 of the French Commercial Code, on the proposal of the Compensation and Nomination Committee, on one or more occasions, to allocate employees of the Company and of companies or groups related to the Company within the meaning of Article L. 225-180 of the French Commercial Code, as well as the executive corporate officer, options giving the right to subscribe to new ordinary shares of the Company to be issued as part of a capital increase, as well as options giving the right to purchase ordinary shares of the Company bought back by the Company as authorized by the law and within the limit of a number of options giving right to a maximum of one million five hundred thousand (1,500,000) shares. This authorization was given for a period of 24 months from April 26, 2019 and superseded and cancelled the unused portion of the previous authorization of April 26, 2018.
Moreover, SCOR strives to ensure that each stock option allocation has a neutral impact in terms of dilution. In particular, its policy is to systematically neutralize, as far as possible, the potential dilutive impact that could result from the issuance of new ordinary shares following the exercise of stock options, by covering the exposure resulting from the issuance of stock options through the purchase of ordinary shares under its share buy-back program and by cancelling the treasury shares thus acquired as the options are exercised. Thus, there is no capital dilution due to the allocation of stock options.
The stock options can be exercised on one or more occasions from the beginning of the exercise period on April 29, 2024 until April 28, 2030 inclusive. After this date, the exercise rights will expire.
The stock options allocated will be exercisable provided: (1) that the beneficiary remains an employee or corporate officer of the SCOR Group until April 28, 2024 inclusive, except as otherwise provided by the plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met if a SCOR Group e-learning course on CSR-related topics is completed and the corresponding test is successfully passed.
The remaining half of the options will be exercisable provided that SCOR’s average solvency ratio over three years (from January 1, 2020 to December 31, 2022) is at least equal to the average of SCOR’s strategic target solvency ratio target over the same period (the "Target Solvency Ratio" (1)). Nevertheless, if the average observed solvency ratio is lower or higher than the Target Solvency Ratio, the stock options will be exercisable according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the options that can be exercised under this criterion
Pursuant to a decision taken by the Board of Directors on November 5, 2020 following a proposal from the Compensation and Nomination Committee at its November 4, 2020 meeting, in accordance with the authorization granted to the Board of Directors by the Ordinary and Extraordinary Shareholders' Meeting of June 16, 2020, 189,326 stock options were allocated on November 5, 2020 to 58 Partners (Executive Global Partners and Senior Global Partners), including one Comex member.
The Partners are executives, managers, key experts, and high potential employees formally identified across the Group. Partners are given specific responsibilities in terms of significant achievements, management of high impact projects for the Group and/or leadership roles. Therefore, they benefit from specific benefits in terms of information sharing, career development and compensation schemes. The Partners represent approximately 25% of the total number of employees in the Group.
(1) If the strategic plan sets a target or “optimal” range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio.
The options will be exercisable according to the table below: SCOR’s ranking within a panel of peers based on the TSR achieved over the reference period Proportion of the options that can be exercised under this criterion 1st to 4th 100%
A table showing the features of the SCOR stock option plans can be found in Section 4.6 – Notes to the consolidated financial statements, Note 17.2 – Stock option plans.
In 2020, the Compensation and Nomination Committee acknowledged the partial achievement of the performance conditions attached to the March and December 2017 stock option plans as described in the 2017 Registration Document, bringing the vesting rate to 75%. In addition to the performance conditions described below, compliance with the Group’s ethical principles as described in the Code of Conduct of the SCOR Group was required.
(1) If the strategic plan sets a target or “optimal” range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio. (2) The peers in the panel include: Allianz, Aviva, AXA, Generali, Hannover Re, Munich Re, Swiss Re, Zurich Insurance Group. In the event that one of the peers is no longer listed, the Board of Directors will define an appropriate substitute that will replace the outgoing peer for the entire reference period. (3) In order to limit the impact of currency movements on share prices, the TSR will be measured in euros for all companies in the panel.
Difference between the average solvency ratio over 2017-2019 and the average of the target solvency ratio +33 percentage points 100%
The option plans allocated since the financial year ended December 31, 2005 are stock subscription option plans.
Stock options allocated to the ten non-officer employees receiving the greatest number of stock options and stock options exercised by the ten employees having exercised the highest number of stock options
Number of stock options of the issuer and of the abovementioned companies exercised during the financial year, by the ten employees of the issuer or such companies, who exercised the highest number of stock options (aggregate information)
For additional information on the stock options plans currently in force within the Group see Appendix B – 5. – Notes to the corporate financial statements, Section 5.3.5 – Stock options.
On June 16, 2020, the Shareholders’ Meeting authorized the Company’s Board of Directors, in its 28th resolution, under the provisions of Articles L. 225-197-1 to L. 225-197-6 of the French Commercial Code, on the proposal of the Compensation and Nomination Committee, on one or more occasions, to allocate employees of the Company and of companies or groups related to the Company within the meaning of Article L. 225-197-2 of the French Commercial Code, as well as the corporate officers as defined under Article L. 225-197-1-II of the French Commercial Code, free allocations of existing, fully paid-up ordinary shares of the Company, and resolved that the Company's Board of Directors would determine the identity of the beneficiaries of the allocations as well as the rights and conditions attached to the conditional entitlement to receive the shares.
