The accounting for this acquisition was fi nalised on 20 February 2008 and there were no changes made to the amounts determined provisionally.
On 24 October 2008, SCOR announced that it had acquired 100% of the share capital and voting rights of Prévoyance Ré and its Life and Health reinsurance subsidiary Prévoyance et Réassurance from the Malakoff Médéric group, the leading group in the French social protection market. Prévoyance Ré’s primary clients consist of provident institutions and other mutual insurance organisations. Prévoyance Ré will continue to provide its clients with high-level services, whilst fully benefi ting from SCOR’s recognised know-how in Life and Health.
Additional details on the acquisition are included in this Registration Document in Section 5.2.1.3 Acquisition of all shares of Prévoyance Ré.
The purchase price has therefore been allocated based on a preliminary estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance with IFRS 3 “Business Combinations”. The provisional allocation requires signifi cant assumptions and the use of external expertise. Therefore, it is possible that the preliminary estimates will change as the purchase price allocations are fi nalised.
The provisional fair value of assets and liabilities acquired on 24 October 2008 is as follows: Prévoyance Ré: fair value of assets and liabilities acquired as at 24 October 2008 In EUR million Provisional
Assets VOBA 21 Investments 160 Share of retrocessionaires in contract liabilities 132 Other assets 4 Cash and cash equivalents 12 Total assets 329
Fair value of net assets 46 Consideration 40 Negative goodwill 6
The value of business acquired (“VOBA”) has been estimated at EUR 21 million based on an estimate of expected future income and using a discount rate including an appropriate risk premium. This intangible asset will be amortised over the lifetime of the underlying treaties, in line with expected emergence of income.
Net book value at 1 January 2007 200 621 15 837 Effect of foreign exchange rate movements - (14) (3) (17)
Change in scope of consolidation 577 179 79 835 Amortisation for the year - (84) (2) (86) Impairment for the year - - - -
By Segment as at 31 December 2007 (1) SCOR Global P&C 736 - 88 824
ergies of the business combination. SCOR groups its CGU’s by its primary segments, SCOR Global P&C and SCOR Global Life. This is consistent with the way that SCOR now manages and monitors its business and cash fl ows.
Effective 24 October 2008 the Group acquired 100% of the share capital of Prévoyance Ré. Based on the provisional initial accounting for this acquisition the SCOR Global Life segment has recorded EUR 6 million in provisional negative goodwill (“badwill”) as at 31 De-
Revios Group, acquired in 2006 457 535 Converium Life portfolio acquired in 2007 78 112 Remark acquired in 2007 52 58 Prévoyance Ré acquired in 2008 (provisional) 20 -
The IFRS 4 liability adequacy testing which includes VOBA recoverability, showed no indicators of impairment for the years ended 31 December 2008 or 2007. Shadow VOBA amounted to EUR 23 million and EUR (3) million at 31 December 2008 and 2007, respectively.
Other intangible assets at 31 December 2008 were EUR 70 million compared with EUR 93 million at 31 December 2007.
Other intangible assets with fi nite useful lives at 31 December 2008 were EUR 56 million compared with EUR 67 million at 31 December 2007. The largest component of this balance is the intangibles with fi nite lives generated from the separate joint venture agreements, GAUM and MDU, acquired through the Converium business combination. The Group amortises its other intangibles with a fi nite life over a 3 to 10 year period dependent on the specifi c circumstances of each arrangement.
The Group conducted its annual assessment of the amortisation period and amortisation method of these fi nite life intangible assets at year end and has concluded that both the amortisation period and existing amortisation methodology are appropriate and in line with current contractual agreements.
Other intangible assets also include indefi nite life intangible assets associated with Lloyds syndicate participations acquired through the Converium business combination. The Lloyds intangibles are deemed to have an indefi nite life due to the ability to realise cash for these contractual rights through the Lloyds auction process. The rights to one Lloyds syndicate participation were sold during the year for a gain on disposal of EUR 0.5 m while on another Lloyds syndicate the contractual nature of the agreement was changed giving rise to a gain on sale of EUR 5 million together with a reduction of the useful life from an indefi nite period to a 10 year period. Other intangible assets having an indefi nite useful life at 31 December 2008 were EUR 17 million compared with EUR 26 million at 31 December 2007.
All properties held by the Group are considered investment property. They consist of offi ce or housing buildings which the Group owns and leases and offi ce buildings and warehouses capitalised under fi nance lease contracts.
Gross value at 31 December 2006 274 106 380 Foreign exchange rate movements Additions 24 - 24 Disposals (24) (15) (39) Change in scope of consolidation 21 - 21 Gross value at 31 December 2007 294 91 385 Foreign exchange rate movements
Cumulative depreciation and impairment at 31 December 2006 (77) (17) (94)
Cumulative depreciation and impairment at 31 December 2007 (79) (16) (95)
Analysis of insurance business investments and fi nancial liabilities carried at fair value by valuation method
Investments at fair value determined using valuation techniques not (or partially) based on market data
Available for sale investments included approximately EUR 118 million which are measured at cost. These investments include primarily unlisted equity securities.
The change in the valuation of the available-for-sale portfolio affecting shareholders’ equity is as follows: In EUR million 2008 2007
(1) Other also includes one listed investment with an unrealised loss of EUR 14 million which the Group did not impair given the high volatility observed in the last two months of the year and the strategic nature of the investment.
Total fi xed income securities as at 31 December 2007 5,637 754 976 309 21 153 7,850
The aging of the insurance business investments is included with the analysis of the aging of all fi nancial assets in Note 27.
Funds held by ceding companies 7,202 7,186 Short term investments 1,929 47 Loans secured against collateral 34 35 Other loans maturing in more than one year 77 28
The increase of EUR 1,929 million in loans and receivables is due to increases in short term investments.
The swap is indexed against a weighted combination of U.S. and European population mortality, measured over two consecutive calendar years. According to the structure of the arrangements, a payment will be triggered if, at any time during the period covered, the index exceeds 115%. At any index level between the trigger point of 115% and the exhaustion point of 125%, JP Morgan will pay to SCOR a pro-rata amount of the notional swap amount of USD 100 million plus EUR 36 million, so that for example at an index level of 120%, 50% of the total amount becomes payable and at an index level of 130%, the full amount will be paid out. The mortality risk swap is fully collateralised by JP Morgan in favour of SCOR and thus SCOR bears no credit risk exposure.
Additionally, SCOR deposited USD 850,000 as collateral in relation to this swap.
SCOR has entered into two real estate swap contracts, with ABN AMRO. The two separate swaps are calculated and settled annually: SCOR swaps the French offi ces return for 1Y Euribor + 2.20%.
SCOR swaps 1Y Euribor + 2.20% for the German all properties return.
This dual-swap transaction has been concluded for 5 years commencing in 2007 and running until 2011. The swaps are settled annually in April of each year.
The indices used to measure the considered real estate returns are those issued by an independent third party company. These indexes are obtained by the analysis of the appraised market values on 31st December of each year and rental incomes of the real estate portfolios of institutional investors using the independent third party provider. The indices are therefore derived from a large and diversifi ed data base.
The notional exposure for each of the four legs of the transactions is EUR 30 million.
S&P 500 index options are purchased as part of the overall asset/ liability duration management strategy for the Equity Indexed Annuity product line. For annuity products where policyholder values are credited based on the performance of a specified index, over the counter options are purchased as investments to provide the income needed to fund the index credits.
These options are valued based on the Black & Scholes model using December 2008 fi nancial date including the appropriate indexes, volatility measures and yield rates. The notional amount at 31 December 2008 was USD 734 million (EUR 522 million) for which the cost of the option was USD 31 million (EUR 22 million) and the fair value adjustment recorded at 31 December 2008 amounted to USD 23 million (EUR 16 million) to reduce the options to their fair value of USD 8 million (EUR 6 million). The total decrease in fair value for these contracts in 2008 recorded through income amounted to USD 57 million (EUR 39 million).
The Group holds investments in associated companies. The following table provides a summary of the fi nancial information for these companies expressed in local standards.
(1) Based on 2006 accounts except ASEFA which is based on 2007 accounts. (2) Based on 2007 accounts except ASEFA which is based on 2008 accounts.
During 2008, following EU approval SCOR completed the sale of its 30.1% equity stake in GAUM to Munich Re and Northern States Agency Inc, a subsidiary of Berkshire Hathaway, for an amount equal to the fair value of its investment in GAUM determined during the acquisition accounting of Converium and accordingly there was no realised gain or loss on disposal of this investment.
Estimated premiums receivable from cedents, net of commission 1,682 956 2,638 915 863 1,777
Assumed insurance and reinsurance accounts receivable 1,831 1,386 3,217 1,072 1,123 2,195
Amount due from reinsurers 82 37 119 138 131 269 Provision for bad debts 0 (6) (6) (1) (7) (8) Receivables from ceded reinsurance transactions 82 31 113 137 124 262
Assumed insurance and reinsurance accounts payable (68) (72) (140) (127) (179) (306)
Liabilities for cash deposits from retrocessionaires (543) (113) (656) (491) (122) (612)
Estimated premiums payable to retrocessionaires, net of commission (115) (45) (160) (91) (24) (115)
Accounts payable on ceded reinsurance transactions (740) (206) (946) (653) (164) (817)
Accounts receivable from and payable to cedents and retrocessionaires are mostly due in less than one year. A complete aging of fi nancial assets is included in Note 27.
Change in scope of consolidation and contract portfolio exchanges - (29) (29) (7) 131 123
Amortisation for the year (90) (231) (321) (64) (111) (175) Capitalised interest 18 - 18 15 - 15 Impairment losses during the year - - - - - - Amortisation and impairment losses 1 - 1 (6) - (6) Foreign exchange rate movements 3 (8) (5) (23) (4) (26) Other changes (including change in shadow accounting) 75 8 83 3 3 6
Cash on hand and cash equivalent 620 1,057 Short-term deposits or investments 1,163 995 Cash and cash equivalents 1,783 2,052
Cash earns interest based on daily deposit interest rates. Short term deposits and investments mature in less than three months from the date of the initial investment and earn interest based on the rates for short term deposits.
Bank overdrafts amount to EUR 41 million and EUR 1 million at 31 December 2008 and 2007, respectively and are included in fi nancial debt (see note 14) and are thus excluded from the cash and cash equivalents balances.
The following table reconciles consolidated net income to net cash fl ow provided by (used in) operations as presented on the statement of cash fl ows: In EUR million
(1) Adjusted for the completion of the initial acquisition accounting of the Converium and ReMark acquisitions. See Notes 1 and 3 to the consolidated fi nancial statements. (2) Classifi cation aligned in 2008 for Revios, Converium and ReMark following the transfer of their technical accounting information into existing SCOR systems. See Note 1 to the consolidated fi nancial statements.
The Groups’ capital management objectives are: To match the profi le of its assets and liabilities, taking account of the risks inherent in the business; To maintain strong credit ratings and healthy capital ratios in order to support its business objectives and maximise shareholder value; To retain fi nancial fl exibility by maintaining strong liquidity and access to a range of capital markets; To allocate capital effi ciently and support the development of business by ensuring returns on capital employed meet the requirements of the regulators and stakeholders; and
An important aspect of the Group’s overall capital management process is the setting of target risk adjusted rates of return for business units, which are aligned to performance objectives and ensure that the Group is focused on the creation of value to shareholders.
In this regard the Group aims to achieve the following objectives over the next three years: To secure a return on equity (“ROE”) of 900 basis points above the risk free rate over the cycle; To provide a Standard and Poor’s A+ level of fi nancial security to clients by 2010; To self-fi nance the current business plan of the Group; To return excess capital to shareholders.
Claims supporting capital managed is comprised of the following: In EUR million
Subordinated debts 583 416 579 539 Debt instruments issued 201 214 206 247 Shareholders’ equity 3,416 3,416 3,648 3,648 Total claims supporting capital 4,200 4,046 4,434 4,434
It should be noted that regulatory fi lings in the majority of counties in which we operate are not prepared on an IFRS GAAP basis. The statutory basis of accounting in various countries is very often different from IFRS giving rise to potential differences between IFRS GAAP capital and statutory capital.
Regulators are primarily interested in protecting the rights of policyholders. At the same time regulators are also interested in ensuring that the group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.
Under the European Directive relating to reinsurance, as adopted in France in late 2008, the Group is now subject to the solvency for which the fi rst report is due in April 2009. SCOR has completed an initial estimate of Group solvency based on consolidated IFRS fi nancial statements (which will be fi nal adjusted for certain French GAAP requirements) which indicate that the Group expects to meet these requirements. SCOR was previously subject to Insurance Group solvency control according with Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance groups.
The movement in the translation adjustment is primarily due to the translation of accounts of the subsidiaries using the U.S. dollar as the functional currency. The Group does not currently hedge its net investments in subsidiaries denominated in foreign currencies.
At the Annual General Meeting of 7 May 2008, the Board of Directors proposed and the shareholders approved a dividend of EUR 0.80 per share. The dividend was fully paid in cash on 14 May 2008 for a total amount of EUR 143 million.
In 2007 following approval at the General Shareholders’ Meeting on 24 May 2007, SCOR SE proceeded with the payment of EUR 0.80 per share dividend, for a total amount of EUR 92 million.
The Company issued, on 6 July 2000, EUR 100 million in 20year subordinated bonds, redeemable by SCOR each quarter as from the tenth year (i.e. 2009) following their issuance. These floating-rate bonds bear interest indexed on the 3-month Euribor plus (i) 1.15% for the first ten years, and (ii) 2.15% thereafter.
On 28 July 2006 SCOR issued a perpetual super-subordinated debt security (Tier 1 type) for an amount of EUR 350 million to fi nance the acquisition of Revios Rückversicherung AG. The bond issue, comprised of last-rank subordinated bearer certifi cates with a face value of EUR 50,000 bearing interest at an initial rate of 6.154% per annum then a fl oating rate indexed on the 3-month EURIBOR plus a margin of 2.90%, payable quarterly. There is no fi xed redemption date but SCOR reserves the right to redeem, in part or in whole, the bonds as from 28 July 2016.
After separation of the shareholders’ equity portion, the gross effective yield of the OCEANE bond is 6.265%. Amortisation is as follows: Normal amortisation: the bonds will be fully amortised on 1st January 2010 at a price of EUR 20 per bond.
Anticipated amortisation: by purchase, on or off the stock market or public offer and under other conditions approved by the AMF under Visa No. 04-627 on 24 June 2004.
After separation of the components, the loan has been classifi ed as fi nancial debt, in accordance with paragraph 25 of the IAS 32 standards, due to the fact that SCOR has a contractual obligation to reimburse it on the maturity date, at the latest.
