4.3. 160Consolidated statement of comprehensive income Consolidated statement of cash flows 1624.5. Consolidated statement of changes in shareholders’ equity Notes to the consolidated financial statements 1654.6.
286Report by the independent third party, on the extra-financial performance declaration included in the management report 6.7.
This Universal Registration Document has been filed on March 13, 2020 with the French financial markets authority (Autorité des marchés financiers – AMF), as competent authority under Regulation (EU) 2017/1129 without prior approval pursuant to Article 9 of the said regulation.
The Universal Registration Document may be used for the purpose of an offer to the public of securities or admission of securities to trading on a regulated market if supplemented by a securities note and, if applicable, a summary and any amendments to the Universal Registration Document. The whole is approved by the AMF in accordance with Regulation (EU) 2017/1129.
The universal registration document has been filed with the French Markets Authority as competent authority under Regulation (EU) 2017/1129 without prior approval pursuant to Article 9 of Regulation (EU) 2017/1129. The universal registration document may be used for the purposes of an offer to the public of securities or admission of securities to trading on a regulated market if approved by the French Markets Authority together with any amendments, if applicable, and a securities note and summary approved in accordance with Regulation (EU) 2017/1129. Pursuant to Article 19 of Regulation (UE) 2017/1129 of June 14, 2017 of the European Parliament and Council, the following information is included by reference in this Universal Registration Document (the “Universal Registration Document”): • SCOR SE’s corporate and consolidated financial statements for the financial year ended December 31, 2018 and the report of the Statutory Auditors regarding said financial statements as presented in SCOR SE’s registration document filed with the AMF on March 4, 2019 under number D.19-0092; • SCOR SE’s corporate and consolidated financial statements for the financial year ended December 31, 2017 and the report of the Statutory Auditors regarding said financial statements as presented in SCOR SE’s registration document filed with the AMF on February 23, 2018 under number D.18-0072.
Business overview1.2.5. 16 221.2.6. Research and development, patents and licenses 251.2.7. Investments
+4,000 clients throughout the world billion euros of premium income in 2019 employees of 65 nationalities accross 30 countries, equally distributed
1.1.1. GROUP KEY FIGURES SCOR SE (“the Company”) and its consolidated subsidiaries (referred collectively as “SCOR” or the “Group”), form the world’s fourth largest reinsurer (1) serving more than 4,000 clients. The Group is organized in three business units, SCOR Global P&C, SCOR Global Life and SCOR Global Investments, and three regional management platforms (the “Hubs”): the EMEA Hub, the Americas Hub and the Asia-Pacific Hub.
Consolidated SCOR Group 15,25816,341Gross written premiums 14,789 14,058Net earned premiums 13,28113,611 658713Operating result 491 422Consolidated net income – Group share 286322 286390Consolidated net income – Group share – before U.S. tax reform (1) 422 615671Net investment income (2) 764 5.0%4.7% 5.0%Group cost ratio (3)
(1) Refer to the 2018 Registration Document Section 1.3.3. – Significant event of the year 2018 on the US tax reform (Tax Cuts and Jobs Act, the « TCJA »). (2) See Section 1.3.5.4. – Net investment income and investment income on invested assets.
(3) See Section 1.3.9. – Calculation of financial ratios, for detailed calculation. (4) Earnings per share are calculated as net income divided by the number of ordinary shares, which includes the average number of shares over the reporting period, shares issued during the period and time-weighted treasury shares. See Section 4.6.21. – Earnings per share for detailed calculation. (5) Closing stock price on December 31, 2019 (December 31, 2018 and December 29, 2017).
(1) By net reinsurance premiums written, source: “AM Best Special Report Global Reinsurance 2019”.
* The leverage ratio is calculated by dividing the subordinated debt by the sum of shareholders’ equity and subordinated debt. The calculation excludes accrued interest and includes the impact of swaps related to subordinated debt issuances. This ratio is expressed as a percentage. It is used to determine how much lenders are financing the Group’s activities over shareholders.
*** In March 2018, SCOR placed a perpetual note in the amount of USD 625 million. In June and November 2018, SCOR redeemed the CHF 315 million and CHF 250 million undated subordinated notes line, using the proceeds of the new instrument.
**** In December 2019, SCOR issued a perpetual note in the amount of USD 125 million. These new notes are assimilated and form a single series with the existing USD 625 million perpetual deeply subordinated notes issued in March 2018. The new notes issue bears the same terms and conditions as the original notes.
The statute of limitations for dividends is five years. Unclaimed dividends will be paid over to the French Treasury. See also Section 4.6. – Notes to the consolidated financial statements, Note 21.– Earnings per share.
* The net combined ratio is calculated by taking the sum of Non-Life claims (including natural catastrophes), commissions and management expenses net of retrocession, divided by earned premiums net of retrocession. The net combined ratio calculation has been refined in 2017 to exclude some immaterial non-technical items that were previously included. Considering their potential growth, these items have been excluded to ensure they do not distort the net combined ratio in the future. The impact on the previously reported ratio is +0.26%pt and +0.22%pt as at December 31, 2016 and December 31, 2015, respectively.
1.1.4. CURRENT STRATEGIC PLAN In September 2019, SCOR launched its new strategic plan, “Quantum Leap”. This plan covers the period from mid-2019 to the end of 2021. It respects SCOR’s four strategic cornerstones, which are: • a strong franchise, achieved by deepening its presence in the local Non-Life and Life markets in which SCOR operates with recognized expertise and strengthening proactive client relationships through best-in-class services and product innovation; • a high degree of diversification of Non-Life and Life business and geographical presence, providing more stable results and robust capital diversification benefits with the use of financial market instruments; • a controlled risk appetite on both sides of the balance sheet; and
• a robust capital shield policy (see Section 3.3.3. – Retrocession and other risk mitigation techniques).
This plan aims to create the reinsurance company of tomorrow. To this end, SCOR is transforming profoundly, accelerating its use of new technologies – such as artificial intelligence, robots, big data, multi-cloud and e-business – to innovate, expand its product and services offering and increase its efficiency for the benefit of its clients throughout the world.
“Quantum Leap” aims to increase the Group’s efficiency and unlock value while transitioning SCOR towards IFRS 17, a more economic-based accounting framework for (re)insurance contracts than IFRS 4.
The Board of Directors’ proposal to SCOR SE shareholders’ annual general meeting will aim for a sustainable dividend per share from year to year by following the below steps: • Step 1: Ensure the projected solvency position is in the optimal range.
• Step 2: Estimate and allocate capital to support future accretive growth.
• Step 3: Define the amount of a sustainable regular dividend accordingly.
Legal name and commercial name of the issuer Legal name: SCOR SE
Domicile and legal form of the issuer, legislation governing its activities, country of incorporation, address and telephone number of its registered office Registered office and contact information of issuer SCOR SE 5, avenue Kléber 75116 Paris France
For additional information on the impact of regulatory changes on the Group’s operations and financial position, see Section 3.1.1.2.
Asset management regulations SCOR Investment Partners SE (formerly known as SCOR Global Investments SE) is subject to strict regulation in the various jurisdictions in which it operates. These regulations are generally designed to safeguard client assets and ensure the adequacy of disclosures concerning investment returns, risk characteristics of invested assets in various funds, suitability of investments for client investment objectives and risk tolerance, as well as the identity and qualifications of investment managers. These regulations generally grant supervisory authorities broad administrative powers, including the power to limit or restrict the performance of business activities for failure to comply with such laws and regulations.