This authorization was given for a period of 24 months from the date of the Shareholder’s Meeting, i.e. until June 15, 2022, and superseded and cancelled the unused portion of the previous authorization granted by the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2019 in its 24th resolution.
Pursuant to a decision taken by the Board of Directors on April 28, 2020 following a proposal from the Compensation and Nomination Committee at its April 24, 2020 meeting, in accordance with the authorization granted to the Board of Directors by the Ordinary and Extraordinary Shareholders' Meeting of April 26, 2019, 125,000 performance shares were allocated on April 28, 2020 to the Chairman and Chief Executive Officer and 410,000 performance shares were allocated to other members of the Executive Committee.
See Section 2.2.3.2 of this Universal Registration Document for details of the performance shares allocated to the members of the Executive Committee.
The plan rules provide for a vesting period of three years for all beneficiaries.
In addition to mandatory conditions (1), (2) and (3), the vesting of the shares is also subject to the fulfilment of performance conditions.
Half of the shares will vest provided that SCOR's average ROE over three years (from January 1, 2020 to December 31, 2022) is equal to the average of SCOR’s strategic target ROE (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the shares will vest according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the shares that will vest under this criterion
The performance shares allocated are subject to a vesting period of three years. In addition, 664,074 of these performance shares are subject to a two-year holding period following the vesting period.
The shares allocated will be vested provided: (1) that the beneficiary remains an employee or corporate officer of the SCOR Group until November 5, 2023 inclusive, except as otherwise provided by the plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met if a SCOR Group e-learning course on CSR-related topics is completed and the corresponding test is successfully passed.
02 REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 40% of the shares will vest provided that SCOR’s average ROE over three years (from January 1, 2020 to December 31, 2022) is equal to the average of SCOR's strategic target ROE (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the shares will vest according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the shares that will vest under this criterion
In any case, if the observed average ROE is lower than 5%, the proportion of the shares that will vest under this criterion will be 0%.
of each company over three years (from January 1, 2020 to December 31, 2022).
The shares will vest according to the table below: SCOR’s ranking within a panel of peers based on the TSR achieved over the reference period Proportion of the shares that will vest under this criterion 1st to 4th 100%
The shares allocated will vest provided: (1) that the beneficiary remains an employee or corporate officer of the SCOR Group until November 5, 2026 inclusive, except as otherwise provided by the plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met if a SCOR Group e-learning course on CSR-related topics is completed and the corresponding test is successfully passed.
(1) If the strategic plan sets a target or “optimal” range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio. (2) The peers in the panel include: Allianz, Aviva, AXA, Generali, Hannover Re, Munich Re, Swiss Re, Zurich Insurance Group. In the event that one of the peers is no longer listed, the Board of Directors will define an appropriate substitute that will replace the outgoing peer for the entire reference period. (3) In order to limit the impact of currency movements on stock prices, the TSR will be measured in euros for all companies in the panel.
40% of the shares will vest provided that SCOR’s average solvency ratio over six years (from January 1, 2020 to December 31, 2025) is at least equal to the average of SCOR’s strategic target solvency ratio over the same period (the "Target Solvency Ratio" (1)). If the observed average solvency ratio is lower or higher than the Target Solvency Ratio, the shares will vest according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the shares that will vest under this criterion
20% of the shares will vest depending on SCOR’s ranking within a panel of peers (2) based on the average Total Shareholder Return (TSR) (3)
of each company over six years (from January 1, 2020 to December 31, 2025). The shares will vest according to the table below: SCOR’s ranking within a panel of peers based on the TSR achieved over the reference period Proportion of the shares that will vest under this criterion 1st to 4th 100%
The table below presents the total number of shares allocated in 2019 and 2020 within the Group, all types of plans included: Total number of
Ratio between the observed average ROE over 2017-2019 and the target ROE 65.0% 50%
In 2020, the Compensation and Nomination Committee acknowledged the partial achievement of the performance conditions attached to 2014 Long-Term Incentive Plan, bringing the vesting rate to 95%. In addition to the performance conditions described below, compliance with the Group’s ethical principles as described in the Code of Conduct of the SCOR Group was required.
Difference between the average solvency ratio over 2014-2019 and the average of the target solvency ratio +30 percentage points 100%
The following table shows the free share allocation plans currently in force within the Group.
It should be noted that the source of the shares to be allocated under these plans is treasury stock.
See also Section 4.6 – Notes to the consolidated financial statements, Note 17 – Stock options and share allocations.