At any time from 2 July 2004 until the seventh day preceding the normal or early redemption date, bondholders may request conversion or exchange of the bonds for shares at the rate of 1.047 shares for one bond. The Company may choose to provide new shares to be issued and/or existing shares.
On 24 December 2007, SCOR Holding (Switzerland) AG had its Luxemburg subsidiary Converium Finance S.A. redeem all of the 8.25% guaranteed subordinated notes due 2032, totalling an aggregate principal amount of USD 200,000,000. This redemption, in addition to the reduction in future fi nancing costs, enabled SCOR Holding (Switzerland) to take steps towards the deregistration of its securities and the termination of its reporting requirements under the U.S. Securities Exchange Act of 1934. For more information on this subject, see Section 5.1.5 of this Registration Document.
The maturity profi les of fi nancial debt is included in Note 27 – Insurance and fi nancial risk.
Acquisition of a subsidiary Current year provision 8 37 45 Used/released reserves (13) (103) (116) Reversal of unused reserves 0 - Foreign exchange rate movements 1 - Adjusted discount rate 18 - 18
Other reserves: The other reserves include mainly provision for restructuring cost (EUR 15 million), real-estate repairs (EUR 2 million ) and other provisions related to employee (EUR 6 million).
Reinsurance recoverable Ceded claims reserves & claims expense reserves (137) (63) (467) (598) (604) (661)
(1) Adjusted for the completion of the initial acquisition accounting of the Converium acquisition. See Notes 1 and 3 to the consolidated fi nancial statements.
Underwriting reserves, or contract liabilities, are subject to the use of estimates. Payments linked to these reserves are not usually fi xed, either by amount or by due date. Liquidity information related to contract liabilities is included in Note 27.
The analysis of the balance sheet reserve movements of SCOR Global P&C, net of retrocession is presented as follows: Gross claims reserves & estimates - end of year (2) 8,402 8,244 7,045 6,135 6,310 5,791 9,325 9,127
Ceded claims reserves & estimates - end of year (2) 1,462 1,313 691 533 554 490 598 467
Net claims reserves & estimates - end of year (2) 6,940 6,930 6,353 5,602 5,755 5,301 8,727 8,660
Net paid losses (3) (4) 1 year later 2,514 2,627 1,425 896 1,000 1,026 1,766 - 2 years later 4,496 3,735 2,119 1,569 1,657 1,626 - - 3 years later 5,425 4,557 2,666 2,075 2,092 - - - 4 years later 6,309 5,029 3,119 2,455 - - - - 5 years later 6,591 5,436 3,456 - - - - - 6 years later 6,913 5,740 - - - - - - 7 years later 7,154 - - - - - - -
Net cumulative inception to date incurred losses as at 31 December 2008 (2) 9,615 8,901 7,205 6,306 6,312 5,765 9,480 -
Deferred acquisition costs (DAC) Gross DAC – end of year 232 204 129 132 137 108 230 227 Ceded DAC – end of year 49 25 5 3 2 - 2 1 Net DAC - end of year 183 179 124 129 135 108 228 226
Additionally payments include losses covered by unearned premium reserves in addition to those covered by the initial claims reserves.
The net incurred losses section is the sum of the paid claims and the change in claims reserves and IBNR at the average exchange rate of the period.
A signifi cant portion of SCOR Global P&C reserves relate to liabilities payable in currencies other than the EUR. The fl uctuations of the EUR to those currencies are included in the data in the above table.
Gross reserves, including IBNR reserves 128 147 28 32 % of Non-Life gross reserves 1.2% 1.4% 0,3% 0,3%
Actual Number of claims notifi ed under non-proportional and facultative treaties 9,135 9,051 7,971 7,335
(1) Does not include claims which result in no ultimate cost and claims notifi ed only for precautionary reasons for which the amount is not evaluated.
The change in Life mathematical reserves for the years ended 31 December 2008 and 2007 was as follows: In EUR million 2008 2007 (1)
Gross mathematical reserves as at 1st January 6,546 6,233 Change in scope of consolidation 83 437 Net premiums 1,498 1,618 Claims expense (1,127) (1,487) Technical result and other (28) 18 Change in “shadow accounting” 2 (6) Impact of foreign exchange movements (10) (267) Gross mathematical reserves as at 31 December 6,964 6,546 Reinsurance Recoverable - Ceded mathematical reserves as at 1st January (563) (624) Change in scope of consolidation (27) (8) Net premiums 24 (69) Claims expense (5) 127 Technical result and other (23) (23) Impact of foreign exchange movements (5) 34 Ceded mathematical reserves as at 31 December (599) (563) Net mathematical reserves as at 1st January 5,983 5,609 Net mathematical reserves as at 31 December 6,365 5,983
Ratchet: After a given number of years, the GMDB is adjusted to the current account balance, if greater. Most common is a 1-year ratchet, meaning that the GMDB is adjusted annually on the policy’s anniversary date.
An analysis of the share of retrocessionaires in the Group’s insurance and investment contract liabilities by rating of the retrocessionaires at 31 December 2008 and 2007 is as follows: In EUR million AAA AA A BBB < BBB Not rated Total
SCOR’s retrocessionaires have issued letters of credit amounting to EUR 125 million (EUR 87 million in 2007) in favour of SCOR. Of the total collateral of EUR 863 million, EUR 183 million is related to retrocessionaires which are not rated.
The post-employment benefi ts granted by the Group vary based on legal obligations and local requirements. Group employees are entitled to short term benefi ts (holiday pay, sick leave and profi t sharing) and long-term benefi ts (service awards, loyalty bonus and seniority bonus) and post-employment benefi ts classifi ed as defi ned benefi t or defi ned contribution plans (termination benefi t, pension).
If the defi ned benefi t plans is not wholly funded, provisions are recognised.
The discounted obligation is calculated based on the projected unit credit method by taking into consideration actuarial assumptions, salary increase, retirement age, mortality, turnover and discount rates. Assumptions defi ned are based on the macro economic environment of each country in which the Group operates.
Modifi cations to actuarial assumptions or differences between these assumptions and actual amounts give rise to actuarial differences which are recorded in shareholders’ equity during the period in which they occur, in accordance with Group accounting principles.
Expected return on assets as at 31 December 2008 7.50% 4.00% 4.60% 6.40% 4.50%
Expected return on assets as at 1 January 2008 7.50% 6.00% 5.00% 6.00% 4.50%
Expected return on assets at 31 December 2007 7.50% 6.00% 5.00% 6.00% 4.50%
Expected return on assets at 1 January 2007 7.50% 6.00% 5.00% 5.60% 4.50%
An increase or decrease in the discount rate of 0.5 would result in an increase or decrease in the estimated pension liability of approximately EUR 11 million with the offsetting impact recorded in equity.
Amortisation of actuarial gains and losses - - - - - - - -
Amortisation of past service cost - - - - - - - -
Asset (gains)/losses due to experience (16) (2) (8) (6) - - - -
Fair value of assets as at 31 December 88 14 47 27 92 11 51 30 Reconciliation of funded status Funded obligation as at 31 December 143 38 68 37 134 32 64 38 Fair value as at 31 December 88 14 47 27 92 11 51 30
Funded status as at 31 December- defi cit 55 24 21 10 42 21 13 8
The following table summarises the movements in accrued (prepaid) balances recorded in the consolidated balance sheets as at 31 December 2008 and 2007: In EUR million Total 2008 Europe Switzerland
The following table includes the allocation of plan assets as at 31 December 2008 and 2007: In EUR million Switzerland North America UK
The Group grants its employees options or share subscription plans under the following terms: Plan Date of award by the board
The stock options are available after 4 or 5 years if the employee is still actively employed by the Group.
(1) After the increase of share capital on 26 December 2006 and the stock consolidation of shares in January 2007.
The average remaining life of the options and the average exercise price for 2008 are presented below.
Deferred tax assets and liabilities and the related expense or benefi t as at and for the years ended 31 December 2008 and 2007 were generated by the following items: In EUR million
Net deferred tax asset (liability) 231 1 Deferred taxes benefi t (expense) 136 (40)
Amounts reported in the consolidated statements of income Current tax – current year (104) (74) Current tax – true-up of prior years 12 - Deferred taxes due to temporary differences 85 (24) Deferred taxes from loss carry-forward 59 (16) Changes in deferred taxes due to changes in tax rates (8) Income tax (expense)/benefi t 44 (114) In consolidated reserves Revaluation of AFS assets 92 9
The main variances are due to the difference between local tax rate of each entity and the Group tax rate, permanent differences reported by each entity, reduced rates and specifi c items.
Income before corporate income tax 274 521 Theoretical tax at 34.43% (95) (180) Reconciling items to actual tax (expense) / benefi t: Non-taxable income 9 21 Unused tax losses (4) - Net capitalised losses brought forward from previous fi nancial periods 38 (10) Reversal of impairment of deferred tax assets 66 18 Changes in tax rates 1 15 Differences between French and local tax rates 48 12 Non-taxable revenue and non-deductible charges (19) 10 Actual tax (expense)/benefi t 44 (114)
The standard tax rates for the primary locations in which the Group has operations are as follows: United Kingdom 28.00% 28.00% United States 35.00% 35.00% Group effective tax rate (15.85)% 21.88%
The net operating losses available for carryforward expire as follows: In EUR million Gross Tax effected Deferred tax asset
(1) Adjusted for the completion of the initial acquisition accounting of the Converium and ReMark acquisitions. See Notes 1 and 3 to the consolidated fi nancial statements. (2) Includes EUR 10 million relating to Groupama.
Ceded claims expense 159 106 265 155 43 199 Ceded commissions 67 6 73 44 (4) 40 Net results from retrocession (36) (104) (140) (46) (123) (169)
20.1.6.22 NOTE 22 – OTHER OPERATING AND ADMINISTRATIVE EXPENSES In EUR million 2008 2007
The increase in expenses in 2008 is due to the acquisitions of Converium and ReMark.
The audit fees paid by Group to the Auditors are detailed below: In EUR thousand
The 2008 audit and related fees includes incurred 2007 year end statutory audit fees for former auditors whereas for 2008 all Group and statutory audit work is completed by Ernst & Young and Mazars.
In June 2008 after meetings with and submissions to the main personnel representative authorities, M. Denis Kessler, CEO and Chairman of SCOR, advised all staff of the main features and objectives of the “R3 plan”. The main objective of the “R3 plan” is to make the Group more effi cient, more responsive and more competitive in its cost structure.
The “R3 plan” is expected to allow the Group to implement all the required synergies previously announced and estimated at EUR 68 million before tax on an annual basis. The estimated cost of the programme is EUR 49 million and implementation commenced during June 2008 with completion expected during the 2nd half of 2009.
The Company considers that the restructuring provisions and charges are material and consequently require separate disclosure on the face of the income statement. The amount of the restructuring provision that meets the relevant accounting criteria as at 31 December 2008 was as follows: In EUR million Gross of Taxation
Basic and diluted earnings per share are calculated as follows for the years ended 31 December 2008 and 2007, respectively: At 31 December 2008 At 31 December 2007
Parties are considered to be related if one party has the ability to directly or indirectly control the other party or exercise signifi cant infl uence over the other party in making fi nancial or operational decisions.
Post employment benefi t plans for the benefi t of SCOR employees.
Issue of share options and share awards to employees of subsidiaries. Costs are charged for annually based on the underlying value of the awards granted calculated in accordance with the guidance set out in IFRS 2. See Note 18 – Stock options and share awards for further details.
SCOR SE provides parental guarantees to a number of operating subsidiaries. Under the terms of these parental guarantees contracts of insurance or reinsurance between clients and the
Group companies are covered so that clients benefi t from the additional fi nancial security of SCOR SE.
Effective 6 June 2008, SCOR SE granted a parental guarantee to SCOR Switzerland AG which had similar terms and conditions to those issued by SCOR SE to other legal entities within the SCOR Group. Under the terms of this guarantee, contracts of insurance and/or reinsurance between clients and SCOR Switzerland AG will be covered so that clients can benefi t from the additional fi nancial security offered by SCOR SE.
SCOR Insurance (UK) Ltd United Kingdom 100.00 100.00 98.06 98.06 Full
SCOR (UK) Group Limited United Kingdom 100.00 100.00 100.00 100.00 Full
SCOR Global Life Reinsurance Ireland Limited Ireland 100.00 100.00 100.00 100.00 Full
SCOR Global Life Reinsurance UK Limited United Kingdom - - 100.00 100.00 Full
Commitments received include available but unused credit lines granted by various banks in a total amount of EUR 666 million. In 2007 the Group also holds letters of credit received for a total amount of EUR 310 million.
Commitments received Credit institutions (Unused Credit Lines) 666 435 Letters of credit – bank facilities 310 735 Letters of credit – received from retrocessionaires 125 87 Endorsements and deposits 19 21 Other commitments received 1 2
Less than one year 23 29 From one to fi ve years 36 55 More than fi ve years 6 6
Payments from Helix to SHS are based on modeled reinsurance losses on a notional portfolio. The Helix 04 contract is fi rst triggered when modeled losses to the notional portfolios reach USD
The Helix counterparty contract is a risk mitigation non exchange traded derivative whose fair value is closely referenced to the Insurance Linked Securities market pricing of the bond. In the absence of a fi rst qualifying event the fair value of the contract is approximately equal to the unexpired cost of the contract. At 31 December 2008 and 31 December 2007 the fair value of the counterparty contract was EUR 2 million and EUR 6 million respectively and is included in other assets on the balance sheet.
The risk management framework and governance of the Group is described in the introduction to Section 4 – Risk factors of the 2008 Registration Document which incorporates these consolidated fi nancial statements.
Insurance risk for the Non-Life and the sensitivity of the Group to that risk is described in the 2008 Registration Document Section 4.1.1 – The Group is exposed to divers risk factors in the non-life and life reinsurance businesses.
Insurance risks and the related sensitivities of the Life business to these risks is described in the 2008 Registration Document Section 4.1.1 – The Group is exposed to divers risk factors in the non-life and life reinsurance businesses.
Credit risks identifi ed by SCOR is described in the 2008 Registration Document in Section 4.1.13 – We are exposed to credit risks.
The following table provides an overall analysis of the aging of fi nancial assets as at 31 December 2007: In EUR million
Current or no maturity 1-12 months 12-24 months months > 36 months Total
Impairment information relating fi nancial assets is included in Note 6, – Investments, Note 7 – Loans and receivables, and Note 10 – Accounts receivables and debts with cedents and retrocessionaires and Note 20 – Investment income.