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Furthermore, the complexity and extraterritorial scope of many legislations on the fight against financial criminality (fight against money laundering, financing of terrorism and corruption, national and international financial sanctions and embargoes) create serious risks of significant penalties and reputational risks in case of noncompliance. As examples, see in particular the French Law of December 9, 2016 on transparency, fight against corruption and modernization of the economic life (called “Law Sapin II”) and the European Market Abuse Regulation (called “MAR Regulation”) which came into force on July 3, 2016.
• On October 1, 2013, SCOR acquired Generali’s life reinsurance operations in the US (Generali U.S. Holdings, Inc. or Generali U.S.) for total consideration of USD 774 million.
1.2.3. ORGANIZATIONAL STRUCTURE OF SCOR The main operational entities of the Group are presented in the chart below (1): 1.2.3.1. Brief description of the Group and of the position of the issuer
SCOR Global P&C, the Group’s Non-Life business unit, operates worldwide through the insurance and reinsurance subsidiaries and branches of SCOR SE in the EMEA region, including Spain, Italy, Switzerland, the UK, Germany, Kenya, South Africa, Russia, the America region and the Asia-Pacific region, including Australia, China, India, South Korea, Hong Kong and Singapore.
SCOR Global Life, the Group’s Life business unit, operates worldwide through the insurance and reinsurance subsidiaries and branches of SCOR SE in the EMEA region including Germany, the UK, Ireland, Italy, Spain, Switzerland, the Netherlands, Sweden, Belgium, South Africa, in the Americas region including Canada, the US, Latin America, and the Asia-Pacific region including Australia, New Zealand, China, Hong Kong, Japan, Singapore, Malaysia, South Korea and India.
SCOR Global Investments, the third business unit of the Group, operates the asset management activities of the Group. It is responsible for defining, implementing and controlling the asset allocation of the Group’s legal entities investment portfolios in a centralized manner. It is organized around two areas: the Group’s functions and a portfolio management company regulated by the AMF, SCOR Investment Partners SE, which manages directly the assets of many SCOR Group subsidiaries and manages also investment vehicles on behalf of the Group and third-party clients.
SCOR SE also makes loans to its subsidiaries and issues them guarantees so that they can underwrite under favorable conditions, particularly by benefiting from its credit ratings. SCOR SE provides actuarial, accounting, legal, administrative, IT, internal audit, investment, and human resources support to Group subsidiaries. Finally, SCOR SE acts, as needed, as retrocessionaire for its operational subsidiaries through annually renewed proportional and non-proportional treaties which constitute the Group’s internal steering instrument through the annual allocation of capital to the operating subsidiaries based on the profitability expected from their underwriting activity. The contracts that formalize the relationships between SCOR SE and its subsidiaries are presented in Appendix C – 5.2.9. – Transactions with subsidiaries, affiliates and others.
The Group’s restructuring SCOR launched and completed several major restructuring projects, notably between 2005 and 2010, in order to simplify the legal structure of the Group and clearly differentiate between the operations of Life reinsurance subsidiaries and Non-Life reinsurance subsidiaries, with a view to optimize the annual allocation of capital between operations under the Solvency I regime.
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• the Group to develop a global culture while keeping local specificities.
Management reviews the operating results of the Non-Life and Life operating segments individually to assess the operational performance of the business and to allocate resources. For more information on SCOR’s operating segments, see Section 4.6. Note 4 – Segment information.
1.2.3.2. List of issuer’s significant subsidiaries and branches See: • Section 1.2.3. – Organizational structure of SCOR; • Section 1.2.3.1. – Brief description of the Group and of the position of the issuer (regarding the role of SCOR towards its subsidiaries); • Section 2.1.3. – Board of Directors (regarding the duties carried out in the subsidiaries by the managers of the Company); • Section 2.1.6. – Executive Committee (regarding the duties carried out in the subsidiaries by the managers of the Company); • Section 4.6. Note 2.1 – Significant subsidiaries, investments in associates and joint ventures; • Section 4.6.3. Note 3 – Acquisitions and disposals; • Section 4.6. Note 22 – Related party transactions; • Section 4.7. – Information on holdings; and • Appendix C – 5.2.1. – Investments.
1.2.4. RATINGS INFORMATION The Company and some of its insurance subsidiaries are rated by recognized rating agencies.
On September 25, 2019, A.M. Best affirmed SCOR’s financial strength rating of “A+ (Superior)” and its Long-Term Issuer Credit Ratings of “aa-”.
On September 9, 2019, SCOR was informed of the decision by Standard &Poor’s (S&P) to affirm the financial strength rating for the Group and its main subsidiaries at “AA-”, with a “stable outlook” and to maintain the counterparty credit ratings at “AA-/ A-1+”.
On July 17, 2019, Fitch Ratings affirmed SCOR's insurer financial strength rating at “AA-” (Very Strong) and long-term issuer default
On March 20, 2019, Moody’s affirmed SCOR SE’s Aa3 insurance financial strength rating as well as its debt ratings (subordinated debt at A2(hyb) and preferred stock non-cumulative debt rating at Baa1(hyb). Moody’s also affirmed the ratings of various SCOR SE subsidiaries. The outlook remains stable.
For more information on risks arising from credit ratings, please see Section 3.1.1.5. – Downgrade risk.
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Risk preferences Risk preferences are qualitative descriptions of the risks which SCOR is willing to accept. The Group aims to cover a wide range of reinsurance risks and geographical areas. On the other hand, it has no desire to take operational, legal, regulatory, tax or reputational risks. This does not mean that the Group is immune to these risks. These risk preferences determine the risks to be included in the Group’s underwriting guidelines.
Risk tolerances Risk tolerances are the limits required by SCOR’s stakeholders (e.g. clients, shareholders, regulators, etc.). The Board of Directors defines and approves risk tolerance limits for the Group in terms of solvency by risk driver, and extreme scenario in order to ensure that the Group’s risk profile remains aligned with its risk appetite framework. SCOR uses various risk assessment measures to verify that its exposures remain within these limits. These measures can take several forms depending on the technical constraints or the level of information available and are based on either internal model outputs, scenarios or expert opinions.
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Proportional and non-proportional reinsurance Both treaty and facultative reinsurance can be written on (i) a proportional (or quota share) basis and/or (ii) a non-proportional (or excess of loss or stop loss) basis.
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SCOR’s cost center is referred to in this Universal Registration Document as “Group Functions”. Group Functions is not an operating segment and does not generate revenues. The costs in Group Functions are Group-related and are not directly attributable to either the P&C or Life segment, but those costs that are indirectly attributable are allocated to the operating segments based on suitable allocation keys. Group Functions includes the cost of departments fulfilling duties for the benefit of the whole Group, such as Group Internal Audit, Group Finance departments (Tax, Accounting, Consolidation and Reporting, Financial Communication, Treasury and Capital Management, Financial Planning and Analysis), Group Chief Operating Officer departments (Legal and Compliance, Communication, Human Resources, Information Technology, Cost Controlling and Budgeting) and Group Chief Risk Officer departments (Actuarial, Risk Management, Prudential Affairs, Internal Modeling).