During 2020, a total of 184,594 rights to free shares vested to the ten employees of the Company and of any company included in its scope receiving the highest number of shares under free share allocation plans. For French tax residents, the rights related to the performance share plans of March 4, 2014, February 21, 2017 and December 1, 2017 for which the shares were transferred to the beneficiaries on March 5, 2020, February 22, 2020 and December 2, 2020. For non-French tax residents, the rights related to the performance share plans of July 26, 2012, February 21, 2017 and December 1, 2017 for which the shares were transferred to the beneficiaries on July 27, 2020,
employees. An employer’s contribution is paid into two of the funds. Sums may be transferred into the funds in several different ways: sums received from profitsharing plans or any other voluntary contributions.
Mr. Denis Kessler Acquisition of 93,750 shares for a total amount of EUR 3,445,313 21,250 options becoming exercisable for a total amount of EUR 0
Mr. Paolo De Martin Acquisition of 45,000 shares for a total amount of EUR 1,653,750 51,000 options becoming exercisable for a total amount of EUR 0
02 REPORT ON CORPORATE GOVERNANCE Related party transactions 2.3. RELATED PARTY TRANSACTIONS
2.3.1. RELATED PARTY TRANSACTIONS AND AGREEMENTS Related party transactions For details on transactions entered into by Group companies with related parties as defined by the standards adopted under EC regulation no. 297/2008, please see Section 4.6, Note 23 – Related party transactions.
According to the procedure, the Group Legal Department, with the assistance of other departments (e.g. the Finance, Treasury and Operating Departments), conducts an annual review of the agreements entered into in the ordinary course of business at arm’s length conditions in order to verify whether they continue to meet the applicable criteria to qualify as such. The Statutory Auditors may take part in the review. The Audit Committee and the Board of Directors are informed of the results of the review. If an agreement is no longer held to meet the criteria for classification as an agreement entered into in the ordinary course of business at arm’s length conditions, the Board of Directors will review the agreement to decide whether it should remain in force. As applicable, the agreement will be authorized by the Board of Directors, notified to the Statutory Auditors and mentioned in their special report on related party agreements, and submitted for approval to the next General Shareholders’ Meeting.
In accordance with the procedure, the Company reviewed at the end of 2020 all ongoing agreements and ensured that they continued to meet the criteria for classification as agreements entered into in the ordinary course of business at arm’s length conditions.
The result of the review was communicated to the Audit Committee and the Board of Directors.
02REPORT ON CORPORATE GOVERNANCE Related party transactions 2.3.2. STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED AGREEMENTS
This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
Agreements previously approved by the Annual General Meeting We hereby inform you that we have not been notified of any agreements previously approved by the Annual General Meeting, whose implementation continued during the year ended on December 31, 2020.
Within each of these categories, specific risks are listed in a decreasing order of importance in terms of likelihood of occurrence and negative impact, after taking into account mitigation measures implemented by the Group.
The risks SCOR is exposed to are identified and assessed through various ERM mechanisms, applied for each risk as relevant and appropriate. Risks are measured by SCOR using its internal model, as approved by the ACPR and Central Bank of Ireland (CBI) for use under Solvency II. The internal model provides the Solvency Capital Requirement (SCR) of the Group, based on the value at risk of the Group’s Eligible Own Funds (EOF) at the 99.5th percentile over a one-year horizon (0.5% VaR). The SCR by risk category is provided in the following table: SCR by Risk In EUR million 0.5% VaR as at December 31, 2020
• SCOR is exposed to liquidity risks arising from both short-term and long-term liquidity needs. The company considers that it has sufficient liquid assets to cover the expected liquidity needs, collateral requirements and extreme events if necessary. For further information on liquidity risks, see Section 3.1.5 – Liquidity risks.
Emerging risks may adversely affect SCOR’s reinsurance business due to either a change in interpretation of the contracts leading to extensions of covers beyond what policyholders had expected (e.g. due to the inapplicability or interpretation of certain clauses) or by increasing the frequency and/or severity of claims. Such risks may also lead to higher fluctuations than expected in macroeconomic indicators such as interest rates and price level, or disruptions in financial markets, further impacting SCOR’s business. In addition, emerging risks may also have a direct impact on SCOR’s operations, for instance by generating unexpected additional expenses.
Specifically, climate change creates a number of challenges for the re/insurance industry and therefore for SCOR. Climate change is likely to interact with the risks associated with SCOR’s strategy, underwriting, investments and operations through physical climate risks (e.g. effects of broad climate trends or “chronic” risks and the frequency and/or severity of natural catastrophes or “acute” risks), the creation of transition risks (through the shift towards a lowcarbon economy) and through the potential to negatively impact the Group’s reputation.
Whilst progress has been made for containing the spread of the virus over the course of 2020, e.g. through safety or lock-down measures, various countries across the world experienced second and third waves. While the situation is expected to improve following the successful development of vaccines, uncertainty remains regarding availability, efficacy, effectiveness and take-up rate of the vaccines. Therefore, the pace of a successful containment of the pandemic, the shape of the economic recovery, and resulting effects on future (re)insurance loss developments remain difficult to predict.