The analysis of the balance sheet reserve movements, including net paid losses is included in Note 16 – Contract liabilities.
The cash fl ows of the life business have been prepared on a best estimates basis. The amounts below represent the estimated timing of the net cash fl ows resulting from recognised insurance liabilities. For long term life reinsurance, benefi t payments are typically settled net of premiums (for treaties with periodic premium payments). Where reserves are deposited with the client, the settlement normally also includes certain other account items, primarily the release of the deposits. For contracts where deposits may be used to offset the amounts settled between SCOR and its cedents, the cash fl ows have been projected on a net basis.
The Group holds a fi nance lease which contains an option to purchase an investment property at the end of the lease term. The amount of the minimum payments and their discounted values are as follows: FINANCIAL LEASE CONTRACTS
Less than one year 8 5 8 4 From one to fi ve years 13 7 21 12 More than fi ve years - - - -
In addition, various entities in the Group rent their offi ce headquarters. The largest lease contract is by SCOR Paris for its headquarters located at La Défense with a remaining lease term of 4 years. The minimum payments are as follows: In EUR million
Currency risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in foreign exchange rates. This risk is more fully described in the 2008 Registration Document in Section 4.2.4 – We are exposed to currency risk.
Interest rate risk is the risk that the value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market interest rates. Floating rate instruments expose the Group to cash fl ow interest risk, whereas fi xed interest rate instruments expose the Group to fair value interest risk.
The Group’s objective is to maintain an appropriate mix of fi xed and variable rate instruments. It also manages the maturities of interest bearing fi nancial assets. Interest rate risk relating to investments is more fully described in the 2008 Registration Document. in Section 4.2.1 – We face risks related to our fi xed maturity investment portfolio.
The life products with guaranteed minimum death benefits (GMDB) are not materially sensitive to 100 basis point decrease in interest rates. An increase in interest rates would not result in a decrease in the level of reserves as the interest rates are locked-in.
The Group does not consider that it is interest rate sensitive if the interest rates are fi xed by local regulators. Additionally, there are no discounted reserves in the Non-Life portfolio which would result in
Equity price risk is the risk that the fair value of future cash fl ows of a fi nancial instrument will fl uctuate due to changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specifi c to the individual fi nancial instrument or its issuer, or factors affecting all similar fi nancial instruments traded in the market. The Group’s equity prices exposure relates to fi nancial assets and fi nancial liabilities whose values will fl uctuate as a result of changes in market prices, principally investments in equity securities.
The majority of the Group’s investments are in debt securities. For investments made in equity securities, the Group’s objective is to develop and manage a high-quality diversifi ed portfolio seeking shares with high dividend payouts. The equity portfolio is continually monitored.
The premiums on the Guaranteed Minimum Death Benefit (GMBD) business underwritten by the SCOR Group in the U.S. market vary with the value of the underlying assets rather than the sum at risk. Thus, premiums would decrease under a decline of the equity values whereas the expected claims would increase thus leading to an increase in the liability. However, included in the reserve calculation is a prudent margin for this fl uctuation. Accordingly, the level of reserves recorded for this business would remain unchanged in the event of a 10% decrease in equity values. As the valuation assumptions are locked-in, an increase in equity values, resulting in a decrease in the economic liability, would not impact the level of reserves recorded in the fi nancial statements.
SCOR conducted an analysis of the sensitivity of the impairment of equity securities, by applying the accounting policy and application rules set out in 20.1.6.1 (H) to theoretical future market value changes. SCOR estimates that, excluding any impairment arising to duration, a further uniform decline of 10% from 31 December 2008 market values would generate a potential future further impairment of equity securities of EUR (65) million, net of tax. It should be noted that this fi gure should not be scaled up or down as the impairment rules are not a linear function of market value. For example a scenario with a market value decline of 20% would not double the potential further equity impairment.
(3) Excludes investments in hedge funds which normally do not have a uniform correlation to equity markets and securities where SCOR has a strategic investment including where the company has a substantial shareholding but does not meet the “signifi cant infl uence” criteria in IAS 28.
The Groups’ existing policy is to actively minimise all foreign currency transaction risk wherever possible by entering into foreign currency contracts. Therefore there is minimal sensitivity to transaction risk. The Group recognised a net foreign exchange gain of EUR 7 million for the year ended 31 December 2008.
The following litigation matters shall be mentioned: In the United States: In August 2006, Highfields Capital LTD, Highfields Capital I LP and Highfields Capital II LP (the “Highfields Funds”), as former minority shareholders of IRP Holdings Limited, a company incorporated in Ireland, commenced an action against SCOR in the Superior Court of the Commonwealth of Massachusetts (the “Highfields Lawsuit”). The complaint in the Highfields Lawsuit, which was served upon SCOR on 18 October 2006, included claims for commonlaw fraud, negligent misrepresentation and violations of a Massachusetts consumer protection statute arising out of the Highfields Funds’ purchase of an equity interest in IRP Holdings Limited in December 2001, and the conditions for setting the price at which the Highfields Funds subsequently sold their interest to SCOR in 2005, a transaction which was highly profitable to the Highfields Funds. The Highfields Lawsuit is similar to a previous lawsuit filed by the Highfields Funds in March 2004 before the U.S. District Court for the District of Massachusetts and which was dismissed for lack of subject matter jurisdiction on 16 August 2006. On 21 March 2007, the Superior Court of the Commonwealth of Massachusetts granted SCOR’s motion to dismiss the Highfields Funds’ claims under the Massachusetts consumer protection law but denied SCOR’s motion to dismiss the remaining claims. On 10 April 2007, the Court denied SCOR’s Motion for Summary Judgment on Statute of Limitations Grounds, and on 17 September 2007, the Court denied SCOR’s Motion for Partial Summary Judgment seeking dismissal of the Highfields Funds’ claim for negligent misrepresentation.
The current fact discovery deadline in the Highfields Lawsuit is in principle 17 April 2009. No proceedings beyond that date are presently scheduled. Discovery is now under way.
SCOR maintains that Highfields’ action is without merit and intends to continue to defend itself vigorously. At this stage of the proceedings, we cannot estimate the likelihood or potential amount of any adverse judgment.
In July 2001, leaseholders of the WTC (“Silverstein Parties ”) purchased a USD 3.55 billion property insurance program covering the World Trade Center (“WTC”). SCOR underwrote a 10% quota share of that program as a 100% fronted reinsurer of Allianz Global Risks U.S. Insurance
On 23 December 2005, the defendants moved to dismiss the Complaint and on 21 April 2006, Lead Plaintiffs moved
On 12 January 2007, Lead Plaintiffs filed a motion for reconsideration of the Court’s 28 December 2006 order. On 9 April 2007, the Court granted Lead Plaintiffs’ motion for reconsideration in part and denied it in part. The Court granted Lead Plaintiffs’ motion to reconsider its dismissal of Exchange Act claims arising out of the IPO. The Court denied Lead Plaintiffs’ motion to reconsider the dismissal of the Securities Act claims, as well their motion to file a Consolidated Second Amended Class Action Complaint.
On 6 May 2008, following several mediation sessions before the Honorable Daniel Weinstein (Ret.), a Memorandum of Understanding was entered to pursuant to which the Lead Plaintiffs and SCOR Holding (Switzerland) will settle the claims and/or potential claims of the certified Class before the U.S. Court and the claims of non-U.S. purchasers of Converium securities in a proceeding in the Netherlands for an aggregate amount of USD 115 million (pre tax and before D&O recoveries).
On 9 January 2009, plaintiff Michael Rubin filed an appeal with the Second Circuit Court of Appeals of (i) that portion of the District Court’s 28 December 2006 Order dismissing plaintiffs’ Securities Act claims as untimely; (ii) that portion of the District Court’s 28 December 2006 Order denying plaintiffs’ motion to amend the complaint; and (iii) the Districts Court’s 12 December 2008 Order and Final Judgment. Because Rubin has appealed the District Court’s 12 December 2008 Order and Final Judgment, the settlement with the Class is not yet final.
SCOR Holding (Switzerland) is in the process of negotiating a definitive agreement for the settlement of the claims of non-U.S. purchasers of Converium securities.
On 11 December 2008, SCOR announced that an agreement had been reached with the SEC to resolve a long-running investigation of Converium related to non-traditional insurance and reinsurance products and the restatement of its financial statements. In connection with the settlement, the SEC issued an administrative cease-and-desist order by consent (the “Order”). In the Order, the SEC found that Converium had violated the anti-fraud, financial reporting, books-and-records and internal control provisions of the Exchange Act and related rules and regulations of the SEC thereunder and prohibited Converium from committing any future violations of those provisions. The Order found that all of the conduct that gave rise to the SEC proceeding took place prior to Converium being acquired by SCOR.
The French Autorité des Marchés Financiers (the “AMF”) initiated an investigation on 21 October 2004 in connection with the financial information and market transactions surrounding the issuance of OCEANEs in July 2004. The AMF also initiated an investigation on 5 October 2005 on the market for SCOR shares after 1st June 2005. As at the date of the financial statements herein, the Company has received no additional information concerning these investigations.
Starting February 2005, SCOR was the subject of a tax accounting audit covering the period 1st January 2002 through 31 December 2003, which ended with a final adjustment notice on 15 January 2008. This tax audit resulted in the base for corporate income tax being raised by EUR 101,067,063, as well as long term unrealised losses by EUR 68,880,000. These various adjustments have no financial consequence in the form of additional tax paid to the French Treasury. They concern the premiums and fees pertaining to proportional treaties and in excess of loss covers granted by SCOR to its subsidiary SCOR U.S. Corporation and the provisioning of equity investments with said subsidiary. Since some adjustments create “discrepancies” and since compensation is made during the year following the audited period, the decrease in net loss carry-forwards is EUR 64,492,071, corresponding to taxation of EUR 22,206,769 attributable to deferred taxes carried over and without effect on the cash of the Company.
Concerning the Swiss Federal Banking Commission’s decision dated 13 July 2007, confirming the position expressed by the Swiss Takeover Board in its Recommendation IV dated
After an initial investigatory phase, the Directorate of Investigation of the CNC has confirmed its initial accusation and has sent the file to the Council of the CNC for a final decision. The Council must issue its decision on the file before 29 June 2009.
(ii) The report from the Statutory Auditors on the consolidated fi nancial statements for the fi nancial year ended 31 December 2006 published pages 243 to 245 of the registration document fi led with the Autorité des marchés fi nanciers on 10 April 2007 under Number D.07-0294.
This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report includes information specifi cally required by French law in all audit reports, whether qualifi ed or not, and this is presented below the opinion on the fi nancial statements. This information includes explanatory paragraphs discussing the auditors’ assessments of certain signifi cant accounting matters. These assessments were made for the purpose of issuing an opinion on the fi nancial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated fi nancial statements. The report also includes information relating to the specifi c verifi cation of information in the group management report.
This report, together with the statutory auditors’ report addressing fi nancial and accounting information in the Chairman’s report on internal control, should be read in conjunction with, and is construed in accordance with French law and professional auditing standards applicable in France.
Accounting estimates used to prepare the consolidated fi nancial statements as at 31 December 2008 have been assessed in a high market volatility and an uncertain economic future environment. In this context, and in accordance with the requirements of Article L.823-9 of the French Commercial Code (Code de Commerce), we have performed our own assessments that we bring to your attention on the following matters: Part 20.1.6.1 “real estate investments”, “fi nancial instruments” and Notes 5, 6 and 8 to the fi nancial statements describe the principles and methods used to estimate the valuation and impairment of investments and derivative instruments.
In the specifi c context of the fi nancial crisis, we examined the control system in place, detailed in Note 27 to the financial statements, relative to the inventory of direct and indirect exposures, and the system in place for their assessment, as well as the valuation methods and write-down policies applicable to certain fi nancial instruments. We have obtained assurance that the information provided in the aforementioned notes is 20.2 Auditing of historical consolidated fi nancial information
appropriate, and that the approaches and policies described were properly applied by the Group.
We have assessed the approaches used in this impairment test, the forecasted cash fl ows and the assumptions made. We have verifi ed that the information described in part 20.1.6.1 “Taxes” is appropriate.
Our audit consisted in assessing the reasonableness of the assumptions used by the management and in verifying calculations leading to the company valuation.
Part 20.1.6.28 “Litigation” describes the uncertainties relating to the potential litigation encountered by the Group.
We have no matters to report regarding its fair presentation and conformity with the consolidated fi nancial statements.
The Report by the Chairman of the Board of Directors on the conditions for the preparation and organisation of the work of the Board of Directors and on internal control procedures, pursuant to Article L.225-37 of the French Commercial Code, featured in Appendix B, has been the subject of a report by the SCOR statutory auditors, which is also included in Appendix B.
The third-party agreements executed in 2007 or continued during 2007, as defi ned by Articles L.225-38 and following of the French Commercial Code, listed in Section 19.3, have been the subject of a specifi c report by the statutory auditors.
The SCOR corporate accounts for the fi nancial periods ending 31 December 2008, 2007 and 2006, featured respectively in Appendix A of this Registration Document, at pages 147 to 185 of the registration document fi led with the Autorité des marches fi nanciers on 28 March 2008 under the number D. 08-0154 and at pages 138 to 166 of the registration document fi led with the Autorité des marches fi nanciers on 10 April 2007 under the number D. 07-0294, have been the subject of reports by the statutory auditors, featured respectively in Appendix A of this Registration Document, at pages 289 to 292 of the registration document fi led with the Autorité des marches fi nanciers on 28 March 2008 under the number D. 08-0154 and at pages 240 to 242 of the registration document fi led with the Autorité des marches fi nanciers on 10 April 2007 under the number D. 07-0294.
20.3 Sources of fi nancial information not extracted from the audited fi nancial statements of the issuer and indication of such absence of audit Not applicable.
20.4 Date of most recently audited fi nancial information 20.5 Interim and other fi nancial information Not applicable.
See also Section 20.1.6 – Notes to the consolidated fi nancial statements, Note 24 – Net earnings per share.
In accordance with the decision of the Combined Shareholders’ Meeting on 16 May 2006 in its seventeenth resolution, to consolidate the shares comprising the share capital of SCOR in the ratio of one new share with a par value of EUR 7.8769723 (the “New Shares”) for 10 existing shares with a par value of EUR 0.78769723 per share (the “Old Shares”) and the decision of the Board of Directors of the Company on 7 November 2006, the Chairman and Chief Executive Offi cer noted on 15 December 2006 and 3 January 2007: that the reverse stock-split of SCOR shares would take place on 3 January 2007; and that prior to the reverse stock-split, the share capital would be reduced by a nominal amount of EUR 3, corresponding to the nominal amount of 4 SCOR shares (as a result of the cancellation of 4 treasury shares in order to obtain a number of outstanding Old Shares in circulation that was a multiple of 10).