Both business units P&C and Life, through the legal entity SCOR SE and its subsidiaries and branches, are leading global reinsurers, executing an underwriting policy focused on profitability, developing value-added services and adhering to a cautious financial policy. During the year ended December 31, 2019, the Group served more than 4,000 clients throughout the world. SCOR’s strategy of offering both P&C and Life products provides it with the benefits of balanced diversification (in terms of risks, geography and markets), which is a cornerstone of its strategy.
1.2.5.2. Non-Life reinsurance SCOR’s Non-Life segment is divided into three business areas: • Reinsurance; • Specialties Insurance; • P&C Partners.
Aviation SCOR provides reinsurance and insurance solutions in all sectors of the Aviation market: airlines, aerospace and general aviation.
Marine and Energy SCOR’s dedicated Transport & Energy team combines local knowledge with global insights, in a line of business that requires constant monitoring of a rapidly changing global environment. SCOR offers flexible adequate solutions to its clients for all the segments of this sector, like hull and cargo as well as marine liability and energy.
P&C Partners To address the evolving needs of its clients and to reinforce its Tier 1 position in a rapidly changing risk ecosystem, P&C Partners, a global technical and expertise center, facilitates business development as well as synergies between underwriting teams.
Its dedicated decision-making committees provide rapid responses and promote consistency of the P&C underwriting approach: • Alternative Solutions focuses on the development of customized, non-traditional, and new products/solutions; • Cyber Solutions helps corporate and insurance clients to develop Cyber insurance coverage; • Alternative Capital explores innovative retrocession facilities; • P&C Ventures and Strategic Partnership focuses on InsurTech investments, technical partnerships and expertise sharing.
1.2.5.3. Life Reinsurance SCOR’s Global Life segment underwrites Life reinsurance business in the following product lines: • Protection; • Financial Solutions; • Longevity.
Protection Protection encompasses traditional Life reinsurance business on living and death benefits. The main risks undertaken are mortality, morbidity and behavioral risks for individuals and groups of individuals. Protection is predominantly underwritten in the form of proportional treaties (quota share, surplus basis or a combination of both). Quota share treaties include structures whereby SCOR Global Life’s exposure is identical to those of its clients, and riskbased premium structures whereby treaty conditions differ from those of the underlying policies. A minority of the portfolio is underwritten in the form of non-proportional contracts: excess of loss per person, catastrophe excess of loss or stop loss.
Long-Term Care Long-Term Care (LTC) insurance covers the inability of the insured to perform predefined activities of daily living, resulting in the insured needing constant assistance from another person.
Personal Accident Personal Accident insurance pays a lump sum benefit, if the insured person dies or is seriously injured as a result of an accident.
Distribution by production source Reinsurance can be written through professional reinsurance brokers or directly from ceding companies. The involvement of a broker in the placement of a reinsurance contract is a decision belonging to the ceding insurance company, which depends on local market practices, the cedent’s worldwide reinsurance market knowledge, the complexity of the risks the cedent intends to transfer and the corresponding available reinsurance capacity in the market, as well as the cedent’s capability and resources to structure market submission data, place risks and manage the placements. In most of the cases, reinsurance programs are syndicated to several reinsurers, which follow a leader, and in some instances a co-leader.
1.2.5.5. Capital shield strategy Once the Board has defined risk tolerances in line with the Group’s Strategic Plan, the Capital Shield Strategy sets mitigating mechanisms to ensure the protection of the Group’s capital in line with its risk appetite. The Capital Shield Strategy is a key part of SCOR’s ERM (Enterprise Risk Management) framework, forming one of the four cornerstones of SCOR Group’s strategy and one of the pillars protecting the solvency of the Group.
The Capital Shield has the following objectives: • ensuring protection of the Group’s capital and solvency in line with SCOR’s Risk Appetite Framework; • balancing the portfolio and improving its diversification, hence using available capital more efficiently. It also contributes to avoiding undesired earnings volatility and providing liquidity in times of stress.
The Capital Shield Strategy builds on the following four concepts: traditional retrocession, capital market solutions, the solvency buffer and the contingent capital facility.
The Group’s asset management mandate, assigned to SCOR Global Investments, consists of: • proposing the macro-positioning of the invested assets portfolio in line with the approved risk appetite and risk limits, respecting a strict ALM process, economic and market expectations, accounting rules and a strict foreign exchange congruency matching between assets and liabilities; • implementing the investment strategy; • optimizing the absolute return on invested assets and focusing on the recurrence of yields while controlling their volatility. This objective is achieved through active and dynamic management of the portfolio, the identification of cycles and market opportunities and strict qualitative and quantitative risk management.
SCOR Investment Partners benefits from third-party asset management through management fees on the assets under management. SCOR Investment Partners has seven investment strategies which are open to third parties with funds in key products such as High Yield, Private Debt (corporate, infrastructure and real estate loans) and ILS.
1.2.5.7. Dependency of the issuer with respect to patents or licenses, industrial, commercial or financial contracts and new manufacturing processes
See Sections 3 – Risk factors and risk management mechanisms and 1.2.6. – Research and development, patents and licenses.
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The analyses and risk projections produced with the support of chapters are used by SCOR Global Life’s teams to advise their clients on the implementation and monitoring of their life and health insurance products.
SCOR also finances the Insurance Risks and Finance Research Center in cooperation with Nanyang Business School (Singapore), whose aim is to promote research in the field of risk management. For SCOR, the related cost is SGD 2.5 million spread over five years.
Information technologies The investment in information technology is one of the key priorities of the “Quantum Leap” strategic plan. In this area, SCOR relies both on the strength and the consistency of its global information system, which is continuously enhanced through the development of an ambitious portfolio of projects, and on the transformation opportunities, enabled by the introduction of new technologies and especially the artificial intelligence, the big data, the multi-cloud, the development of e-business and Blockchain et the robotic process automation (RPA).
In accounting, consolidation and financial reporting area and through all entities of the Group, SCOR runs a global solution, SAP-based, embedding a unique chart of accounts and standard processes, and reinforced by the recent introduction of Hana technology to extend its real-time analytical capabilities. This
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At the Group level, and in the frame of an integrated architecture, the various risk modeling tools are feeding the enterprise internal model which has been key in the Solvency II compliance process. This model now benefits from the scalability of the public cloud, providing enhanced analytical capabilities.
The Group is promoting a paperless environment. Internally, global document management and sharing processes have been set up for the Life and Non-Life business units. With its clients, SCOR can automatically process claims, reinsurance and financial accounts received electronically in the standard formats defined by ACORD, an association created for the development of e-processing in insurance and reinsurance, without having to re-enter them. SCOR is also actively participating to the B3i initiative which aims at exploiting the power of the Blockchain technology to ease exchanges between actors of the insurance value chain.
SCOR’s IT Department is playing a key role in implementing the Group’s “Green SCOR” policy, and drives several elements of this multi-year plan, including data center consolidation, server virtualization, the purchase of new low-energy desktops and laptops, and reductions in printing. Mobility is still being enhanced through ongoing developments in line with technological progress and business needs that require a more permanent connection with the company, while complying with security standards.
Hence, the FED has decreased, by steps of 25 basis points, its reference rate from 2.25% to 1.50% and has stopped its balance sheet reduction started in 2018. Indeed, its assets size is increasing again and represents now USD 4,166 billion. The European Central Bank has symbolically decreased its rate from -0.4% to -0.5% and announced the reinvigoration of its asset purchase program.