The main material impacts on SCOR’s risk profile due to the Covid-19 pandemic originate from underwriting risks related to the Property & Casualty (P&C) and Life reinsurance businesses, and from the risks associated with SCOR’s invested assets portfolio. The operational implications of the progressive closure of SCOR’s offices as the virus has spread across the globe, have been mitigated to a large extent by the successful implementation of SCOR’s Business Continuity Plan (BCP). The BCP has provided the required IT infrastructure and support for SCOR’s activities to be continued by employees working from home, whenever and wherever deemed necessary. Increased external cyber-attacks have been observed since the start of the pandemic, though no attempts against SCOR have been successful.
The full impact of the Covid-19 crisis on SCOR’s business and results can still not be accurately assessed at this stage, given the uncertainty related both to the magnitude and duration of the Covid-19 pandemic resulting from the considerable difficulty in working on sound hypotheses related to: • the duration of the pandemic, its impact on health on the short and long term; • the availability, efficacy, effectiveness and take-up rate of the vaccines; • the response of government bodies world-wide; • the potential judicial actions or social influences; • the coverage and interpretation of SCOR’s contracts under these circumstances; and • the assessment of the net claim estimate and impact of claim mitigation actions.
Based on data currently available, information received from cedents to date and the results of the models used, SCOR currently estimates the total cost of the Covid-19 pandemic in 2020 for Life, P&C and Investments at EUR 640 million, net of retrocession and before tax. The impact is comprised of the following: • EUR 314 million estimated impact, net of retrocession and before tax, on the Life side, with the main exposure arising in the United States (EUR 283 million). A further EUR 31 million of Covid-19 related claims (net of retrocession and before tax) have been booked in other markets in 2020. Within the overall booked amount, the actual Covid-19 related claims received stand at EUR 187 million. The Covid-19 pandemic is estimated to have a manageable impact on SCOR Global Life’s portfolio over the next 12 months, even though uncertainty remains. The ultimate outcome is still subject to significant variation, partly due to the development of the virus with new strains, combined with the level of application of containment measures and roll-out of vaccination particularly in the U.S. The outcome on SCOR Global Life’s portfolio will also be affected by any divergence in the impact of the virus on lives reinsured with SCOR Global Life, including the infection fatality rate, compared to the impact on the general population, particularly in the US; • EUR 284 million estimated impact (including reserves for potential claims), net of retrocession and reinstatement premiums and before tax, on the P&C side, mainly arising from Credit, Surety & Political risks and from Property Business Interruption. Within this amount, the actual Covid-19 related claims received stand at EUR 104 million. SCOR estimates Covid19 claims to be manageable. The January 2021 renewals led to a clarification of terms and conditions, i.e. to exclude Covid-19 from the events insured; • EUR 42 million, before tax and excluding amounts attributable to non-controlling interest, in impairment charges on its invested assets portfolio. SCOR has benefited from the defensive nature and high quality of its investment portfolio when the Covid-19 pandemic started.
In addition, the global spread of Covid-19, which is still ongoing has created significant uncertainties which might affect SCOR, and which pose material risks to its risk profile.
As Covid-19 affects SCOR’s risk profile across the risk categories identified by SCOR, the related risks for SCOR are addressed within the next sections. SCOR may be exposed to a number of other risks over the medium-term as the pandemic develops and as related consequences come to light.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.1. STRATEGIC RISKS Strategic risks can be defined as the risks related to losses arising from an unsuccessful strategy or objectives. Strategic risks can arise as a consequence of either the strategy itself (such as the accumulation of risks or development in lines of business or less known markets), from external risks (such as an adverse economic environment), or from internal risks (such as certain causes of operational risk). Therefore, many of the risks discussed throughout Section 3, in addition to emerging risks, could also impact the success of the strategy.
SCOR has a large investment portfolio. In the event of extreme prolonged market events, such as global credit crises, SCOR could incur significant losses in its investment portfolio. See Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments, which includes analyses of unrealized and realized investment losses.
The impact of the current health and economic crisis due to Covid-19 on the invested assets of the SCOR Group is presented in Section 3.1.3 – Market risks.
SCOR is exposed to significant and protracted deviations of inflation from its trend The Group’s liabilities are exposed to a significant increase in the rate of inflation (prices and salaries) which would require an increase in the value of reserves, in particular in respect of P&C long-tail business, e.g. general liability (medical among others) and motor bodily injury claims. In addition, SCOR is exposed to claims inflation over and above general inflation and in particular to the inflation of court awards in respect of general liability and bodily injury claims. For further information on P&C long-tail risks, refer to Section 3.1.2.1 – P&C reinsurance.
The International Association of Insurance Supervisors (IAIS) is seeking implementation of its newly adopted holistic approach to evaluating and mitigating systemic risk in the insurance sector from 2020 onwards. This revised systemic framework could influence national and European regulations, and result in greater regulatory burdens, such as the establishment of recovery and resolution plans, and additional liquidity requirements.
Similarly, changes in tax legislation and regulations, or in their interpretation, may have a negative impact on SCOR’s performance, including financial results, and business model.