As a result, on the date of the Registration Document, the share capital of SCOR was EUR 1,450,523,984.67 divided into 184,147,402 shares each with a par value of EUR 7.8769723.
Delegation of powers granted by the Shareholders’ Meeting of 7 May 2008 13th resolution (Delegation of powers to the Board of Directors for the purpose of deciding upon the incorporation of profi ts, reserves or premiums into the share capital)
15th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding on the issuance of shares and/or of securities granting access to capital or giving entitlement to a debt instrument, with cancellation of preferential subscription rights)
17th resolution (Authorisation granted to the Board of Directors for the purpose of the issuance of shares and/or securities granting access to the Company’s capital or giving entitlement to a debt instrument, as remuneration for shares contributed to the Company in the context of any public exchange offer launched by the Company or of any contributions in kind within a limit of 10% of the share capital)
22nd resolution (Aggregate ceilings of the capital increases) 110,561,865 actions (7 may 2008) 106,185,457 shares (Date of the Registration Document)
The authorisations granted by the Shareholders’ Meeting of 7 May 2008 are each granted for an eighteen (18) months duration as from the date of the Shareholders’ Meeting, i.e. until 7 November 2009, date on which it will be deemed expired if the Board of Directors did not use it.
The total number of shares authorised at the date of the Registration Document, including the shares (i) to be issued in connection with the implementation of stock option plans and the subscription of OCEANEs or (ii) that could be issued under current authorisations is 121,405,209.
On 31 December 2008, SCOR held 4,904,551 shares compared with 2,911,194 shares at 31 December 2007. The par value of these treasury shares is EUR 38,633,012.37 and their book value is EUR 83,051,649.61.
Percentage of share capital 1. Stimulation of the secondary market or the liquidity of the Company's shares by an investment services provider through a liquidity agreement compliant with a professional ethics charter recognised by the Financial Markets Authority 2. Implementation of any stock option plan of the Company within the framework of the provisions of Articles L.225-177 et seq. of the French Commercial Code 3. Free allotment of shares to employees and/ or company representatives 4,673,488 294,621 shares initially allocated to objective n. 5 have been reallocated to objective n. 3 4. Allotment of shares to employees and, where applicable, company representatives for the purpose of participating in the results of the company's expansion and implementing any company savings plan, under the conditions specifi ed by law, in particular within the framework of Articles L.443-1 et seqq. of the French Labour Code 5. Purchasing of shares for keeping and later remittal for exchange or as payment within the framework of possible external growth operations 294, 621 shares initially allocated to objective n. 5 have been reallocated to objective n. 3 6. Remittal of shares during the exercise of rights attached to securities giving access to the capital 7. Cancellation of the shares bought back in this way, within the limits established by law - - - 21. 1.4 AMOUNT OF CONVERTIBLE SECURITIES, EXCHANGEABLE SECURITIES OR SECURITIES WITH SUBSCRIPTION WARRANTS
The gross actuarial yield is 4.125% on the date of payment. Amortisation is as follows: Normal amortisation: the bonds will be fully amortised on 1 January 2010 at the price of EUR 20 per bond; Early amortisation: by purchase on or off the stock market or public offering, under other conditions detailed in the offering circular approved by the AMF under No. 04-627 on 24 June 2004.
At any time since 2 July 2004, holders of OCEANEs may, up to the seventh day prior to the normal or early amortisation date, request the allotment of new and/or existing Company shares, at the Company’s discretion, and which shall be paid and/or settled by set-off for their bond claim, at the rate of one share per bond. Any bond holder who has not exercised his right to the allocation of shares before said date shall receive an amount equal to the redemption price of the bonds.
Any request for exercise of the share allotment right which reaches BNP Paribas Securities Services in its capacity as clearing agent during a calendar month shall take effect (i) on the last business day of said calendar month or (ii) the seventh business day preceding the date set for redemption. Bond holders shall receive delivery of the shares on the seventh business day following the exercise date.
The terms and conditions of the OCEANEs are described in detail in the prospectus registered with the AMF under number 04-627 and available on the SCOR website (www.scor.com) and on the internet site of the AMF (www.amf-france.org).
Appendix A – Notes to the Corporate Financial Statements – Note 12 - Stock Options,
Section 20.1.6 – Notes to the Consolidated Financial Statements – Note 17 - Costs of employee-related benefi ts, and
(1) The amounts in New Shares indicated for the periods prior to 3 January 2007 are amounts adjusted on the basis of the corresponding amounts for Existing Shares in order to refl ect the impact of the reverse stock split described in Section 21.1.1 of the Registration Document, as if the split had taken place prior to the period covered by the information provided in this table, as the SCOR capital was entirely represented by Existing Shares prior to 3 January 2007. The adjustment was made by dividing the corresponding amount expressed in Existing Shares; the result was rounded off to the next lowest whole number. (2) This capital increase was essentially intended to fi nance with equity a portion of the acquisition by SCOR VIE, a wholly owned subsidiary of SCOR, of 100% of the stock of Revios Rückversicherung AG (“Revios”), a German company, from GLOBALE Rückversicherungs-Aktiengesellschaft – For more information on this acquisition, refer to Section 5.2.1.1 –Acquisition of Revios. This issue was described in an offering circular approved by the AMF on 16 November 2006 under number 06-406.
21.2.2 SUMMARY OF THE BYLAWS AND INTERNAL REGULATIONS OF THE COMPANY CONCERNING THE MEMBERS OF ITS ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES
The voting right attached to shares is proportional to the portion of share capital they represent. During a period of two years from the reverse stock-split of the Company’s shares implemented on 3 January 2007, any Old Share shall give the right to one vote and any New Share to ten votes, so that the number of votes attached to the shares shall remain proportional to the portion of share capital they represent.
Failure to observe the legal and statutory obligations concerning thresholds may be sanctioned by the removal of voting rights for those shares or rights exceeding the undeclared fraction.
ried forward, the Shareholders’ Meeting shall distribute them as follows: 1/ The profi t available for distribution comprises the net profi t for the fi nancial year, less prior-year losses and all sums transferred to reserves pursuant to the law, plus any retained earnings; 2/ All or part of the profi t available for distribution may be transferred by the Shareholders’ Meeting to any discretionary, ordinary or extraordinary reserves or carried forward, as deemed appropriate; 3/ Any remaining balance shall be distributed on all the shares in proportion to their unredeemed paid-up value, it being stipulated that during a period of two years starting from the reverse split operation on the shares of the Company, pursuant to the seventeenth resolution of the Ordinary and Extraordinary Shareholders’ Meeting of 16 May 2006, shares which have been subject to the reverse split shall be entitled to an amount ten times greater than the amount to which shares which have not been subject to the reverse split shall be entitled.
Under current French regulations, and in particular Article L.225-132 of the French Commercial Code, any cash capital increase gives a pre-emptive right for shareholders to subscribe to new shares which is proportional to the amount of their shares.
The Board of Directors of the Company determines the time period during which formalities for the immobilisation of bearer shares must be completed. This period is 24 hours under ordinary circumstances.
The Board of Directors of the Company may also determine that shareholders may participate in and vote at any Shareholders’ Meeting by videoconference or by any other mode of telecommunication permitting the identifi cation and effective participation of the shareholders, under the conditions set forth by the legal and regulatory provisions in force.
In addition to the information required by law from all shareholders who, acting alone or in concert, hold either directly or indirectly a given fraction of the share capital or of the voting rights of the Company, any natural person or legal entity, acting alone or in concert, which comes to hold or ceases to hold, either directly or indirectly, a fraction of the share capital or of the voting rights of the Company equal to or greater than 2.5%, or 5%, or 10%, or 15%, must inform the Company by registered letter, return receipt requested, addressed to the registered offi ce, within fi ve trading days of the date of the crossing of such threshold, of the total number of shares and/or of securities giving access to share capital held either directly or indirectly or in concert by such natural person or legal entity. The failure to comply with this requirement is sanctioned, upon request of one or more shareholders holding at least 2.5% of the Company’s share capital, noted in the minutes of the Shareholders’ Meeting, by the suspension of voting rights from all shares in excess of the non-declared fraction for any Shareholders’ Meeting that may take place during a period of two years following the date of the regularisation of the notifi cation.
Triple X – SCOR Global Life Rückversicherung AG (formerly Revios) Transaction
It has been an objective of the Revios Group to reduce its reliance on short term LoC in favour of a longer term solution, not only as a prudent course of action, but also in order to garner more favourable treatment from the rating agencies. For this purpose, in 2005 Revios put in place a Funding Arrangement (“FA”). This FA is in the form of a reinsurance agreement with two third party reinsurers, London Life and Union Hamilton. London Life acts as an intermediary for the retrocession of Revios business to its offshore companies. Under the FA, funds are placed in trust for the benefi t of London Life, which reduces the LoC requirement on a dollar-for-dollar basis.
The FA is supported by the profi tability of a large portfolio of in force life reinsurance contracts. Under the FA, Revios is able to cover under the guarantee approximately 90% of the excess of US statutory reserves over IFRS liabilities, up to the facility’s maximum of USD 225 million.
The cost of the FA is competitive with long term LoC facilities and is guaranteed for 15 years. It also has the benefi t of being nonrecourse to Revios.
In order to anticipate the increasing requirements of the Triple X regulations, the FA provided regulatory guarantees of approximately USD 215 million as at 31 December 2006, USD 226 million as at 31 December 2007 and USD 224.75 million as at 31 December 2008.
SCOR Global Life SE has signed on 22 February 2008 a four-year mortality swap with JPMorgan Ventures Corporation, under the terms of which it will receive up to USD 100 million and EUR 36 million in the event of a signifi cant rise in mortality. The agreement runs from 1 January 2008 to 31 December 2011 and will compensate SCOR notably for a rise in mortality rates due to major pandemics, natural catastrophes or terrorist attacks.
Stand-by letter of credit facility agreements executed on 23 October 2008 between SCOR SE, SCOR Global Life SE and SCOR Global P&C SE on one side and Deutsche Bank on the other side
Deutsche Bank agreed to issue Stand-By Letters of Credit (“SBLCs”) in a form acceptable to the American National Association of Insurance Commissioners (“NAIC”) as guarantee for commitments undertaken by SCOR, SCOR Global Life SE and SCOR Global P&C SE in the context of their reinsurance activities. The maximum face value of the letters of credit under this agreement is USD 325,000,000, as from 1 January 2009 until 31 December 2011.
Stand-by letter of credit facility agreements executed on 23 October 2008, between SCOR SE, SCOR Global P&C SE, SCOR Global Life SE, SCOR Switzerland AG and SCOR Rückversicherung (Deutschland) AG on one side and Natixis on the other side
The issuance of SBLCs under the terms of these agreements is subject to the execution by each entity of a pledge over a fi nancial instrument account consisting of OATs or U.S. Treasury bills representing at least 50% of the amount of the SBLC.
The Company certifi es that all the following information stated in this Registration Document and received from third parties has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by such third party, no facts have been omitted, which would render the reproduced information inaccurate or misleading: Data issued from the Standard & Poor’s Global Reinsurance Highlights (2008 Edition) and relating to the ranking on reinsurance market participants quoted in Sections 5.1.5; Ratings issued by the Standard & Poor’s, Fitch Ratings, AM Best and Moody’s rating agencies quoted in Sections 4.1.8, and 6.3.
The document referred to in Article 222-7 of the general regulation of the AMF is incorporated in the Registration Document and is shown in Section 28 – Published Information. The information quoted therein is available for downloading from the following sites: Autorité des Marchés Financiers (AMF): Bulletin des Annonces Légales Obligatoires (BALO): ciel.gouv.fr
Increase of a stake in the share capital of GECIMED (formerly SOFCO)
As at 31 December 2008, SCOR held, however indirectly, shares or units in the following companies, which represent at least 10% of the consolidated net assets or generate at least 10% of the consolidated net profi t or loss: As concerns the holdings held directly by SCOR, refer to: Section 7 – Management chart,
Appendix A – Notes to the Corporate Financial Statements Note 2.3 – Subsidiaries and affi liates, and
The Prévoir group (“Groupe Prévoir”) comprises a holding company including two insurance companies, Prévoir-Vie and PrévoirRisques divers, and a portfolio management company, Société de Gestion Prévoir.
25.2 Increase of a stake in the share capital of GECIMED (formerly SOFCO) On 28 December 2006, SCOR Global P&C entered into an agreement subject to conditions precedent relating to the acquisition from GECINA of shares representing 10.05% of SOFCO’s (now GECIMED) share capital, for an amount of EUR 16,204,700. The transfer was completed, after the lifting of conditions precedent, on 30 January 2007.
GECINA, SCOR Global P&C and RBS CBFM Netherlands BV (which also acquired GECIMED’s shares to ISM) declared that they are not acting in concert in GECIMED.
Refer to Section 20 – Consolidated fi nancial statements, Note 22 – Other operating and administrative expense for the detail of audit fees.