Hence, during the year, the 10-year rates have moved in the US from 2.7% to 1.9%. In the Eurozone, they decreased from 0.2% to -0.2% after reaching a record low -0.7% during the summer.
The same phenomenon affected the UK, Canada and Australia with 10-year rates at respectively 0.8%, 1.7% and 1.4%. In Asia, rates were more stable with Japanese and Chinese 10-year rates at respectively 0.0% and 3.1%.
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Completion of the merger of the three SE legal entities of the Group SCOR Global Life SE and SCOR Global P&C SE merged into SCOR SE on March 31, 2019. This reorganization, which was announced by SCOR in September 2016 as part of its previous strategic plan "Vision in Action", enables SCOR to optimize its operational and legal structure and level of regulatory capital, thereby creating additional value for its shareholders, customers and other stakeholders.
Acquisition of Coriolis Capital Limited On September 10, 2019, SCOR Investment Partners completed the acquisition of 100% of the capital of Coriolis Capital Limited (Coriolis Capital) and obtained all necessary approvals from relevant regulators, notably the Financial Conduct Authority (FCA) in the United Kingdom. Coriolis Capital is a pioneering fund manager in the Insurance-Linked Securities (ILS) field, investing in catastrophe bonds, collateralized reinsurance and climate derivatives.
New catastrophe bond Atlas Capital UK 2019 PLC SCOR sponsored a new catastrophe bond (“cat bond”), Atlas Capital UK 2019 PLC, which provides the Group with multi-year risk transfer capacity of USD 250 million to protect itself against named storms in the U.S., earthquakes in the U.S. and Canada, and windstorms in Europe. The risk period for Atlas Capital UK 2019 runs from June 1, 2019, to May 31, 2023.
The transaction has received the approval of the Prudential Regulatory Authority (PRA) and the UK regulatory authorities.
The solution also allows SCOR to extend its solvency and offers a very cost-effective alternative to traditional retrocession contracts and ILS.
Placement of USD 125 million deeply subordinated Tier 1 issuance On December 11, 2019, SCOR successfully placed a perpetual deeply subordinated restricted Tier 1 notes issue on the Regulation S USD market in the amount of USD 125 million (hereinafter referred to as the “New Notes”). These New Notes will be assimilated (assimilées) and form a single series with the existing USD 625 million perpetual deeply subordinated Restricted Tier 1 Notes issued on March 13, 2018 (hereinafter referred to as the “Original Notes”). The New Notes issue will bear the same terms and conditions as the Original Notes.
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See also Section 4.6. – Notes to the consolidated financial statements, Note 1 – Accounting principles and methods, Note 15 – Net contract liabilities and Note 24 – Insurance and financial risks.
• the diversification of underwritten risks by product lines in Life reinsurance (Protection, Financial Solutions, Longevity) and in Non-Life reinsurance (Specialties Insurance, Reinsurance and P&C Partners).
Gross written premiums for the financial year ended December 31, 2017 amounted to EUR 14,789 million, an increase of 7.0% compared to EUR 13,826 million in 2016. At constant exchange rates the growth was 8.6%. The overall increase in gross written premiums of EUR 963 million in 2017 was composed of an increase of EUR 386 million for SCOR Global P&C and of EUR 577 million for SCOR Global Life.
See Section 4.6. – Notes to the consolidated financial statements, Note 4 – Segment information, for further details on the results of the reportable segments.
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Distribution by geographical area In 2019, SCOR generated approximately 38% of its gross written premiums in Europe, Middle East and Africa (EMEA) (2018: 38%), with significant market positions in France, Germany, Spain and Italy, 46% of its gross written premiums in the Americas (2018: 43%) and 16% in Asia (2018: 19%).
(1) In 2019, the market responsibility for one portfolio was reallocated from the Americas to EMEA in SCOR Global Life. The gross written premiums for SCOR Global Life previously reported in the 2018 Registration Document for Americas were EUR 4,375 million and EUR 4,567 million for the years ended December 31, 2018 and 2017, respectively. Gross written premiums previously reported for EMEA were EUR 2,980 million and EUR 2,733 million for the years ended December 31, 2018 and 2017, respectively.
Net earned premiums Net earned premiums for the year ended December 31, 2019 amounted to EUR 14,058 million as compared to EUR 13,611 million and EUR 13,281 million for the years ended December 31, 2018 and 2017, respectively. The overall increase in net earned premiums of EUR 447 million from 2018 to 2019 and EUR 330 million from 2017 to 2018 is consistent with the evolution in gross written premiums.
The return on invested assets in 2019 was 3.0% as compared to
The total amount recorded under "other operating expenses" in 2019 is an expense of EUR 61 million (2018: EUR 35 million and 2017: EUR 38 million) mainly linked to the Atlas catastrophe bonds’ depreciation and litigation expenses.
Operating income Operating result before impact of acquisitions for the year ended December 31, 2019 amounted to EUR 713 million as compared to EUR 632 million in 2018 and EUR 491 million in 2017. The increase between 2018 and 2019 is notably due to the lower severity of natural catastrophes. For the year ended December 31, 2019, the operating segment SCOR Global Life contributed EUR 437 million (EUR 371 million and EUR 342 million in 2018 and 2017, respectively) and SCOR Global P&C EUR 407 million (EUR 393 million and EUR 265 million in 2018 and 2017, respectively) to the operating result. In 2019, 2018 and 2017, EUR (131) million, EUR (132) million and EUR (116) million respectively, related to Group functions.
Consolidated net income – Group share SCOR generated a consolidated net income of EUR 422 million in 2019, compared to EUR 322 million and EUR 286 million for the years ended December 31, 2018 and 2017, respectively.
SCOR Global P&C continued on a strong growth trend in 2019 benefitting from a robust underwriting performance following successive treaty renewals and facultatives’ portfolio underwritings throughout the year. Despite a second half year marked by natural catastrophes, SCOR Global P&C confirms the objectives of its new strategic plan “Quantum Leap”, in particular thanks to an efficient portfolio management policy.
SCOR Global P&C had a strong growth in 2018, supported by renewals in line with the Group’s strategic plan “Vision In Action”, benefiting from improved pricing for its reinsurance programs as well as improvements in the insurance market environment through its Reinsurance and Specialties Insurance activities. Despite a year marked by natural catastrophes, SCOR Global P&C confirmed its position as a leading reinsurer, in particular thanks to an efficient portfolio management policy.
2017 was marked by an exceptional series of large natural catastrophes that occurred during the 2nd half of the year. The inforce retrocession programs have responded as expected, bearing witness to the SCOR Global P&C efficient capital shield policy. Despite these events and an increasing competition in the market since last year, the “Vision in Action” objectives were confirmed thanks notably to January 2017 renewals and strengthening of initiatives undertaken in 2016.
Net combined ratio In 2019, the net combined ratio reflects large and extended natural catastrophes that occurred during the year, impacting mainly Japan and the Bahamas, partially absorbed by 1.9 percentage points of reserve releases (EUR 110 million). The natural catastrophe ratio stands at 11.6% compared to 12.6% in 2018 and 14.9% in 2017.
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Impact of natural catastrophes SCOR defines a catastrophe as a natural event involving several risks and causing pre-tax losses, net of retrocession, above or equal to EUR 3 million.