More generally, adverse changes in laws or regulations or an adverse outcome of any legal proceeding could have an adverse impact on SCOR.
3.1.1.3. RISKS RELATED TO THE VALUATION OF SCOR’S INTANGIBLE ASSETS AND DEFERRED TAX ASSETS
Details of intangible assets, related impairment testing policy and recent acquisitions are included in Section 4.6 – Notes to the consolidated financial statements, Note 1 – Accounting principles and methods, Note 4 – Acquisitions and disposals, Note 6 – Goodwill, Note 7 – Value Of Business Acquired and Note 18 – Income taxes.
3.1.1.4. RISKS RELATED TO THE COMPETITIVE ENVIRONMENT Reinsurance is a highly competitive sector. As is the case for all other reinsurers, SCOR’s position in the reinsurance market is based on several factors, such as its financial strength as assessed by the rating agencies, its underwriting expertise, its reputation and experience in the lines written, the countries in which it operates, the premiums charged, as well as the quality of the proposed reinsurance products and services offered, particularly in terms of claims settlement and payment. The Group competes for business in the European, American, Asian and other international markets with numerous international and domestic reinsurance companies, some of which have a larger market share than SCOR, greater financial resources, state backing, and, in certain cases, higher ratings from the rating agencies.
Therefore, SCOR remains exposed to the risk of losing its competitive advantage. In particular, when available reinsurance capacity via traditional reinsurers or capital markets is greater than the demand from ceding companies. Its competitors, in particular (re)insurers benefiting from higher ratings than SCOR’s or other competitors in alternative capital markets, may be better positioned to enter new contracts and gain market shares at SCOR’s expense. Furthermore, competitors are currently promoting innovation, impacting all areas of the business, in addition to its products and services, and the underlying risks. If competitors are quicker at integrating innovative solutions into their business, products and services, or make choices which have a bigger impact on future reinsurance trends, SCOR might lose its competitive advantage.
Finally, the Group’s reputation is sensitive to reinsurance sector information. It can be affected by adverse events concerning competitors but also by its own business activity, such as financial difficulties following a major market event. Loss of reputation due to internal risks would also weaken SCOR’s competitive position.
There has been no significant M&A activity in 2020, but challenging business conditions, sub-par performance of some players, the continued convergence of alternative and traditional capital, the impact of Covid-19 as well as other challenges, could result in further mergers in the next few years.
Within the insurance industry, these consolidated entities may use their enhanced market power and broader capital base to negotiate price reductions for SCOR’s products and services, and reduce their use of reinsurance, and as such, the Group may experience price declines and possibly write less business.
3.1.1.5. DOWNGRADE RISK Credit ratings are very important to all reinsurance companies, including SCOR, as ceding companies wish to reinsure their risks with companies that have a satisfactory financial position. For more details on the current rating of the Group, see Section 1.2.4 – Ratings information.
Impact on the Group’s letters of credit Many of the Group’s reinsurance treaties contain a requirement to put in place letters of credit (LOC) as a general requirement or when triggered by a downgrade of SCOR or one of its subsidiaries. In certain circumstances, the cedent has the right to draw down on a LOC issued by a bank in SCOR’s name.
3.1.1.6. RISKS RELATED TO CAPITAL SCOR’s regulated legal entities must satisfy local regulatory capital requirements. There could potentially be some local regulatory constraints, which in certain circumstances could affect SCOR’s ability to transfer capital from one legal entity to another, and in particular from one subsidiary or branch to another, or to the parent legal entity. This may have negative consequences for the legal entity concerned and could have a material adverse impact on SCOR.
The main acquisitions realized by SCOR are described in Section 1.2.2 – History and development of SCOR. Additionally, refer to Section 1.3.3 – Significant events of the year for more on the recent acquisition of AgroBrasil.
• Client relationships: it may be outside the control and influence of SCOR to retain certain client relationships and business volumes related to acquired businesses. Related earnings and efficiencies may be lower than expected, which may dilute the return on such acquisition related investments.
• Unknown acquired risks: due notably to the size and complexities of acquisitions, there may be a risk that not all financial elements (including litigation related to prior periods) have been fully and/ or correctly evaluated. Unknown or unexpected financial risks could emerge, which may have significant consequences on the initially estimated impact of the relevant acquisition on the combined Group.
Cyclicality of the business P&C insurance and reinsurance businesses are cyclical. The primary consequences of market softening are a reduction in the volume of P&C reinsurance premiums on the market, an increase in competition within the reinsurance market, and also a preference for those operators who are most attentive to the specific needs of the cedents and the most capable of meeting them. This could potentially lead to a loss of competitive advantage for SCOR.
SCOR’s long term mortality reserves are based on a number of assumptions and information provided by third parties, which, if incorrect and/or incomplete, could have an adverse effect on the Group. For further information on risks related to reserves, see Section 3.1.2.4 – Risks related to reserves.