Information published in the Bulletin des Annonces Légales Obligatoires (BALO) [Bulletin of required legal notices publications] (www.journal-offi ciel.gouv.fr/balo/index.php)
28.1 Information published on the Autorité des Marchés Financiers (AMF) website (www.amf-france.org) Date Subject 28 January 2009 Disclosure of trading in own shares by the Company 12 December 2008 Disclosure of trading in own shares by the Company 2 December 2008 Disclosure of trading in own shares by the Company 4 September 2008 Disclosure of trading in own shares by the Company 21 July 2008 Disclosure of trading in own shares by the Company 30 June 2008 Disclosure of trading in own shares by the Company 28 April 2008 Disclosure of trading in own shares by the Company 22 April 2008 Disclosure of trading in the Company’s shares by members of the Board of Directors (Georges Chodron de Courcel)
28 March 2008 Registration document 28.2 Information published in the Bulletin des Annonces Légales Obligatoires (BALO) [Bulletin of required legal notices publications] (www.journal-offi ciel.gouv.fr/balo/index.php) Date Subject 22 September 2008 Periodical publications – Half year fi nancial statement as at 30 June 2008 29 August 2008 Periodical publications – Consolidated turnover and quarterly fi nancial statement as at 30 June 2008 20 June 2008 Periodical publications – Approval of the fi nancial statements for the fi nancial year 2007 by the Ordinary Annual General Meeting of the Shareholders held on 7 May 2008 and certifi cation of the auditors 19 May 2008 Other notices – Voting rights 14 May 2008 Periodical publications – Consolidated turnover and quarterly fi nancial statement as at 31 Mars 2008 23 April 2008 Periodical publications – Corporate and consolidated fi nancial statements for the fi nancial year ended on 31 December 2007 21 April 2008 Notices of meeting – Notice of convening of the shareholders and securities holders to the Ordinary and Extraordinary General Meeting of the Shareholders of 7 May 2008 2 April 2008 Notices of meeting – Notice of meeting of the shareholders and securities holders to the Ordinary and Extraordinary General Meeting of the Shareholders of 7 May 2008 15 February 2008 Periodical publications – Consolidated turnover as at 31 December 2007
Information relating to the total number of voting rights and shares comprising the share capital in compliance with Article L.233-8-II of the French Commercial Code and 223-16 of the General Regulation of the Autorité des Marchés Financiers – Press release 11 February 2009 SCOR records strong 2009 Non-Life renewals and optimises its portfolio with a view to greater profi tability and predictability – Press release 5 February 2009 Prestigious Redmayne report recognises SCOR with three awards in Life and Protection reinsurance in the United Kingdom and Ireland – Press release 27 January 2009 SCOR sets up Zurich Hub – Press release 19 January 2009 SCOR wins Risk Magazine’s – Press release 19 January 2009 Shareholders having declared owning more than 2.5% of the registered capital and shareholders represented to the Board of Directors – Update 13 January 2009 Disclosure of trading in own shares – from 1st to 31st December 2008 13 January 2009 Half-yearly review of SCOR SE’s liquidity contract with the company EXANE BNP Paribas – Press release 9 January 2009 SCOR comments on decision of the Swiss Federal Administrative Tribunal dated 22 December 2008 – Press release 30 December 2008 Shareholders having declared owning more than 2.5% of the registered capital and shareholders represented to the Board of Directors – Update 30 December 2008 Disclosure of trading in own shares – from 3 to 28 November 2008 29 December 2008 Frieder Knüpling promoted to SCOR Deputy Chief Risk Offi cer position – Press release 22 December 2008 SCOR receives Life Retakaful licence – Press release 16 December 2008 SCOR adopts the AFEP-MEDEF recommendations on the remuneration of Executive Offi cers – Press release 11 December 2008 SCOR SE comments on settlement of administrative proceeding with SEC relating to historical conduct at Converium 11 December 2008 Shareholders having declared owning more than 2.5% of the registered capital and shareholders represented to the Board of Directors – Update 5 December 2008 SCOR reasserts its commitment to actuarial research in Europe: a record number of applicants for the 2008 Actuarial Awards – Press release 4 December 2008 Moody’s upgrades SCOR to "A2" – Press release 28 November 2008 SCOR establishes reinsurance subsidiary in Moscow – Press release 14 November 2008 SCOR generates net income of EURO 280 million in the fi rst nine months of 2008 with a liquidity position strongly increasing to EUR 3.2 billion – Press release 6 November 2008 Disclosure of trading in own shares – From 3 to 29 October 2008 4 November 2008 Shareholders having declared owning more than 2.5% of the registered capital and shareholders represented to the Board of Directors – Update 29 October 2008 SCOR establishes SCOR Global Investments 24 October 2008 SCOR fi nalises purchase of Prévoyance Ré in France 6 October 2008 Disclosure of trading in own shares – From 1st to 23 July 2008 – Correction 29 September 2008 Disclosure of trading in own shares – 23 September 2008 17 September 2008 SCOR celebrates offi cial opening of Property & Casualty branch in China – Press release
Date Sujet 4 September 2008 Denis Kessler is elected “Personality of the year” for the reinsurance sector – Press release 27 August 2008 SCOR records net income of EUR 225 million in the fi rst Half of 2008, confi rming its profi tability track record – Press release 21 August 2008 Fitch upgrades SCOR to “A” – Press release 1 August 2008 Disclosure of trading in own shares – From 24 to 29 July 2008 31 July 2008 SCOR acquires Prévoyance Ré in France – Press release 24 July 2008 Disclosure of trading in own shares – From 1st to 23 July 2008 8 July 2008 Disclosure of trading in own shares – From 13 to 30 June 2008 27 June 2008 SCOR established Asia-Pacifi c Hub – Press release 27 June 2008 SCOR is admitted as a Life reinsurer in Brazil – Press release 18 June 2008 SCOR establishes its Hub for the Americas – Press release 10 June 2008 Information on the number of shares and the number of voting rights of the Company 10 June 2008 Disclosure of trading in own shares – From 19 to 30 May 2008 5 June 2008 SCOR donates USD 200,00 to help in earthquake-battered Sichuan province and cyclone-ravaged Myanmar – Press release 4 June 2008 SCOR Global Life Embedded Value rises to EURO 1.64 billion; strong business outlook – Press release 23 May 2008 SCOR completes cancellation action of SCOR Holding (Switzerland) Ltd.’s shares – Press release 20 May 2008 SCOR releases structure for London Hub – Press release 19 May 2008 2008-2009 Shares buy back program 7 May 2008 SCOR’s releases strong net income of EUR 124 million in the fi rst quarter 2008, up 63% despite a challenging fi nancial environment – Press release 7 May 2008 SCOR’s Combined General Meeting adopts all of the proposed resolutions by a wide majority – Press release 5 May 2008 SCOR rolls-out hub structure in Cologne – Press release 21 April 2008 SCOR proposes a dividend of EUR 0.80 per share – Press release 21 April 2008 Notice of convening to the 2008 Shareholders’ General Meeting (7 May 2008) 10 April 2008 SCOR is admitted to the Brazilian reinsurance market – Press release 9 April 2008 Disclosure of trading in own shares – From 26 to 27 March 2008 1 April 2008 Notice of meeting to the 2008 Shareholders’ General Meeting 19 March 2008 Record 2007 results – SCOR enters a new global dimension with net income reaching EUR 407 million – Press release 3 March 2008 SCOR enters fully collateralised USD 100 million and EUR 36 million mortality risk swap – Press release – Press release 18 February 2008 SCOR appoints Gilles Meyer as new CEO of SCOR Global Life and optimizes organisational structure – Press release 13 February 2008 SCOR records excellent 2008 January Non-Life renewals, demonstrating the successful integration of Converium– Press release 5 February 2008 SCOR launches Property & Casualty branch in China– Press release 21 January 2008 SCOR Group has no material exposure to the monoliner crisis – Press release 17 January 2008 Disclosure of trading in own shares – From 10 to 11 January 2008 10 January 2008 Swiss subsidiary of SCOR delisted its American Depositary Shares from the NYSE on 7 January 2008 – Press release 7 January 2008 SCOR renews strategic alliance for medical malpractice business with the MDU in the United Kingdom – Press release 3 January 2008 SCOR opens representative offi ce in South Africa – Press release 28 | PUBLISHED INFORMATION
28.5 Information published on NYSE-Euronext’s web site (www.euronext.com) All press releases and offering circulars published on the AMF site (point 1.1) and on SCOR’s web site (point 1.4) are simultaneously published on NYSE-Euronext’s website. In addition, the following were published on the NYSE-Euronext’s website: Date Subject 6 October 2008 SCOR: Amendment of the means allocated to the liquidity agreement 11 September 2008 SCOR: Disclosure of the 2008 half year fi nancial report 10 June 2008 SCOR: Information relating to the total number of voting rights and shares 28.6 Information published on the Info-Financieres web site (www.info-fi nanciere.fr/search.php.com) All press releases and offering circulars published on the AMF site (point 1.1) and on SCOR’s web site (point 1.4) are simultaneously published on the Info-Financières’ website. No other information has been published on the Info-Financières’ website.
(ii) The corporate fi nancial statements for the year ended 31 December 2006 and the Auditors’ Report pertaining thereto published on pages 138 to 166 and 240 to 242, respectively, of the registration document fi led with the Autorité des marchés fi nanciers on 10 April 2007 under number D. 07-0294; SCOR’s corporate fi nancial statements for the fi nancial year ended 31 December 2008 are shown below: 1.1 Signifi cant events of the year “Signifi cant events of the year” are an integral part of the notes to the corporate fi nancial statements.
This year SCOR SE (“SCOR”) carried out the following transactions: Acquisition of the remaining shares of Converium Holding AG (“Converium”).
In 2007, the Group acquired 98,06% of the share capital and voting rights of Converium (renamed SCOR Holding Switzerland).
In October 2007, SCOR fi led a request with the Business Court of the canton of Zurich for the cancellation of the shares of SCOR Holding (Switzerland) not yet held by the Group (i.e. 1.94% of SCOR Holding (Switzerland)’s share capital), which was authorised by the Court on 15 May 2008 and became effective as of 5 June 2008. Following this cancellation, as at 31 December 2008, SCOR held 100% of SCOR Holding (Switzerland)’s share capital.
Acquisition of Prévoyance et Réassurance and its Life and health reinsurance subsidiary Prévoyance Ré on 24 October 2008.
On 31 July 2008, SCOR entered into an agreement with the Malakoff Médéric group, in order to acquire 100% of the share capital and voting rights of Prévoyance et Réassurance and of its Life and health reinsurance subsidiary Prévoyance Ré.
SCOR SE completed a transfer, on 23 December 2008, of 100% of SCOR P&C Ireland Holding Limited’s shares (previously named IRP Holding Limited) to SCOR Global P&C SE for an amount of EUR 113 million.
In EUR million Gross amount Impairment and provisions 2008 Net 2007 Net
Current property, plant and equipment 41 8 33 46 Bank accounts and cash 25 25 43
Accrued income and deferred charges Note 4 1,211 1,211 1,212 Accrued and earned interest and rents 1 1 3 Deferred acquisition costs – Acceptance (Non-Life) 32 32 43 Reinsurance estimates –Acceptance 1,172 1,172 1,158
Liabilities for cash deposits received from retrocessionaires Note 4 - -
(1) The data for fi nancial years 2007 and 2008 are before appropriation of earnings.
Internal and external investment management costs and interest expense (14) (14) (10) Other investment expenses (1) (1) (2) Realised losses from investment (3) (3) (8)
Investment revenues 152 154 Investment income 134 63 Other investment income 6 72 Realised gains 12 19
Asset swap Index default swap Caps and fl oors 75 75 75 Commercial paper Confi rmed credits Foreign currency forward purchases 187 187 153 Performance bond Mortgages Leases from leased buildings Letters of credit 310 310 494 Endorsements and sureties 9 9 9
The fi nancial statements for the 2008 fi nancial year are presented in accordance with the European Directive of 19 December 1991, the French Decree 94-481 of 8 June 1994, and the Order of 20June 1994 as amended by the Order of 28 July 1995, whose application has been extended to include reinsurance companies. The income statement was split between the Non-Life underwriting statement, the Life underwriting statement and the non-underwriting statement. In addition to reinsurance operations, the underwriting accounts include general expenses and income from investments relating to reinsurance activities. Income from invested shareholders ’ equity is recorded in the non-underwriting account.
The detail of the impact of these branches can be analysed as follows for the Balance sheet and the Net income: 1.5 Notes to the Corporate Financial Statements
NET INCOME (EUR million) SCOR Beijing SCOR Direcktion SCOR UK Total
At each balance sheet date, if the carrying value of an investments in associated is less than its historical cost, an analysis is conducted in order to determine if it must be impaired The assumptions and conclusions of this analysis, conducted as at 31 December 2008, are detailed in Section 2.1.
For real estate and fi nancial (holding) companies, the fair value is calculated as the pro rata of the net assets increased for unrealised gains, net of tax. An impairment provision is recorded on a line-byline basis when these values are less historical cost.
Shares and other variable income securities are recorded at cost, excluding expenses. The realisable value as at the balance sheet date is determined according to article R.332-20 of the French Insurance Code, and for listed securities, corresponds to the share price on the balance sheet date. For unlisted securities; the fair value is based on net assets.
Bonds and other fixed-income securities are recorded at cost, excluding accrued interest. In compliance with article R.332-19 of the French Insurance Code, the difference between cost and redeemable par value is amortised to income over the remaining period until maturity using the effective interest rate method.
A liquidity risk reserve is recorded for the possible need to liquidate assets in order to make immediate payment on major claims. This reserve is included in underwriting reserves and is recorded when the total net book value of assets, excluding bonds and other fi xed income securities (investments valued according to article R.332-19 of the French Insurance Code), exceeds their fair value. The fair value corresponds to the market price for listed shares, the net asset value for unlisted shares the net realisable value for investments in subsidiaries as described in 2.1.
An allowance for bad debts relating to accounts receivable from reinsurance transactions and other receivables is recorded when recoverability is uncertain.
In Opinion n° 2008-17 dated 6 November 2008 relating to the accounting of stock option and share purchase and plans and free share allotment plans, the CNC redefi ned the accounting of such benefi ts granted to employees and the accounting for impairment of treasury shares held for such plans. In the event of the delivery of already existing shares, the expense should be recognised over the vesting period if the attribution of shares is based on the employee remaining with the company over the vesting period. As such, at each period end, a provision for risk is recorded for the pro rata of the estimated cost (calculated as the difference between the cost to acquire the shares and nil to which the pro rata of the expired period since the date of attribution to the entire vesting period is applied).
The impact of this change in method, as applied at the beginning of the accounting period and recorded to retained earnings was EUR 31 million before tax and EUR 21 million after tax.
Assumed reinsurance is recorded upon receipt of accounts transmitted from ceding companies.
Estimates of premiums and commissions not yet received from ceding companies at period end are recorded in the income statement and included on the balance sheet in the account “Estimates of reinsurance assumed”.
The retroceded portion of assumed reinsurance, determined in accordance with the treaty terms, is recorded separately from the assumed reinsurance transaction.
The retrocessionaires’ share in estimates of assumed premiums and commissions is included on the balance sheet in the liability account, entitled “Estimates of reinsurance retrocessions.”
Cash deposits received from retrocessionaires are recorded as liabilities on the balance sheet.
Securities pledged as collateral by reinsurers to guarantee their commitment are included in off- balance sheet accounts at their fair value.
The Company is required to have adequate reserves to cover its commitments after consideration of estimated investment returns, mortality, morbidity, and apse rates, and other assumptions.
At each balance sheet date, items in foreign currencies are converted into Euro by allocating the underlying transactions as follows: transactions relating to assets and liabilities generating a “structural ” foreign currency position primarily investments in subsidiaries and related provisions; other transactions generating an “operational” foreign currency position.
The foreign currency differences on off-balance sheet positions (forward fi nancial instrument contracts – “IFT”) and the related off -balance sheet account represent unrealised foreign currency gains or losses. These differences are recorded on the balance sheet in the accounts “exchange differences” and “regularisation of forward fi nancial instrument contracts”, based on the underlying strategy.