Number of catastrophes occured during previous financial year In EUR millions 12 (8)4 (6)139 (4)Losses and loss adju stment expenses due to catastrophes, gross
(4) Including developments on Italian Storms 2018, Typhoon Jebi and Trami, Hurricane Michael, Camp California Wildfire and Kuwait Flood. (5) Including Typhoons Jebi, Trami, Mangkhut and Yutu in Saipan and Tinian, Hurricanes Michael, Florence and Leslie, Camp Califnornia Fire and Woolsey California Fire, Friederike storm, Papua New Guinea Earthquake, Ituango heavy rains, Italian Storms, Kilauea vulcanic eruption in Hawai, floods in Japan and Kerala, Cyclone Mekunu, Northern Osaka Earthquake, US storms in May and July, Carr Wildfire in California and Swedish wildfires, Ontatio windstorm and Sydney hailstorms.
(6) Including developments on Hurricane Harvey, Irma, Maria, Mexico Earthquakes, Northern and Southern California wildfires and Flash Flood N. Italia (Brescello). These figures did not take into account the late information received on typhon Jebi and that do not have any impact on the Group financial statements 2017 as mentioned in Section 4.6. – Notes to the consolidated financial statements, Note 15.1 – Net contract liabilities, SCOR Global P&C. (7) Including Hurricane Harvey, Irma, Maria, Mexico Earthquakes, Northern and Southern California wildfires, Cyclone Debbie, South Africa climatic events, Typhoon Hato, Peru El Nino Costero events, Newcrest Mining Earthquake loss, US April and May Winds, Mumbai Floods, Portuguese Fires. (8) Including developments on Hurricane Matthew and Kaikoura Earthquake.
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In 2019, SCOR was affected by the following catastrophes which resulted in total net estimated losses of EUR 616 million as at December 31, 2019: Estimated loss net of retrocession as at December 31, 2019Date of loss
(1) Reported in Q2 2019 for the first time, but a 2018 event.
Protection encompasses traditional life reinsurance business for living and death benefits. The main risks undertaken are mortality, morbidity and behavioral risks for individuals and groups of individuals. Financial Solutions combine traditional life reinsurance with financing components providing liquidity, balance sheet, solvency and/or income improvements to the client. Longevity products cover the risk of negative deviation from expected results due to the insured or annuitant living longer than assumed in the pricing of insurance cover provided by insurers or pension funds.
Asia Pacific remains a region with significant growth opportunities both in terms of premiums and profitability. Protection premium development in this region was driven by higher business volumes in China and North Asia.
• Personal Accident also represents a small proportion of SCOR Global Life’s portfolio. A main source of Personal Accident business for SCOR Global Life is obtained through its distribution services company, ReMark, which provides direct marketing of life insurance products to insurers, financial institutions and affinity partners.
Through its Global Distribution Solutions (GDS), SCOR Global Life has successfully deployed a number of innovative and tailored client services which aim to help insurers expand and develop their own client bases (ReMark, Velogica and SCOR Telemed). SCOR Global Life has leadership positions in many markets in the EMEA and Asia Pacific regions.
Financial Solutions In the Financial Solutions product line, accounting for 9% of 2019 gross written premiums, SCOR Global Life has built a recognized position in providing capital and solvency solutions. Since 2013, SCOR Global Life has signed landmark transactions in Europe, the US, Asia and Latin America. In 2019 SCOR Global Life expanded its footprint in the Asia Pacific region and in the US market. Due to the renewal and new acquisition of certain Financial Solution contracts as fee business, the business growth of this product line is not fully reflected in the development of gross written premium figures.
Longevity SCOR Global Life has established itself as a recognized provider for longevity reinsurance, focusing on longevity risk transfer transactions for large in-payment pension portfolios, creating a new business pipeline with growth opportunities. The Longevity product line accounts for 10% of SCOR Global Life’s gross written premiums in 2019 and is one of the main drivers of premium growth (6.6% increase in gross written premiums in 2019 at constant exchange rate (1). The main active market to date for SCOR Global Life is UK.
Life technical margin Overall, the Life technical margin in 2019 was 7.5% compared to 1.3.5.4. Net investment income and investment income on invested assets Net investment income for the year ended December 31, 2019 amounted to EUR 671 million compared to EUR 615 million and EUR 764 million for the years ended December 31, 2018 and December 31, 2017, respectively.
As at December 31 In EUR millions 201720182019 463Investment revenues on invested assets (1) (2) 511 403 34Realized gains/(losses) on fixed income 665 --Realized gains/(losses) on loans 2Realized gains/(losses) on equities -107 1921048Realized gains/(losses) on real estate (3)
19 14Realized gains/(losses) on other investments 93 272Realized gains/(losses) on invested assets (2) (3) (4) (5) 123 Impairment of fixed income (2)(9) -
IFRS INVESTMENT INCOME NET OF INVESTMENT MANAGEMENT EXPENSES 728619679 19,838Average invested assets 18,75719,041
(1) Investment revenues on invested assets are presented net of EUR 3 million real estate revenues attributable to third parties and net of EUR 1 million revenues related to investments not held for investment purposes.
(2) Investment revenues on invested assets are presented net of EUR 8 million revenues on later impaired/sold securities, shown in impairments (EUR 5 million) and realized gains (EUR 3 million), respectively.
(4) Realized gains/(losses) on invested assets are presented net of EUR 6 million realized losses on derivatives shown under fair value through income on invested assets.
(5) Realized gains/(losses) on invested assets are presented net of EUR 1 million realized gain on a fair value security, shown under fair value through income on invested assets.
(6) Impairment/depreciation of real estate is presented net of EUR (2) million impairment/depreciation attributable to third parties. (7) Fair value through income on invested assets includes EUR (1) million investment income from other consolidated entities. (8) Real estate financing expenses relate to real estate investments (buildings held for investment purposes) only, net of financing expenses attributable to third parties.
(10) Income/(expenses) on technical items include (1), (3) and (5) amongst other technical items.
Market and financial review SCOR GROUP01 34 SCOR Universal Registration Document 2019
SCOR’s exposure to loans remained stable at 5% of invested assets as at December 31, 2019 (as at December 31, 2018: 5% of invested assets).
SCOR’s exposure to equity securities remained stable at 2% of invested assets as at December 31, 2019 (as at December 31, 2018: 2% of invested assets). This exposure is essentially composed of convertible bonds and listed equities.
Market and financial review SCOR GROUP01 35SCOR Universal Registration Document 2019
The following table presents a reconciliation of these figures with the IFRS amounts as presented in Section 4. – Consolidated financial statements: As at December 31, 2019 Total IFRS
TOTAL INSURANCE BUSINESS INVESTMENTS AND CASH AND CASH EQUIVALENTS 23,090 1371,435 466 208749 8,28316,926
(1) Including Atlas CAT bonds and foreign exchange derivatives. (2) Loans and receivables excluded from invested assets are certificates of deposit (CDs) maturing in more than three months and less than twelve months.
TOTAL INSURANCE BUSINESS INVESTMENTS AND CASH AND CASH EQUIVALENTS 21,455 1381,175 403 67802 8,10115,906 29,556 29,761
(3) Assets invested by third parties in mutual funds and non-controlling real estate investments fully consolidated by SCOR. (4) Certain consolidated entities held for investment purposes have been included in the scope of Invested Assets. (5) Fair value less carrying amount of real estate investments excluding EUR 5 million attributable to third-party investors. (6) Real estate financing related to real estate investments (buildings held for investment) excluding EUR 30 million attributable to third-party investors.