Morbidity risks Products such as critical illness, short-term and long-term disability and long-term care, which all contain morbidity risk, are subject to the risk of negative trends in health, as well as to the consequences of improved medical diagnoses capabilities which increase the number of claims due to conditions that otherwise would possibly have remained undetected. Medical progress may in the future enable better treatment, resulting in higher claims, since certain diseases would have otherwise led to a much shorter life expectancy of the insured. Products providing cover for medical expenses are in particular subject to the risk of higher than expected incidence and inflation of medical costs.
SCOR’s ability to grow or maintain its portfolios in the P&C and Life reinsurance business units may also be subject to external factors which may be interconnected, such as economic and political risks. For instance, slowdowns in economic growth or recessions in the major markets may lead households and companies to take out less insurance, to suspend certain premium payments, or to terminate the insurance policies underlying the existing P&C and Life treaties earlier than anticipated. Similarly, the risk of social and political instability is particularly significant in emerging markets, in which both business units operate. These risks could lead to significantly reduced business growth in these target markets.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.2.4. RISKS RELATED TO RESERVES The SCOR Group is required to maintain reserves to cover its estimated ultimate liability for losses and loss adjustment expenses with respect to reported and unreported claims, incurred as at the end of each accounting period, net of estimated related recoveries. Its reserves are established based on the information it receives from its cedent insurance companies, including their own reserving levels, as well as on the basis of its knowledge of the risks, the studies it conducts and the trends it observes on a regular basis. As part of the reserving process, SCOR reviews available historical data and tries to anticipate the impact of various factors, such as changes in laws and regulations, judicial decisions, social and political attitudes and trends in mortality and morbidity, and changes in general economic conditions.
3.1.3. MARKET RISKS Market risk is the risk that the fair value or future cash flows of a financial instrument fluctuates because of changes in market prices or macro-economic variables. This risk includes: • interest rate risk; • currency risk; • equity risk; • real estate risk, to which SCOR is exposed through its investments; and • credit spread risk on these invested assets.
3.1.3.1. INTEREST RATE RISKS Interest rate risk is the risk that the fair value of future cash flows of a financial instrument fluctuates because of changes in interest rates. Interest rate fluctuations have direct consequences on both the market value and the return on SCOR’s investments as the level of unrealized capital gains or losses and the return on securities held in its portfolio both depend on the level of interest rates. Floating-rate instruments expose the Group to cash flow interest rate risk, whereas fixed interest rate instruments expose the Group to fair value interest rate risk.
The Group recognized a net foreign exchange loss of EUR 13 million for the year ended December 31, 2020 (2019: gain of EUR 3 million and 2018: loss of EUR 13 million).
(1) This analysis excludes the impact of hedging activity, and the presentation has been adjusted to 2020 disclosures.
Section 3.2.4.6 – Monitoring of sensitivity to market risks provides an overview of the sensitivity of the Group’s consolidated income and consolidated equity to equity risk. As at December 31, 2020, the impact on the Group’s consolidated income and equity of a +10% change in equity market values is assessed to be EUR +8 million and EUR +19 million, respectively. The impact on the Group’s consolidated income and equity of a -10% change in equity market values is assessed to be EUR -8 million and EUR ‑17 million, respectively.
3.1.3.5. REAL ESTATE RISKS Real estate risks, either for properties owned directly or through funds, are risks arising from a variation in the real estate market valuation or a change in rental market conditions, the two being closely linked.
The value of property assets is exposed to the risk of regulatory obsolescence of properties (regulatory developments related to the accessibility of buildings for people with a disability, on the reduction of energy consumption and the production of carbon dioxide, etc.) which would lead to losses of value in the event of a sale of the assets or to additional expenditure to restore the value of the property.
3.1.4.1. CREDIT RISKS RELATED TO CASH AND INVESTED ASSETS A deterioration in the financial situation of an issuer (sovereign, public or private) or borrower can, for example, lead to its insolvency and to the partial or total loss of coupons and of the principal invested or lead to a loss in value.
SCOR is exposed to the risk of losing all or part of any cash deposited with banks in the event that such a bank is no longer able, due to insolvency, to honor its commitments (e.g. following liquidation). The current main risk for the Group is the significant concentration of deposits in a small number of banks. This risk is a direct result of the selection of the most stable banks.
03 RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.4.2. CREDIT RISKS RELATED TO REINSURANCE CONTRACTS Under most of its Life reinsurance contracts, SCOR expects to receive premiums from its cedents over several years. These often exceed expected future payments for claims, commissions, etc., meaning that SCOR expects to receive positive future cash flows.
3.1.4.3. OTHER CREDIT RISKS For special and highly-technical risk categories such as terrorism, nuclear, aviation or pollution, SCOR chooses to participate in various market dedicated groups of insurers and reinsurers (“pools”) aimed at pooling the relevant risks among the members of each group pools which offer best available expertise and risk sharing at market level. In the event of a total or partial default by one of the members of a group, it could be required to assume, in the event of joint liability of the members, all or part of the liabilities of the defaulting member.