The use of and accounting fi nancial instruments comply with the French General Statement of Accounting Principles (“Plan Comptable Général”) of 1982 and French Decree 2002-970 dated 4 July 2002, relating to the use of forward fi nancial instruments by French insurance companies.
Income and losses in the form of interest or premiums are recorded on a pro rata basis over the life of the contract. Commitments given and received recorded at the balance sheet date refl ect the nominal amount of open transactions. Any unrealised loss positions on swaps are recorded in the fi nancial statements.
Shares in and advances to land and real estate companies 161 8 11 158
Shares in and advances to land and real Estate companies 1 1
Loans (related and associated companies) 17 1 5 23 Other investments 3 3
Analyses performed for other equity investments did not result in other impairment provisions.
In EUR million Gross value Net book value Realised value 1 - Real estate investments and real estate investments in process 159 157 232 2 - Shares and other variable-income securities (other than mutual fund shares) 4,492 3,542 5,390 3 - Mutual fund shares (other than those in 4)
4 - Mutual fund shares exclusively invested in fi xed-income securities 3 3 3 5 - Bonds and other fi xed-income securities 108 108 109 6 - Mortgage loans 7 - Other loans and similar bills 592 569 569 8 - Deposits with ceding companies 9 - Cash deposits (other than those in 8) and security deposits 10 - Assets representative of unit-linked policies 11 - Other forward instruments - Investment or divestment strategy - Anticipation of investment - Yield strategy - Amortisation premium/discount a) including: - investments valued according to article R.332-19 108 108 109 - investments valued according to article R.332-20 5,245 4,271 6,194 - investments valued according to article R.332-5 b) including: - investments and IFT OECD 5,296 4,679 6,472 - investments and IFT excluding OECD 412 55 186 2.3 -SUBSIDIARIES AND AFFILIATES
As at 31 December 2008, loans and advances granted by SCOR to its subsidiaries totalled EUR 564 million (including EUR 505 million to SCOR Global Life and EUR 44 million to CRP), compared to EUR 635 million as at 31 December 2007.
Loans granted to SCOR by its subsidiaries totalled EUR 995 millions (including EUR 868 million from SCOR Global P&C and EUR
96 million from Fergascor) compared to EUR 1,125 million as at 31 December 2007.
For 2008, SCOR recognised EUR 26 million in fi nancial income from loans and EUR 48 million in interest on borrowings with related companies.
199 Water Street, NEW YORK, NY 10038-3526 USA - SCOR Holding Switzerland AG USD 555 1,004 General Guisan-Quai 26, 8002 Zurich
C. Orense, 58 Planata 7A, 28020 Madrid - SCOR GESTION FINANCIERE EUR 4 2 1, Avenue du Général de Gaulle 92800 PUTEAUX - PREVOYANCE RE EUR 40 6 1, Avenue du Général de Gaulle 92800 PUTEAUX - SCOR HANOVRE EUR 2 0 1, Avenue du Général de Gaulle 92800 PUTEAUX - SCOR P.O. MOSCOW EUR 6 0 10 Nikolskaya Street, 109012, MoscoW, Russian Federation - SCOR AFRICA LTD ZAR 150 0 2nd Floor,West Tower, Maude Street, Nelson Mandela Square, Sandton 2196
Share Gross book Net book Loans and Receivables Guarantees Turn Net Dividends of capital value value advances against issuers and pledges given (2) over income received
As at 31 December 2008, the number of shares held as treasury stock amounted to 4,904,551 shares (i.e., 2.66% of capital) for a total of EUR 83,051,650. These shares were acquired in the context of anticipated awards to Company employees and offi cers as part of share allotment plans.
Shares other than variable income securities and bonds 4,407 1 83 4,491 4,480 6 117 4,603
Long-term fi nancial debt includes: EUR 50 million in Perpetual Step-Up subordinated notes issued on 23 March 1999. These notes are callable by after 15 years, and at fi ve-yearly intervals thereafter. The fl oating-rate notes bear interest based on the 6-month Euribor plus (i) 0.75% for the fi rst fi fteen years of the issue, and (ii) 1.75% thereafter.
USD 100 million 30-year subordinated bonds issued on 7 June 1999, callable by SCOR quarterly as from the tenth year. These fl oating-rate bonds bear interest based on the 3-month Libor rate plus (i) 0.80% for the fi rst ten years of the issue, and (ii) 1.80% thereafter.
EUR 200 million loan represented by SCOR OCEANEs issued on 2 July 2004 as authorised by the Combined Shareholders’ General Meeting of 18 May 2004. This loan is represented by 10 million OCEANEs with par value of EUR 20 each. The bonds earn interest at the rate of 4.125% payable 1st January each year. The loan has a term of 5 years and 183 days. At any time after 2 July 2004 and until the seventh day preceding the normal or early redemption date, bondholders may request conversion or exchange of the bonds for shares at the rate of 1,047 shares for one bond (1). The Company may, at its discretion, provide newly issued shares and/ or existing shares.
EUR 350 million undated deeply subordinated notes (Tier 1 type) issued on 28 July 2006 in connection with the fi nancing of the acquisition of Revios Ruckversicherung AG. The bond issuance is represented by last-rank subordinated bearer notes with a par value of EUR 50,000 each bearing interest at an initial rate of 6.154% per annum, a floating rate indexed on the 3-month EURIBOR plus a margin of 2.90%, payable quarterly. No fi xed redemption date is set but SCOR reserves the right to redeem the bonds in full or in part as from 28 July 2016.
(1) The Chairman and Chief Executive Offi cer of SCOR, acting, in accordance with the provisions of Articles L.225-129-4 et seq. of the French Commercial Code, by virtue of the powers conferred thereon by the Board of Directors at its meeting of 7 November 2006, decided, on 13 November 2006, to increase the share capital of the Company by a nominal amount of EUR 169,577,046.10 by issuing 215,282,014 new shares with a par value of EUR 0.78769723. To protect the rights of OCEANE bondholders, the share allocation ratio was adjusted in accordance with the provisions of Article 2.6.7.3 of the offering circular (note d’opération) registered with the Autorité des marchés fi nanciers on 24 June 2004 under number 04-627. OCEANE bondholders were informed by notice published in the BALO of 13 December 2006 that the new conversion and/or exchange ratio of the options with conversion and/or exchange for new or existing shares is now 1.047 share for one OCEANE bond.
Pepetual debt (other equity) 10 400 410 Convertible debt 200 200 Bank debt 10 10 Negotiable instruments 10 10 Other loans and deposits received 1,000 171 1,171
The profi t for 2007, i.e., EUR 28 million, was allocated to the legal reserve in the amount of EUR 1 million, the remaining balance plus a portion of additional paid-in capital (EUR 74 million) and EUR 45 million of retrained earnings were paid out as dividends in the amount of EUR 146 million (i.e., EUR 0.80 per share).
The impacts on opening balances of the change in accounting principles relating to foreign currency (EUR 1 million- see 1.10) and from the change in accounting for share allotment plans (EUR 21 millions- see 1.5) were recorded in retained earnings.
Total at the beginning of the fi nancial year Increases Decreases
The contingency reserves amount to EUR 50 million, of which: EUR 20 million for free share allotment plans: the application of the change in accounting method at the beginning of the period was recorded directly in retained earnings for EUR 31 million pre-tax (EUR 21 million, net of tax).
EUR 6 million in reserves for post-employment benefi ts: retirement provisions (EUR 1.3 million), severance pay (EUR 1.5 million), supplementary retirement (EUR 2.1 million) and long-service awards (EUR 1.3 million).
Management and fi nancial costs 36 55 91 48 54 102
Dividends received from subsidiaries total EUR 115.7 million (SCOR Global P&C EUR 82.5 million, SCOR Global Life EUR 30 million and ASEFA EUR 3.2 million).
Results from transactions involving financial instruments (rate swaps, interest-rate options, real estate swap) were posted to fi nancial income in the net amount of EUR -4.1 million in 2008 compared to EUR -0.2 million in 2007.
The impact of the change in accounting method for currency transactions is described in 1.10 and had an impact of EUR 1 million on opening retained earnings.
The corporate fi nancial statements are prepared in original currencies converted to euros. Fluctuations in the exchange rates used to convert the accounts might generate a signifi cant foreign exchange impact. To limit the exchange rate fl uctuation risk, forward foreign currency hedges are entered into at the beginning of the year to cover the main currency surplus in the balance sheet at the beginning of the year and adjusted during the year for material arbitrage transactions involving currencies. Hedges include spot trades of foreign currencies, forward trades of foreign currencies and option strategies.
Workforce Executives- Paris 166 163 Employees/ Supervisors -Paris 38 29 Employees/ branches - 343
Total tax losses or the consolidated French tax Group were EUR 807 million as at 31 December 2008.
By application of Articles L.225-181 and R.225-137 of the French Commercial Code, the Company adjusted the price of the shares corresponding to options granted and the number of shares linked to options following the capital increases of 31 December 2002, 7 January 2004 and 12 December 2006. Thus, according to the provisions of Article R.228-91 of the French Commercial Code, the adjustment applied rounds, to the nearest hundredth of a share, the value of shares that will be received if the rights attached to share subscription and purchase options are exercised after the capital increase of the Company decided on 13 November 2006, while retaining the preferential subscription right and the value of the shares that would have been obtained had those rights been exercised prior to the capital increase.
In addition, on 3 January 2007, the Company carried out a reverse stock split of shares comprising the capital of SCOR with the exchange of one new share, par value of EUR 7.8769723, for 10 old shares with a par value of EUR 0.78769723 per share.
The stock option plans for the years 2003 to 2008 are share subscription plans that may give rise to a share capital increase. The other plans are share purchase options.
No options were exercised in 2005, 2006 and 2007. In 2008, 109,445 options were exercised relating to the stock option plan dated 25 August 2004 which expired 26 August 2008.
Amount distributed under the profi t-sharing plan - 439 1,230 1,442 1,708 Amount distributed under the collective incentive plan - 1,688 2,198 1,540 979
An estimate of EUR 1.2 million relating to the 2008 profi t-sharing plans has been recognised in the accounts.
Fixed compensation paid 800,726 1,000,000 Variable compensation paid 1,000,000 1,200,000 Directors’ fees 55,700 57,100 Total compensation paid 1,856,426 2,257,100
Confi rmed credits, letters of credit and guarantees given (note 15.1.2) 494 310 416 209
Following the change in accounting method (described in 1.10), exchange rate hedges generated an unrealised loss of EUR (8) million, recorded in income.
SCOR has signed agreements with different fi nancial institutions concerning the granting of letters of credit for EUR 310 million.
During 2007, collateral was granted to BNP for the WTC in the amount of EUR 80 million.
On 19 February 2009, SCOR announced having closed the three series of its cat bonds which provides the Group with protection of USD 200 million for exposures to earthquakes and hurricanes in the USA and Puerto Rico. It consists in multi-year property catastrophe (“CAT“) agreements between Atlas V Capital Limited (“Atlas V“) and SCOR Global P&C.
With regard to the fi nalisation of the reverse stock-split that was initiated in 2007, the terms of which are, ten existing shares being exchangeable for one new share, the new shares corresponding to the existing shares, a reverse stock-split of which had not been requested by their shareholders on 3rd January 2009, were sold by SCOR on the stock exchange, resulting in the voidance of the corresponding existing shares.
In July 2001, leaseholders of the WTC (“Silverstein Parties”) purchased a USD 3.55 billion property insurance program covering the World Trade Center (“WTC”). SCOR underwrote a 10% quota share of that program as a 100% fronted reinsurer of Allianz Global Risks U.S. Insurance Company (“Allianz”). Beginning in October 2001, various claims were brought in U.S. Federal District Court in New York to resolve whether the 11 September 2001 WTC attack constituted one or two occurrences, as well as other coverage disputes (“WTC Litigation”). Allianz, as SCOR’s 100% fronting company, was a named party to the WTC Litigation. SCOR, as the fi nancially interested reinsurer, associated in the defence and control of the claim against Allianz. On 6 December 2004, a jury determined that the 11 September 2001 WTC attack constituted two occurrences under the terms of the property insurance policy issued by Allianz. On 18 October 2006, the U.S. Court of Appeals for the Second Circuit affi rmed the jury’s verdict. The two-occurrence verdict against Allianz did not determine the amount of damages owed by Allianz under its policy. That determination was the subject of the ongoing coverage litigation, as well as a separate court-supervised appraisal proceeding.
On 27 September 2007, SCOR initiated claims against Allianz in an arbitration proceeding challenging both Allianz’s issuance of a policy prior to the loss that did not conform to the terms of coverage agreed by SCOR, as well as Allianz’s 23 May 2007 settlement of the claim over SCOR’s objection. The arbitration is underway and expected to be completed in 2009. The arbitration will determine SCOR’s total indemnity obligation in connection with this claim, which amount could be signifi cantly greater or less than SCOR’s current gross reserve of USD 550 million (USD 247 million net). Shortly before its 23 May 2007 settlement, Allianz unilaterally increased its reserves to assume a total incurred loss of USD 710 million, plus an additional USD 39 million in expenses, and thereby obtained from SCOR increased letters of credit securing those reserves, as provided in the SCOR-Allianz fronting arrangement. During the pendency of the arbitration, Allianz has drawn on SCOR’s letters of credit to cover settlement payments made by Allianz to the Silverstein Parties and the Port Authority, as well as alleged loss adjustment expenses incurred by Allianz. As at 31 December 2008, the total amount of letters of credit outstanding was USD 250 million. SCOR continues to assess on an ongoing basis the amount of its reserves in light of developments regarding the WTC claim, including with respect to the pending arbitration against Allianz.
On 29 April 2006, a fi re occurred at Huntsman Corporation’s Aromatics and Olefi ns Plant. Huntsman Corporation (“Hunstman ”) was insured by its “captive” insurer, International Risk Insurance Company (“IRIC”), and IRIC was 100% reinsured by various reinsurers, including SCOR UK Company. On 30 August 2007, certain reinsurers, including SCOR UK Company, brought suit in Federal Court in the Southern District of Texas (“Reinsurers Action”) seeking to compel Huntsman and IRIC to arbitrate their disputes regarding certain coverage and quantum issues that had arisen with reinsurers, and alternatively seeking a declaratory judgment from the Court regarding these issues. Both Huntsman and IRIC fi led motions to dismiss the Reinsurers Action. Huntsman later fi led suit in Texas State Court against IRIC (“Huntsman Action”), who then fi led a third-party action against reinsurers in the same matter. Reinsurers sought to remove the Huntsman Action from State Court to Federal Court in the Eastern District of Texas. On 21 September 2007, reinsurers were then successful in getting the Huntsman Action transferred to the Federal Court in the Southern District of Texas (where the Reinsurers Action is now pending). On 4 February 2008, Huntsman fi led a motion to have the Huntsman Action sent back to State Court. On 26 September 2008, the Court denied Huntsman and IRIC’s motions to dismiss the Reinsurers Action and refused to send Huntsman Action back to State Court. Arbitrability discovery has been ordered and will be conducted absent an agreed resolution of the arbitrability issue.