Market and financial review SCOR GROUP01 37SCOR Universal Registration Document 2019
Book value per share (1) stood at EUR 34.06 at December 31, 2019 compared to EUR 31.53 and EUR 33.01 at December 31, 2018 and 2017, respectively.
On December 15, 2016, SCOR arranged a contingent capital facility with BNP Paribas. Under this EUR 300 million arrangement, SCOR raised its level of protection by EUR 100 million. On June 29, 2018 BNP Paribas transferred all the warrants to UBS in agreement with SCOR. UBS has thus fully substituted BNP Paribas in relation to all the rights and obligations arising from the contingent capital facility. On December 2019, SCOR launched of a new 3-year contingent capital facility. This takes the form of a contingent equity line, providing the Group with EUR 300 million coverage in case of extreme natural catastrophe or life events impacting mortality. This equity line facility replaces, as of January 1, 2020, the contingent capital facility which comes to an end on December 31, 2019. For more information on contingent capital, see Section 4.6. – Notes to the consolidated financial statements, Note 12 – Information on share capital, capital management, regulatory framework and consolidated reserves.
For more information on the Capital Shield Strategy, refer to Section 3.3.3. – Retrocession and other risk mitigation techniques.
For information on collateral requirements, see Section 3.1.5. – Liquidity risks and Section 4.6. – Notes to the consolidated financial statements, Note 23 – Commitments received and given.
For information on financial liabilities, including their related covenants, see Section 4.6. – Notes to the consolidated financial statements, Note 13 – Financial liabilities.
Subordinated debt and leverage ratio The total amount of subordinated debt increased to EUR 2,409 million from EUR 2,277 million in 2018 (2017: EUR 2,211 million).
On December 11, 2019, SCOR placed a perpetual deeply subordinated restricted Tier 1 Regulation S notes issue in the amount of USD 125 million. These New Notes will be assimilated (assimilées) and form a single series with the existing USD 625,000,000 perpetual deeply subordinated Restricted Tier 1 Notes issued on March 2018.
On May 24, 2016, SCOR successfully placed a dated subordinated notes issue on the Euro market in the amount of EUR 500 million. On July 28 and August 2, 2016 respectively, SCOR completed the calls of the remaining balance of its EUR 350 million (issued in 2006) and CHF 650 million (issued in 2011) perpetual subordinated note lines.
Real estate debt and other financial liabilities SCOR uses real estate debt and other financial liabilities mainly to finance real estate investments and for general corporate purposes. Real estate debts are non-recourse, the debtors’ claims are limited to assets underlying the financing, and there is an asset and liability matching with little to no risk that the assets will be insufficient to service and settle the liabilities. They meet the conditions for operational leverage and can be classified as operational debts, and therefore excluded by the rating agencies from financial leverage calculations. As at December 31, 2019, real estate financing and other financial liabilities amounted to EUR 517 million and EUR 101 million, respectively (December 31, 2018: EUR 510 million and
EUR 44 million, respectively). This includes the real estate debt of MRM for the amount of EUR 78 million (EUR 75 million as at
1.3.6.3. Liquidity The Group’s total liquidity, defined as cash and cash equivalents (including cash and cash equivalents from third parties) (1), shortterm government bonds with maturities above three months and below twelve months and bank overdrafts, which is well diversified across a limited number of banks, stood at EUR 1.5 billion at the end of 2019 (2018: EUR 1.2 billion and 2017: EUR 1.0 billion) supported by strong operating cash flow generation.
Solvency ratio At year-end 2019, SCOR’s solvency ratio stood at 226% (1), slightly above the Optimal Range.
1.3.8. CASH FLOWS Positive operating cash flows amounted to EUR 841 million in 2019 (2018: EUR 891 million and 2017: EUR 1,144 million, respectively). In 2019, SCOR Global P&C provided strong operating cash flows of EUR 740 million in increase compared to 2018 (EUR 592 million) following seasonality effects and natural catastrophe payments. The decrease of technical operating cash flows in 2019 compared to 2018 for SCOR Global Life is mainly due to higher claims payments in US and positive one-off impacts in 2018. In 2018, SCOR Global P&C provided strong operating cash flows globally in line with 2017. The decrease of technical operating cash flows for SCOR Global Life in 2018 compared to 2017 is mainly due to positive one-off impacts in 2017. In 2017, SCOR Global P&C provided strong cash flow in line with expectations, despite of having commenced payments on Q3 2017 cat events. SCOR Global Life showed elevated technical business cash flow in the last quarter of 2017 due to two large transactions.
Cash flow used in financing activities amounted to EUR (373) million in 2019, EUR (638) million in 2018 and EUR (467) million in 2017. This figure mainly includes dividend payments, and the issuance of a perpetual subordinated restricted Tier 1 note of USD 125 million.
See Section 4.4. – Consolidated statement of cash flows and Section 4.6. – Notes to the consolidated financial statements, Note 4 – Segment information for an analysis of the main cash flow statement items and Note 11 – Cash and cash equivalents, for a reconciliation between consolidated net income and operating cash flows, and between cash and cash equivalents and Group’s total liquidity.
(1) Solvency ratio based on Solvency II requirements. The Group solvency final results are to be filed to supervisory authorities by May 2020, and may differ from the estimates expressed or implied in this Universal Registration Document.
Market and financial review SCOR GROUP01 40 SCOR Universal Registration Document 2019
As at December 31, 2018As at December 31, 2019In EUR millions As at December 31, 2017 6,348Group shareholders' equity 6,1955,800 193,085,792187,049,511Shares issued as at closing date 193,500,317 (668,058)Treasury shares as at closing date (5,866,249)(9,137,286)
183,948,506186,381,453Basic number of shares 187,634,068 34.06BASIC BOOK VALUE PER SHARE 33.0131.53 1.3.9.2. RETURN ON INVESTMENTS AND RETURN ON INVESTED ASSETS The return on investments (ROI) is used to assess the profitability of the Group’s investments, including funds withheld by cedents and other deposits less cash deposits. This percentage return is calculated by dividing the total net investment income by the average investments (calculated as the quarterly averages of the total investments).
1.3.9.4. Return on equity Return on equity (ROE) is based on the Group’s share of net income divided by average shareholders’ equity (calculated as time weighted average shareholders’ equity).
Consolidated net income – Group share – before U.S. tax reform impact (1) 390 Opening shareholders' equity – Group share 6,1955,800 6,661 161211 143Weighted consolidated net income(2)
(3) Considers time weighted transaction based on transaction dates. (4) A daily weighted average is applied used for the currency or currencies that experienced material foreign exchange rates movements, and simple weighted average is applied used for the other currencies.
Total P&C management expenses (355)(370)(397) 6.9%Total P&C management expense ratio 6.8%7.1%
1.3.9.6. Life technical margin The Life technical margin is calculated as a percentage of the net technical result plus income from funds held by ceding companies and the net of gross and ceded earned premiums.
1.3.10. EVENTS SUBSEQUENT TO DECEMBER 31, 2019 No material change has occurred in the Group’s financial or commercial situation or in the Groups’ financial performance since the end of the 2019 financial year.