Liquidity needs may also arise from increased collateral requirements. Some of the facilities that SCOR uses to grant letters of credit to cedents require 100% collateral from SCOR, for example in case of default (non-compliance with financial covenants, a significant decrease in the Group’s financial strength rating…), which would result in a deterioration of the Group’s liquidity level. Also, cedents have the right to draw down on letters of credit issued by a bank in SCOR’s name at any time, however the impact on their relationship with SCOR would be considered. The risk of this occurring would increase if cedents’ concerns of SCOR not honoring its obligations increase. In a severe scenario for SCOR, multiple cedents could draw on letters of credit simultaneously, requiring SCOR to provide the total amount of required cash or fungible assets resulting in a liquidity strain for SCOR. Collateral arrangements are also used by SCOR when operating business in a jurisdiction or jurisdictions that demand a higher level of reserves than under IFRS. This is especially the case in the US for business falling under the NAIC Model Regulation XXX or Valuation of Life Insurance Policies Model Regulation, commonly referred to as Regulation XXX (or Triple X). Letters of Credit carry the risk of a duration mismatch, i.e. that short-term letters of credit are covering long-term business and might have to be renewed as less favorable conditions, creating additional cost.
Information on SCOR’s letter of credit facilities, including related financial covenants, is included in Section 4.6 – Notes to the consolidated financial statements, Note 24 – Commitments received and granted.
Maturity profiles The table below includes the estimated maturity profiles of the Non-Life insurance liabilities based on payment patterns derived from historical data.
The analysis of the balance sheet reserve movements, including net paid losses, is included in Section 4.6 – Notes to the consolidated financial statements, Note 16 – Net contract liabilities.
* Accrued interest on perpetual debt as at December 31, 2020 of EUR 12 million (2019: EUR 13 million). ** Of the amounts above, EUR 68 million (2019: EUR 20 million) relate to variable rate debt. These amounts exclude debt which has been swapped from a variable interest rate to a fixed interest rate.
3.1.6.2. RISKS RELATED TO STAFF Risks related to staff can arise as follows: • incidents due to mistakes or non-compliance with instructions, guidelines or policies; • Malicious or fraudulent acts from internal staff mandated by
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.6.4. LEGAL AND REGULATORY RISKS IN SCOR’S OPERATING ENVIRONMENT SCOR may also be exposed to an unfavorable business environment such as evolving or additional regulatory constraints potentially hindering its business model.
As an international group, SCOR must comply with national and international laws, regulations and applicable accounting standards. This includes all applicable economic sanctions, programs relating to anti-corruption, anti-money laundering, in addition to anti-terrorism laws, and laws and regulations applicable to its operations. Laws and regulations applicable to some of SCOR’s operations refer inter alia to the economic trade sanctions laws and regulations administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) and to certain laws administered by the United States Department of State. They also refer to applicable economic trade sanctions laws, regulations and directives of the European Union and its member states. Other directives with which SCOR complies apply to anti-money laundering, corruption, terrorism financing and insider trading. Regarding anti-corruption laws and regulations, in particular, SCOR must comply with the provisions of Sapin II, the Foreign Corrupt Practices Act (FCPA) and other laws such as the UK Bribery Act. Additionally, SCOR must comply with regulatory requirements regarding data management (both SCOR’s data and that of its clients), in particular the General Data Protection Regulation (GDPR) enacted by the European Union.
Any violation of laws, regulations or accounting requirements could potentially expose SCOR to fines, class actions with compensation payments, accounts reinstatements or business restrictions, and reputational damage.
3.1.6.5. RISKS RELATED TO EXTERNAL FRAUD SCOR is exposed to external fraud which is characterized by the theft of certain SCOR assets by third parties or by cedents. External frauds may be perpetrated by various means including cyber-attacks, and usually target cash or data. Should an act of fraud succeed in bypassing the controls or protection measures in place, this could generate a direct loss for the Group.
Any of the above could generate significant damages to SCOR’s systems or data, a reputational risk, give rise to a breach of SCOR’s legal responsibility, and may also result in regulatory sanctions depending on the level of sensitivity of the data or system that is successfully attacked. A cyber-attack could also assist external fraudsters resulting in a financial loss.
3.2.1.1. MANAGEMENT OF RISKS RELATED TO THE MACROECONOMIC ENVIRONMENT These risks are monitored via a robust strategic planning approach and regular risk reporting mechanisms throughout the Group, including complementary risk analyses on ad hoc topics, where deemed necessary. Potential impacts on SCOR’s risk profile are managed through a variety of dedicated and transversal risk management mechanisms. For more details on risk reporting mechanisms and roles and responsibilities of SCOR’s main governance bodies, see Section 3.3 – Internal control and risk management procedures.
3.2.1.2. MANAGEMENT OF RISKS RELATED TO LEGAL AND REGULATORY DEVELOPMENTS SCOR monitors the legal and regulatory developments which could have an impact on the Group and its entities, ensuring in particular that it takes an active position in relation to the requirements to which it is exposed or could be exposed in the different jurisdictions where it operates and that it prepares in due time for their implementation.