On 23 December 2005, the defendants moved to dismiss the Complaint and on 21 April 2006, Lead Plaintiffs moved for leave of Court to fi le a proposed Consolidated Second Amended Class Action Complaint, to amend their complaint to add, among other things, Securities Act claims based on Converium ’s 1st March 2006 restatement of its fi nancial accounts from 1998 through 2005.
On 24 August 2007, Lead Plaintiffs filed a Motion for Preliminary Approval of Proposed Settlement with ZFS. Under the terms of the Proposed Stipulation of Settlement, ZFS is to pay USD 30 million in cash for the benefi t of a Settlement Class. The Settlement Class includes persons who purchased American Depositary Shares and Swiss shares purchased on the Swiss Stock Exchange, including persons who reside abroad, during the period 11 December 2001 through 2 September 2004.
On 14 September 2007, the Court issued an opinion rejecting certain additional arguments raised by Converium and the offi cer defendants in their motion to dismiss with regard to Lead Plaintiffs’ Exchange Act claims that it had not ruled on in its initial decision or its reconsideration decision.
On 20 March 2008, Lead Plaintiffs fi led a motion for reconsideration of the ruling of the 6 March and 19 March 2008 Orders.
On 25 July 2008, SCOR Holding (Switzerland) executed a defi nitive settlement agreement in the U.S. class action. On 12 December 2008, the U.S. Court issued an Order and Final Judgment approving the settlements as fair, reasonable and adequate and dismissing with prejudice all claims against the defendants in the action, including those asserted against SCOR Holding (Switzerland) and certain of its former offi cers and directors.
On 11 December 2008, SCOR announced that an agreement had been reached with the SEC to resolve a long-running investigation of Converium related to non-traditional insurance and reinsurance products and the restatement of its fi nancial statements. In connection with the settlement, the SEC issued an administrative cease-and-desist order by consent (the “Order“). In the Order, the SEC found that Converium had violated the anti-fraud, fi nancial reporting, books-and-records and internal control provisions of the Exchange Act and related rules and regulations of the SEC thereunder and prohibited Converium from committing any future violations of those provisions. The Order found that all of the conduct that gave rise to the SEC proceeding took place prior to Converium being acquired by SCOR.
An unfavorable outcome of one or more of the class action lawsuits or regulatory investigations involving entities of the former Converium Group described above could have a material adverse effect on the Group’s fi nancial condition and results of operations.
The French Autorité des Marchés Financiers (the “AMF”) initiated an investigation on 21 October 2004 in connection with the fi nancial information and market transactions surrounding the issuance of OCEANEs in July 2004. The AMF also initiated an investigation on 5 October 2005 on the market for SCOR shares after 1st June 2005. As at the date of the fi nancial statements herein, the Company has received no additional information concerning these investigations.
In its decision dated 23 December 2008, the Federal Administrative Court concluded that it did not have to decide in the merits, as the Offer had been consummated and the period for the application of the best price rule had expired on 26 January 2008. In its report dated 22 April 2008 (with supplement dated 13 May 2008), the independent review body Ernst & Young had confi rmed that SCOR had complied with all its obligations in connection with the Offer even if Martin Ebner and the persons directly or indirectly controlled by him had been deemed to be acting in concert with SCOR. Accordingly, the appeal was written off without judgment on the merits due to the interests in the appeal having fallen away during the procedure and the appeal therefore having become abstract. None of the parties fi led an appeal against this decision of the Federal Administrative Court.
In October 2007, SCOR received an arbitration notice from the “captive” of a British pharmaceuticals laboratory. SCOR
contests the validity of the presentation of this claim. Documents are being exchanged and no decision should be expected before the beginning of the year 2010. A mediation has been proposed.
On 14 January 2008, SCOR Global Life received notifi cation of a tax accounting audit for the period 1st January 2005 through 31 December 2006. The tax audit started in early 2008 and is still going on at present. In order to avoid the statute of limitation for fi scal year 2005, the tax administration has sent an interim assessment notice for fi scal year 2005. Up to now, the contemplated assessments arrived at consist most signifi cantly in timing differences and, due to the tax loss position of the French tax Group in France, they will not lead to a signifi cant impact on the consolidated results of the Group.
On 29 January 2008, the Spanish competition authority (Comisión Nacional de la Competencia, the “CNC“) opened a sanctioning procedure against SCOR Global P&C SE Ibérica Sucursal, a branch of SCOR Global P&C, and a number of other insurance and reinsurance companies for alleged antitrust practices to set the commercial conditions applied to customers in relation to the decennial insurance to construction that could result in an infringement of Article 1 of Law 15/2007, of 3 July 2007, on Competition (the “Competition Act“) (which prohibits agreements and concerted practices that may have as an object or effect the restriction of competition in the market).
At present, it is diffi cult to predict the outcome of the procedure, since the alleged infringement under investigation is considered to be serious under the Competition Act.
SCOR and its subsidiaries are involved in legal and arbitration proceedings from time to time in the ordinary course of their business. Nevertheless, other than the proceedings mentioned above, to the knowledge of SCOR, as at the date of the fi nancial statements herein, there are no other litigation matters likely to have a material impact on the fi nancial position, business or operating income of SCOR.
1.6 Certifi cation of audit of historical fi nancial information This is a free translation into English of the statutory auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers. This report includes information specifi cally required by French law in all audit reports, whether qualifi ed or not, and this is presented below the opinion on the fi nancial statements. This information includes explanatory paragraphs discussing the auditors’ assessments of certain signifi cant accounting matters. These assessments were made for the purpose of issuing an opinion on the fi nancial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated fi nancial statements. The report also includes information relating to the specifi c verifi cation of information in the group management report.
These annual financial statements have been approved by the Board of Directors at their meeting on 3 March 2009. Our role is to express an opinion on these fi nancial statements, based on our audit.
Accounting estimates used to prepare the consolidated fi nancial statements as at 31 December 2008 have been assessed in a high market volatility and an uncertain economic future environment. In this context, and in accordance with the requirements of Article L.823-9 of the French Commercial Code (Code de Commerce), we have performed our own assessments that we bring to your attention on the following matters: Within the framework of our assessment of the accounting rules and policies followed-up by your company, we ensured ourselves of the reasonableness of the change of accounting method mentioned above and of the presentation which was made thereof.
As stated in part 1.7 and 1.9 to the annual fi nancial statements, the technical accounts specifi c to reinsurance are estimated on the basis of reinsurance commitments or on statistical and actuarial bases, particularly the technical estimates accounted in accounts receivable from reinsurance transactions, gross and ceded technical reserves, and deferred policy acquisition costs. The methods used to calculate these estimates are described in the Notes to the annual fi nancial statements.
Our audit work consisted in assessing the data and assumptions on which the estimates are based, reviewing the company’s calculations, in comparing estimations from prior periods with actual outturns, and in examining senior management’s procedures for approving these estimates.
Notes 6 and 17 to the annual fi nancial statements describe the uncertainties relating to the potential litigation encountered by the company.
We examined the Group’s procedures to identify these risks, to evaluate and refl ect them in the annual fi nancial statements.
These assessments were made as part of our audit of the annual fi nancial statements taken as a whole and therefore served in forming our audit opinion expressed in the fi rst part of this report.
In accordance with French law, we have ensured that the required information concerning the purchase of investments and controlling interests and the names of the principal shareholders has been properly disclosed in the directors’ report.
APPENDIX B: REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS ON THE TERMS AND CONDITIONS FOR PREPARING AND ORGANISING THE WORK OF THE BOARD OF DIRECTORS AND ON INTERNAL PROCEDURES IN ACCORDANCE WITH ARTICLE L.225-37 OF THE FRENCH COMMERCIAL CODE
Terms and conditions for preparing and organising the work of the board of directors
It has been incorporated in the 2008 Registration Document of SCOR SE (“SCOR”) which is available on the Company’s web site (www.scor. com) and on the AMF web site (www.amf-france.org).
Allan Chapin, Daniel Lebègue, André Levy-Lang, Herbert Schimetscheck, Jean-Claude Seys, Claude Tendil and Daniel Valot.
The experience and competences of the Directors and the NonVoting Director are suitably varied. Six of the Directors listed, work or have worked at a very high level within the insurance industry. Three of the members practise or have practised at a very high level in the fi nancial and banking industry, in addition to one Director from the manufacturing industry. The Board benefi ts from international experience, provided by the Italian, Portuguese, Austrian and American nationalities of its members.
As carried out in 2007 and in compliance with the recommendations stated by the government code, an assessment of the Board of Directors was conducted in 2008. Mr Daniel Valot, an independent Director, addressed a questionnaire to the Directors in September 2008. This questionnaire concerned the composition of the Board, its functioning and the functioning of the Committee ’s Boards. All the Directors, without exception, completed the questionnaire. Mr Daniel Valot assessed the questionnaires and presented his summary report during the Board Meeting that took place on 13 November 2008.
Denis Kessler, Chairman of the Board 56 French 04/11/2002 2011 24/05/2007 Carlo Acutis 70 Italian 15/05/2003 2009 Gérard Andreck 64 French 18/03/2008 (1) 2011 Antonio Borgès 59 Portuguese 15/05/2003 2011 24/05/2007
Pursuant to the provisions of Articles L.225-37 and R.225-21 of the French Commercial Code, the Internal Regulations allow the Board to hold its meeting by videoconference or via telecommunications,
providing that the identifi cation of the participating Board members can be determined.
The Internal Regulations prohibit Directors from accepting benefi ts from the Company or from the Group that could jeopardize their independence, and require them to dismiss any pressure from other Directors, specifi c groups of shareholders, creditors, suppliers or other third parties. Directors undertake to submit to the Board of Directors of the Company any agreement falling under the purview of article L.226-38 of the French Commercial Code. In the event of a confl ict of interest, Directors are obliged to inform
Firstly, the Internal Regulations set out the legal and regulatory provisions, demanding confi dentiality with regard to privileged information known to the Directors during their appointment.
The average attendance rate of the Members of the Board was 87%.
Denis Kessler 100 Carlo Acutis 88 Gérard Andreck (1) 57 Antonio Borgès 75 Allan Chapin 100 Georges Chodron de Courcel, Non voting Director 88 Daniel Havis 75 Daniel Lebègue 88 André Lévy-Lang 75 Luc Rougé 100 Herbert Schimetschek 88 Jean-Claude Seys 88 Jean Simonnet (2) 100 Claude Tendil 88 Patrick Thourot 100 Daniel Valot 88
In 2008, the Strategy Committee met on four occasions. Its works dealt with the whole strategy of the Group and in particular, the review of acquisition plans.
It submits recommendations concerning compensation packages for the corporate offi cers and members of the Executive Committee of the Group (‘Comex’), pensions, stock allotment plans and stock option plans or stock subscription plans to the Board and makes proposals concerning the composition and organisation of the Board of Directors of the Company and its Committees.
The Committee met fi ve times in 2008. Its works dealt with the stock allotment and subscription plans, the modalities of remuneration of the Chairman and Chief Executive Offi cer and other members of the Executive Committee of the Group. The Committee focussed particularly on the implementation of the TEPA Act (Act in favour of Work, Employment and Purchasing Power) and submitted the criteria of performance with regard to the bonus of the Chairman and Chief Executive Offi cer, as well as those determining a part of the granting of the stock option plans and shares allotment (30%). The Committee deliberated on the composition of the Board of Directors. It suggested that the Board of Directors should adopt the AFEP and MEDEF recommendations on the compensation of Corporate Executive Offi cers of listed companies. This accession was the subject of a press release published on 16 December 2008. The Committee also worked on the general organisation and on the succession schemes of the key offi cers of the Group.
The following chart states the attendance of the members of the Compensation and Nomination Committee in 2008: Committee Members Attendance rate (%)
Allan Chapin 100 Georges Chodron de Courcel 100 André Lévy-Lang 75 Claude Tendil 75 Daniel Valot 100
It is responsible for highlighting the main risks to which the Group is exposed, regarding both assets and liabilities and for ensuring that the means put in place to monitor and manage those risks have been effectively implemented. It examines the Group’s main technical and fi nancial risks. The Committee met four times in 2008, primarily to discuss the following matters: the Group’s ‘Enterprise Risk Management’ and ‘Asset Liability management’ schemes, a review of the main exposures of the Group, the retrocession policy and coverage, capital funds and risk appetite, internal control standards and Directors’ and Offi cers’ liability insurance.
No retirement contribution (or commitment) has been paid for the benefi t of the Directors.
For 2008, the variable compensation of the Chairman and Chief Executive Offi cer has been determined according to the following criteria: personal criteria: conclusion of strategic transactions, maintenance of A- rating from Standard & Poor’s, restructuring of the Group following the acquisitions of Revios and Converium; fi nancial criteria: Return on Equity (RoE) achieved by SCOR.
In the case of departure during fi nancial year n: – all the variable part of his compensation for year n-1 will be payable during year n as soon as the Company’s fi nancial statements for year n-1 are settled by the Board of Directors; – in addition, in the case of dismissal, the amount of the variable part of his compensation for year n will be (i) determined on the basis of the variable compensation for year n-1 and prorated on the basis of the departure date for the current year n, and (ii) paid as soon as the Company ’s fi nancial statements for year n-1 are settled by the Board of Directors.
On 12 December 2008, the Board of Directors also decided that the purchase of new performance shares and the exercise of new stock options by the Chairman and Chief Executive Offi cer will be subject to the performance conditions, which are to be defi ned by the Remuneration and Nomination Committee, with regard to all the allotments. It was also decided that the Chairman and Chief Executive Offi cer would commit to buy a number of the Company ’s shares on the market, equivalent to 5% of the performance shares which have been allotted to him as from the date of their defi nitive acquisition.
(c) death or permanent disability insurance for an accident, underwritten on 1 January 2006; it is specifi ed that the Chairman and Chief Executive Offi cer will benefi t from any policy that may replace the existing one.