There is significant uncertainty about the potential impact of the pandemic based upon current information. SCOR will continue to regularly assess the COVID-19 impact on its business.
This underwriting risk and related risk management measures are described in the Universal Registration Document risk sections 3.1.2 – Underwriting risks related to the P&C and Life reinsurance businesses and 3.3.2 – Management of underwriting risks related to the P&C and Life businesses.
2.1. 46CORPORATE GOVERNANCE PRINCIPLES, SHAREHOLDERS’ MEETINGS, CORPORATE OFFICERS, EXECUTIVES, EMPLOYEES, INFORMATION REQUIRED BY ARTICLE L. 225-37-5 OF THE FRENCH COMMERCIAL CODE Corporate governance principles 462.1.1.
2.1. CORPORATE GOVERNANCE PRINCIPLES, SHAREHOLDERS’ MEETINGS, CORPORATE OFFICERS, EXECUTIVES, EMPLOYEES, INFORMATION REQUIRED BY ARTICLE L. 225-37-5 OF THE FRENCH COMMERCIAL CODE
In application of article L. 225-37-4 of the French Commercial Code, SCOR SE refers to the AFEP-MEDEF corporate governance code in preparing the report to be issued in accordance with article L. 225-37 of the French Commercial Code.
In accordance with the possibility offered by Section 8.4. of the AFEP-MEDEF Code, the Internal Regulations of the Board of Directors of SCOR provided, until February 26, 2020, the possibility for a director holding a mandate in a subsidiary of the Group to be qualified as independent provided that he abstains from participating in the decisions of the Board of Directors of SCOR SE in the event of a conflict of interest with the subsidiary in which he/ she held his/her mandate. The Board of Directors' meeting held on February 26, 2020 removed this possibility, in order to align the independence criteria of SCOR's directors with those of the AFEPMEDEF Code and thus taking into account the opinions expressed by the shareholders as part of the active dialogue held with them (Refer to Section 2.1.3.4. – Functioning of the Board of Directors Independence of Directors).
2.1.2. SHAREHOLDERS’ MEETINGS The terms and conditions for the participation of the shareholders at Shareholders’ Meetings and, more specifically, the mode of operation, the main powers of the Shareholders’ Meetings, the description of the shareholders’ rights as well as the methods of exercising the voting rights are set forth by the Article 19 of the Company’s bylaws, an electronic version of which is available on SCOR’s web site (www.scor.com).
2.1.3.1. Mission of the Board of Directors In accordance with European law governing European Companies and applicable French law, the principal responsibility of the Board of Directors is to define the strategic orientations of the Company and to ensure their implementation, in accordance with its corporate interest, taking into account the social and environmental aspects of its activity. It monitors management’s performance and ensures the sound and prudent management of the Company. The Chairman and Chief Executive Officer (Président et Directeur Général) of SCOR SE has authority to manage the business of the Company, subject to the prior authorization of the Board of Directors or the Shareholders’ Meeting for certain decisions as required by law and by the Company’s bylaws (statuts) and subject to the Code des assurances which prescribes that at least two persons shall effectively run the Company (“four-eyes” principle).
French – Age: 67 – SCOR SE, 5 avenue Kléber, 75116 Paris, France
Denis Kessler, a French citizen, is a graduate of HEC business school (École des Hautes Études Commerciales), holds a PhD in economics and advanced degrees in economics and social sciences, and is a Fellow of the French Institute of Actuaries. He was Chairman of the Fédération Française de l’Assurance (FFA), Senior Executive Vice-President and member of the Executive Committee of the AXA Group and Executive Vice-President of MEDEF (Mouvement des Entreprises de France). He joined SCOR as Chairman and Chief Executive Officer on November 4, 2002. In January 2016, he was elected to join the Academy of Moral and Political Sciences of the Institut de France.
French – Age: 58 – Aéroports de Paris, 1 rue de France, 95931 Roissy Charles de Gaulle, France
• Chairman and Chief Executive Officer of Aéroports de Paris (France)*
• Director and Vice-Chairman of the Board of Directors of TAV Havalimanlari A.S. (TAV Airports) (Turkey) • Director and Vice-Chairman of the Board of Directors of TAV Yatirim Holding A.S. (TAV Investment) (Turkey) • Director and Vice-Chairman of the Board of Directors of TAV Tepe Akfen Insaat Ve Isletme A.S. (TAV Construction) (Turkey) • Chairman of the Board of Directors of ACI Europe (Belgium) • Member of the Supervisory Board of NV Luchthaven Schiphol (Netherlands)
Augustin de Romanet, a French citizen, is a graduate of the Institut d'Études Politiques in Paris and a former student of the École Nationale d’Administration. He was previously Chief Executive Officer of Caisse des Dépôts et Consignations, between 2007 and 2012, and chaired the Fonds Stratégique d’Investissement between 2009 and 2012. Prior to that, he was Deputy Finance Director at Crédit Agricole S.A. and a member of the Executive Committee. Before taking up that position, Augustin de Romanet served as Deputy Secretary General to the Presidency of the Republic of France, between June 2005 and October 2006, and held positions in various ministerial offices. In particular, between 2002 and 2005, he was Chief of Staff to Alain Lambert, Minister Delegate for the Budget, Deputy Chief of Staff to Francis Mer, Minister for the Economy, Finance and Industry, Chief of Staff to JeanLouis Borloo, Minister for Employment, Labor and Social Cohesion, and lastly, Deputy Chief of Staff to Prime Minister Jean-Pierre Raffarin. Awarded the Légion d’honneur in 2007, Augustin de Romanet has received a number of awards, notably “Capitalist of the Year” awarded by the Nouvel Economiste magazine in 2008 and “Financier of the Year” awarded by Minister of the Economy in 2012. Augustin de Romanet has been Chairman and Chief Executive Officer of Aéroports de Paris since 2012 and Chairman of Paris Europlace since July 2018.
French – Age: 42 – BNP Paribas, 20 avenue Georges-Pompidou, 92300 Levallois-Perret, France
Marguerite Bérard, a French citizen, is a graduate of the Institut d’Etudes Politiques de Paris, of Princeton University (Woodrow Wilson School of International and Public Affairs), and a former student at the Ecole Nationale d’Administration (ENA). She began her career in 2004 as an auditor at the French Treasury in the Inspection Générale des Finances. From 2007 to 2010, she was an advisor to the President of the French Republic on employment and social affairs. From November 2010 to May 2012, she was the Chief of Staff of the French Minister for social affairs. Then, she joined BPCE Group and was appointed Deputy Chief Executive Officer, member of the General Management Committee in charge of Strategy, Legal Affairs, the Group Company Secretary’s Office and Compliance. In May 2016, she was appointed member of the Management Board of BPCE, in charge of the Finance, Strategy, Legal Affairs and Group Company Secretary of BPCE Group. Marguerite Bérard joined the management team of BNP Paribas in January 2018. After an interim period, she is now in charge of the French retail banking and is a member of the Group Executive Committee. She is member of the Steering Committee of Institut Montaigne.