In particular, developments in existing or emerging prudential regulations (such as Solvency II, ComFrame or the regulations on systemic risk) are monitored at Group level by the Prudential and Regulatory Affairs Department. Regulations relating to corporate law and business compliance are monitored by the General Secretariat and, within it, the Legal department.
See Section 3.1.6 – Operational risks for further details on SCOR’s Internal control system approach, Section 3.3.4.1 – Group functions for a description of some of the departments involved in the management of intangible assets and Section 3.3.7 – Financial reporting for further details on the production of SCOR’s technical and financial results, including intangible assets.
For further details on the management of valuation risks related to goodwill and Value of Business Acquired, see Section 3.2.1.7 – Management of risks related to acquisitions.
This team analyses rating agencies’ methodologies, reports published on the reinsurance market, on SCOR and on its main competitors, in order to anticipate any potential rating actions. It also monitors specific qualitative and quantitative Key Performance Indicators developed by the four main rating agencies and performs analyses of selected deterministic scenarios (for more details on 'footprint scenarios' process, see Section 3.3 – Internal control and risk management procedures). The team also monitors the capital adequacy level as measured by the capital models developed by rating agencies.
All planned acquisition projects that may have an impact on SCOR’s risk profile are reviewed in collaboration with SCOR’s risk management teams. The planning for integration of acquired businesses typically begins during the due diligence phase. SCOR integration plans typically take into account all systems, procedures, commitments and constraints, as well as employees, clients, suppliers and contractual third parties, and focuses on closing day and post-closing objectives. While SCOR has experience in managing acquisitions and takes care in planning and executing such operations, the outcomes may not always meet expectations.
3.2.2. MANAGEMENT OF UNDERWRITING RISKS RELATED TO THE P&C AND LIFE BUSINESSES
• The underwriting teams are supported by P&C business unit’s Underwriting Management. This function provides worldwide treaty and facultative underwriting guidelines, policies regarding the delegation of capacity, underwriting support to specific lines of business or individual risks when required, ceding company portfolio analysis and risk surveys and is responsible for monitoring and referral of non-standard business and for authorizing exceptions to the underwriting guidelines.
• The P&C Pricing & Modeling department is responsible for monitoring Nat Cat accumulations. Earthquake and storm risks gross exposures are measured using proprietary external models from industry-leading catastrophe model suppliers, including Risk Management Solutions RiskLink® (“RMS”) and AIR Worldwide Catrader® (“AIR”). These tools enable the Group to quantify its exposure in terms of a probable maximum loss (“PML”) at various levels of probability for each peril and geographic location. The overall aggregate annual PML per peril, allowing for potential multiple events, provides the information required to determine the level of retrocession and other alternative risk transfer solutions (e.g. catastrophe bonds) that are needed to ensure that the net aggregate exposure is optimized for the Group’s risk appetite and remains within predefined tolerance limits.
• For non-Nat Cat business, per-risk accumulation limits are defined in the underwriting guidelines. Underwriting functions are responsible for the application and the monitoring and control of the application of these guidelines within their business unit.
• The claims handling function is performed by the claims teams, which review, process and monitor reported claims. P&C business unit’s Claims & Commutations is responsible for the implementation and overview of the overall claims handling and commutation management policy for the P&C business unit, implementing worldwide control and reporting procedures and managing commutation of portfolios and commitments. It supports and controls the day-to-day activity and takes over the direct management of large, litigious, serial and latent claims. In addition, periodic audits are conducted on specific claims and lines of business, and claims processing and procedures are examined at the ceding companies’ offices with the aim of evaluating their claims adjustment process, valuation of case reserves and overall performance. When needed, recommendations are given to underwriters and local management.
• Cross reviews are conducted to assess the quality of underwriting, pricing and claims handling of particular market areas or lines of business. This includes an evaluation of the appropriateness and effectiveness of controls and proposals for additional risk management measures, including mitigating actions. The selection process to define the order of priority of Cross reviews is guided by a risk-based approach.
3.2.2.2. MANAGEMENT OF UNDERWRITING RISKS RELATED TO THE LIFE BUSINESS SCOR’s Risk Management area, along with the Life business unit, has implemented mechanisms to mitigate certain risks specific to the Life business: • Claims deterioration risks are mitigated through yearly renewable terms for parts of the mortality business, and through premium adjustment clauses for some products.
• Underwriting of the Life business within the Group is under the worldwide responsibility of SCOR’s Life business unit. Clients are worldwide insurance companies. They are served by SCOR's specialized underwriters and actuaries who are familiar with the specific features of the markets in which they operate, particularly with local lines of business and policy conditions, as well as the technical specifics such as mortality tables, morbidity incidence rates and persistency rates. In the Life underwriting process, consideration is typically given to the quality of the client’s medical and financial underwriting standards, the target clientele of the ceding company, as well as past experience to the extent credible data is available.