Like all the Group’s Executive offi cers, the Chairman and Chief Executive Offi cer benefi ts from pension coverage capped at 50% of the reference salary, provided he has been with the Group for a minimum of five years. The rights to this pension are vested progressively, based on seniority over a period of 5 to 9 years, on the basis of the average compensation received over the last fi ve years with the Group. The right to a supplementary pension is only acquired under the condition that the benefi ciary is a corporate offi cer or an employee of the Company when he claims his rights for the pension, according to the rules in force at that time.
The modalities of the participation of the Shareholders to the General meetings and notably the main powers of the Shareholders ’ General meetings, the description of the Shareholders’ rights as well as the modalities of the exercise of the voting rights are set forth by the Article 19 of the Company’s by-laws, an electronic version of which is available on SCOR’s web site (www.scor.com)
Because of the international activity of the Group, and to ensure coherence between ERM and the internal control system, the Group uses the COSO report “internal control – integrated framework” published by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) in developing and formalising the internal control system. The three general objectives sought through the application of these guidelines are (1) to ultimately achieve better operating effi ciency and protection of assets, (2) to ensure compliance with applicable laws and regulations, and (3) to ensure reliable accounting and fi nancial information. The use of this framework requires us to cover the fi ve components set forth by the COSO, i.e. defi ning the control environment (or internal environment), performing a risk evaluation, listing and formalising control activities, presenting the information and communication process, and ensuring monitoring of the internal control system. The structure of this report has been revised in 2008 to ensure it is in line with the fi ve components of the COSO. The elements concerning accounting and fi nancial reporting are separate and are presented in the last part.
Like any internal control system, the Group’s system cannot absolutely guarantee that the risks not to achieve the COSO objectives will be totally eliminated. For example, among the various limitations inherent in the effectiveness of internal controls relating to the preparation of fi nancial documents, those involving decisionmaking errors based on human judgment are particularly high in a reinsurance company. In effect, the accounting data is subject to numerous estimates, primarily because of the evaluation by the reinsurer of claim reserves, either those not yet declared to the ceding companies or the reinsurer, or those for which development is uncertain or subject to a number of assumptions.
General organisation: Owing to its recent acquisitions and in order to improve effi ciency, the general organisation has been subject to numerous changes and is now structured as follows: The Group consists of SCOR SE (“SCOR”) and its subsidiaries, branches and representation offi ces throughout the world. SCOR, a European company having its registered offi ce in Paris, has the responsibilities of a parent company, operational responsibilities for cash management and for the internal retrocession of the Group’s operating entities and functional responsibilities. SCOR carried out operating activities of asset management in 2008. This responsibility will be taken over in the near future by a new company: SCOR Global Investments.
The Finance Department includes the Investor Relations, Rating Agency & Capital Management Department and the Group Treasury Department. The Planning, Budget and Results Department was replaced in 2008 by the Group Financial Planning & Analysis Department, the Group Accounting Department and the Group Tax Department, all three of which report to the Chief Financial Offi cer.
Non-life treaties, facultative business in major corporate risks, and specialty treaties Life and health reinsurance Management of the investment portfolios of all the Group’s entities
(1) Chief Operating Officer. (2) To be fully structured in 2009.
As summarised in the preceding diagram, the SCOR Group’s internal control system is organised as follows: operating entities and their subsidiaries/branches provide an initial level of control over all operations under their organisational responsibility; the functional or transversal departments of SCOR Global P&C and SCOR Global Life, the Group Treasury Department, and the Group functional departments exercise second-level control in their respective areas over the operations performed by the operating entities; the Group Internal Audit Department conducts a third-level control by checking the effectiveness and relevance of the internal control procedures of the fi rst two levels in all areas and for all of the Group’s entities.
The main tasks of the Group Risk Management Department are to further develop the Enterprise Risk Management (ERM) framework and to promote an ERM culture within the Group so that risks are managed within each department. This department is supported in these tasks by the Risk Management Departments of SCOR Global P&C and SCOR Global Life.
The approach used to develop the internal control system was adopted by the Risk Committee, which will monitor it. The principal characteristics of this approach are as follows: establishment of an Internal Control Group Policy specifying the approach, the reference framework, the Group principles, the responsibilities of the different participants in internal control and the quality requirements. Various application guides supplement this policy, appointment of global process owners (GPO) at the Group, SCOR Global P&C, SCOR Global Life and SCOR Global Investments levels and local process owners (LPO) at the hub level. The GPOs’ main responsibility is to defi ne the key controls and to ensure their deployment and application in the various entities of the Group, monitoring through (a) a self-assessment procedure on the maturity (quality) of their processes and controls by the GPOs and LPOs and (b) periodic missions of the Group Internal Audit Department. An insuffi cient level of maturity requires an action plan to be established.
Compliance to local regulations and constraints is ensured by local managers, including the LPOs.
The migration of the reinsurance administration systems implemented and finalised in 2008 was accompanied by a change management and training programme. This migration is already widely providing the fi rst two advantages described above. The harmonisation of the control procedures and their deployment will be carried out in the second stage which will be covered by the internal control project described above.
Amongst the key documents currently being updated to create Group references, there are: the Code of Ethics. This sets forth the Group’s fundamental values and principles and is a guide for resolving the legal and ethical issues which an employee may face. It covers, amongst other things, business confi dentiality, use of privileged information, fi nancial communication, relations with our clients and our competitors, and confl icts of interest; an Information Charter, which describes the importance of information for SCOR’s Paris entities and establishes the framework for using information systems. It especially sets forth the applicable security measures and the legal considerations involved in using information technology resources. The other purposes of this Charter are also to avoid misuse of professional and personal information and to guarantee compliance with the confi dentiality of said information.
With the combination of SCOR, Converium and Revios, the processes for identifying and assessing risks have been revised to approach risk from different angles in order to deal with it in an exhaustive manner. These include: A Risk Enquiry process
The methodology of this process is based on a large number of interviews carried out by the heads of risk management in the different companies and functional departments of SCOR with members of the Executive Committee, department directors and other managers. The risks identifi ed during the interviews are analysed and grouped into three different categories according to their importance, with mention of the action underway or to be recommended. This complete review is carried out once a year and an update is carried out after six months.
The control activities dealt with below are considered as the principal activities for controlling risks specifi c to different fi elds. These control activities are: either applied across all Group entities; or they are adjusted and rolled-out gradually in order to ensure the internal control system is adequate and consistent across the Group.
The formalisation will be revised in accordance with the new Group standards.
– SCOR Global Life, by Market Unit and provides technical results by country and by line of business; Underwriting guidelines, defi ned respectively by SCOR Global P&C and SCOR Global Life, specify the underwriting capacities delegated to each entity, as well as the underwriting rules to be observed. Cases going beyond the framework thus defi ned are subject to special referral procedures at two levels. These cases are examined respectively: – for SCOR Global P&C, by the Underwriting Management Department of SCOR Global P&C,
– for SCOR Global Life, by the Central Actuarial & Underwriting Department and where applicable the Risk Management Department and the Finance Department of SCOR Global Life.
Cases which may have a signifi cant impact on the balance sheet (thresholds and/or conditions defi ned in a procedure) must be reviewed by the Group Risk Management Department; Concerning claims management
– for SCOR Global P&C, the defi nition of a global claims and commutations management policy for all Treaty, Facultative and Specialty business of SCOR Global P&C is carried out by the Claims & Commutations Department of SCOR Global P&C; this department manages major, serial, contentious and latent claims. In addition, audits of the clients’ claim departments are conducted by claim experts from the principal entities of SCOR in order to review important fi les and to provide technical support to these cedents; – for SCOR Global Life, claims exceeding a predefi ned threshold are reviewed by the Central Actuarial & Underwriting Department of SCOR Global Life.
A “Major Claims” Committee, common to both SCOR Global P&C and SCOR Global Life, meets on a regular basis to review the Group’s major claims; Catastrophe risk accumulations are monitored as follows: – for SCOR Global P&C, the Risk Modelling & Global Natural Hazards Department is in charge of monitoring accumu-
The Group Retrocessions Department establishes and implements the internal and external retrocession plan for P&C and Life activities. This department is responsible for its proper application, for monitoring the solvency of the retrocessionaires and, when necessary, for the collection of sums due.
Financial communication: The establishment and centralisation of all fi nancial information, particularly press releases, intended for the market, investors, fi nancial analysts, and the press are the responsibility of the Corporate Communications Department and the Investor Relations, Rating Agency & Capital Management Department, which respects a formalised process. Financial information intended for rating agencies is the responsibility of the Investor Relations, Rating Agency & Capital Management Department. All of this information is ultimately controlled by General Management.
Furthermore, SCOR has increased use of collaborative sites enabling it to share and retain document history or to collect and centralise information specifi c to certain subjects (e.g. emerging risks, internal control procedures) from various sources.
In 2008, the Group Risk Management Department instigated a self-assessment process for processes deemed critical by the global and local process owners in order to obtain a report of the level of maturity relating to three topics: documentation of processes, analysis of risks and description of key controls, and control acti-
The Group Internal Audit Department has the following main responsibilities: to inform the Chairman and Chief Executive Offi cer and the operating and functional departments of any operating irregularities through the implementation of an annual audit plan based on an analysis of risks, resulting amongst other things from discussions with the Group, P&C and Life Risk Management Departments, and approved by the Accounting and Audit Committee, to advise the entity managers in the establishment of their control plans, to ensure the relevance and compliance by the operating and functional departments with control procedures.
The Group Internal Audit Director reports his activity to the Accounting and Audit Committee of the Board of Directors of the Company. The Group Internal Audit Department was able to focus on its audit missions in 2008 due to the transfer of responsibilities to the Group Risk Management Department and to the strengthening of the team, made up of fourteen auditors, including various experts and one information systems auditor.
The processes described below concerning reinsurance accounting and calculation of technical reserves, which are within the technical information system, are being applied progressively by Group entities following the migration in 2008 to the single platform used by the Group since the late 1990’s (OMEGA).
(a) Concerning SCOR Global P&C: the calculation of technical reserves (including IBNR - Incurred But Not Reported) having a signifi cant impact on the balance sheet and income statement, is largely based on contractual and accounting data, the relevance of which is verifi ed upstream. This calculation of technical reserves inventories is subject to the following successive controls: by the actuaries in charge of reserving through control reports for which the proper implementation is verifi ed by the Group Actuarial Department; by the Chief Actuary, particularly for methods, tools and results; (b) Concerning SCOR Global Life: the reinsurance treaties are either reviewed individually or are pooled within an affi liation treaty based on certain criteria defi ned in advance, the treaties are then subject to reserving estimates, which are reviewed at each quarterly closing either by the actuaries or at meetings attended by underwriters, technical assistants and actuaries.
Monitoring of fi nancial assets and cash fl ow is provided through various operating methods. The information systems used provide an audit trail of the transactions carried out. In certain entities, accounting activities are delegated to external service providers; controls implemented by these entities make it possible to verify the proper recording of accounting data and consistency of the fi gures. “Cash” reconciliations are made on a daily basis, for the most part, and securities are reconciled the following day (D+1) with reports from the various custodians. Portfolios managed directly are monitored in real time.
by the use of general and consolidation accounting softwares shared by all Group entities; by the defi nition by the Group Accounting Department of a closing process, clear responsibilities and a detailed fi nancial statement closing schedule, which is monitored, in the closing period, on a daily basis; by a defi nition of responsibilities for controlling the integration of auxiliary accounting systems; by the centralised management of charts of accounts; by the creation of an IFRS Centre of Excellence in 2008 whose objectives are to (1) communicate developments and standards to all contributors and (2) coordinate justifi cations and documentations of accounting processes for complex operations.
daily monitoring of the closing process of each of the Group entities.
internal manitoring of changes in legislation and accounting standards, together with the Group’s external consultants and auditors.
In addition, and without calling into question the implementation of internal control rules by SCOR and its managers, General Management requests, within the framework of the reporting and quarterly consolidation procedure, that all local managers of Group entities, as well as Senior Managers of SCOR Global P&C and SCOR Global Life, make a specifi c quarterly statement to the Chairman and Chief Executive Offi cer, and to the Group Chief Financial Offi cer in the management representation letters as to the reliability and fair presentation of the accounts of the entities they manage and the effectiveness of the internal controls. This process was revised and improved in 2008: the results are analysed and monitored by a committee including the General Secretary of SCOR, the Group Accounting Director and the Head of the IFRS Centre of Excellence. The key points are communicated to the Executive Committee.
On the basis of our work, we have nothing to report on the information in respect of the company’s internal control procedures relating to the preparation and processing of accounting and financial information contained in the report prepared by the chairman of the board of directors in accordance with article L.225-37 of the French commercial code (Code de Commerce).
APPENDIX C : ENVIRONMENTAL IMPACTS Information required under Article R.225-105 of the Commercial Code
Measures taken to improve energy effi ciency: Individual setting of heat pumps; Setting of central air conditioners; Consumption monitoring; Optimisation of energy resources through Technical Building Management; Replacement of standard bulbs with energy-saving bulbs upon each change; Replacement and modernisation of the building technical management system; Consideration of energy consumption when replacing equipment; Replacement of level 1&2 lighting with low energy devices and separate electronic ballasts; Continuation of the campaign to replace heat pumps (4 levels in 2008). The new equipment is more energy effi cient; Campaign to replace Air Treatment Plants with more energy effi cient equipment and greater fi ltration power.
Air emissions: Generation Station was renovated in 1998, covering combustion and emissions, in accordance with the provisions of the Order of July 25, 1997 defi ning general recommendations applicable to facilities classifi ed for the protection of the environment and the applicable standards; Four closed air-cooling towers, treated in accordance with the applicable standards to combat legionnaires’ disease; Air conditioning plants using ultra-sound humidifi ers (no noise) treated against legionnaire’s disease; Regular anti-bacterial analyses carried out by a control offi ce; Implementation of the “ECOVENT” system on electricity generation groups in order to limit emissions of motor oil particles into the air.
Parts not included in this or these documents are either of no concern to the investor, or else are covered by another section of this registration document.
(1) This version cancels and replaces the version put on line between 5 March 2009 and 18 March 2009 and contains, on page 5, the adding of the following paragraph: “I confi rm that, to the best of my knowledge, the fi nancial statements have been drawn up in accordance with applicable accounting standards and accurately show the position of the assets and liabilities, the fi nancial position and the profi t or loss of the company and of all businesses and fi rms included within the scope of the consolidated group, and that the management report, mentioned in Sections 3, 4, 7.1, 9, 10, 11, 15.1, 17, 18, 20.1, 21.1, Appendix A and Appendix C, accurately refl ects the evolution of the business, the results and the fi nancial position of the company and of all businesses and fi rms included within the scope of the consolidated group, and describes the main risks and contingencies which they are faced with”.