Date of first appointment: April 26, 2019 Expiration of term: 2022
French – Age: 58 – Palantir Technologies, 5 rue Charlot, 75003 Paris, France
Fabrice Brégier, a French citizen, is a graduate of the École Polytechnique and a Chief Engineer of the Corps des Mines. He began his career at the DRIRE Alsace (Ministry of Industry and Trade) before being appointed Sub-Director of Economic, International and Financial Affairs at the Ministry of Agriculture (Directorate-General for Food) in 1989. After serving as an Advisor to several French Ministers from 1989 to 1993, Fabrice Brégier was appointed Chairman of Franco-German joint ventures at Matra Défense, Director of Standoff activities at Matra BAe Dynamics, and then CEO of MBD/MBDA. Before becoming a member of the EADS Executive Committee in 2005, he was Chairman and CEO of the Eurocopter Group. Fabrice Brégier has over twenty years of experience in Aerospace and Defense. He has spent a large part of his professional career at the Airbus group, successively holding the positions of Airbus COO between 2006 and 2012, Airbus President and CEO between 2012 and 2017, and finally COO and Chairman of Airbus Commercial Aircraft between 2017 and 2018. Fabrice Brégier has been Chairman of Palantir France since October 2018.
Fiona Derhan, a French citizen, studied foreign languages at Paris-Sorbonne University where she graduated with a bachelor’s degree and then a Master of Science degree in Tourism Management. Fiona Derhan began her career in 2013 as a Personal Assistant for a tour operator manager in San José (Costa Rica). She later worked as a Personal Assistant for a music manager in Atlanta (USA), as well as for VIPs in a French concierge service. Fiona Derhan joined SCOR in 2015 as the SCOR Group Chief Information Officer’s Personal Assistant.
Member of the Compensation and Nomination Committee and Corporate Social and Societal Responsibility and Environmental Sustainability Committee
Member of the Strategic Committee, Risk Committee, Audit Committee, Compensation and Nomination Committee and Corporate and Social Responsibility and Environmental Sustainability Committee
Belgian – Age: 48 – Loyens & Loeff, 2 Avenue de Tervueren, 1040 Brussels, Belgium
Vanessa Marquette, a Belgian citizen, holds a law degree and an economic law degree from the Université Libre de Bruxelles. She also studied law at the University of Michigan Law School as well as at Davis University and Berkeley University. She has practiced as a lawyer of the Brussels Bar since 1995. She specializes in Banking Law and Financial Law and has particular expertise in the areas of Banking and Finance Law, Corporate Law, Insolvency Law and Security Interests and Private International Law. She is a partner at the business law firm Loyens & Loeff since March 2020 after having been partner at the business law firm Simont Braun from 2005 until February 2020 and after having practised law at the Brussels offices of Stibbe Simont Monahan Duhot and Freshfields Bruckhaus Deringer. Vanessa Marquette is an independent director of the Erasme Hospital. She also teaches international financial law at the Université Libre de Bruxelles.
• Chairman of the Board of Directors of Crédit Suisse Asset Management (Switzerland) Ldt (Switzerland) • Chairman of the Board of Directors of Assepro AG (Switzerland) • Director of Assura (Switzerland)
• Director of Gottex Fund Management Holdings Limited (Guernsey) • Executive Chairman of the “Wealth Management & Trust” of Rothschild & Co Group • Chairman of the Board of Directors of Rothschild & Co Bank AG (Switzerland) *
Bruno Pfister, a Swiss citizen, lawyer at the Geneva Bar and MBA graduate from UCLA Anderson School of Management, was from December 2014 to September 2019 Chairman of the Board of Directors of Rothschild & Co Bank AG. He was Vice-Chairman of the Swiss Insurance Association, Group Chief Executive Officer and Chairman of Swiss Life AG, member of the Executive Committee of Crédit Suisse Banking and Chief Financial Officer and member of the Executive Board of LGT Groupe AG.
* Companies whose shares are listed on a regulated or organized market
Date of first appointment: April 30, 2015 Expiration of term: 2023
French – Age: 61 – SCOR SE, 5 avenue Kléber, 75116 Paris, France
• Chief Executive Officer of Macif Group (France) • Chief Executive Officer of Macif Sgam (France) • Chief Executive Officer of UMG Macif Santé Prévoyance (France) • Chief Executive Officer of Macif SAM (France) • Chief Executive Officer of GIE Macif Finance Epargne (France) • Chairman and director of Foncière de Lutèce (France) • Director of Compagnie Foncière Macif (Permanent representative of Macif) (France) • Director of Macif Participations (France) • Member of the Supervisory Board of OFI Asset Management (France) • Director of OFI Holding (permanent representative of Macif) (France) • Member of the Supervisory Board of Inter Mutuelles Assistance (permanent representative of Macif) (France) • Non-voting director of Macifilia (France) • Non-voting director of Mutavie (France) • Non-voting director of Socram Banque (France) • Non-voting director of Ofivalmo Partenaires (France) • Member of the Executive Committee of Siem (France) • Member of the Steering Committee of Macifimo (France) • Ex officio member at the Board of Directors of Campus (GIE), as an observer (France) • Member of the Executive Board and Vice-Chairman of Association des Assureurs Mutualistes (AAM) (France) • Vice-Chairman and member of the Supervisory Board of Macifimo ADB, formerly GPIM (France) • Member of the Executive Board and member of the Board of Macif and Vice-Chairman of Gema (France) • Chairman of Inter Mutuelles Solutions ex Macifilia Courtage (France) • Chief Executive Officer of Macifilia (France) • Chief Executive Officer of Sferen (France) • Member of the Management Board of Macifin’ (France) • Member of the Management Board of Mutavie (France) • Director of Sferen (France) • Director of Macif Mutavie Finance (GIE) (France) • Director of Socram Banque (France) • Director of BPCE Assurances (permanent representative of Macif) (France) • Director of Ofi Asset Management (France) • Director of Ofivalmo Partenaires (permanent representative of Macif) (France) • Member of the Executive Committee of Siil (France) • Member of the Steering Committee of Sipemi (permanent representative of Macif) (France) • Director of Thémis (permanent representative of Macifilia) (France) • Director of Euresa Holding (Luxembourg) • Manager of GEIE Euresa (Belgium)
Other positions • Chief Executive Officer of Holding Malakoff Humanis (France) • Director of Quatrem (France) • Director of Auxia (France) • Director of Auxia Assistance (France) • Permanent Representative of Malakoff Humanis Prévoyance at the Board of Directors of OPPCI Vivaldi (France) • Chief Executive Officer of SGAM Malakoff Humanis (France) • Chief Executive Officer of la Caisse Mutuelle Assurance sur la Vie « CMAV » (France) • Chief Executive Officer of Malakoff Humanis Prévoyance (France) • Chief Executive Officer of Institution Nationale de Prévoyance des Représentants « INPR » (France) • Chief Executive Officer of Capreval (France) • Chief Executive Officer of Malakoff Humanis Agirc-Arrco (France) • Chief Executive Officer of Malakoff Humanis Groupement Assurantiel de Protection Sociale (France) • Chief Executive Officer of l’Association Sommitale Malakoff Humanis (France) • Chief Executive Officer of l’Association de Moyens Assurance de Personnes (France) • Chief Executive Officer of l’Association de Moyens Retraite Complémentaire (France) • Chief Executive Officer of Malakoff Humanis Innovation Santé (France) • Chief Executive Officer of l’UGM Agilis (France)Chief Executive Officer of Malakoff Humanis International Agirc-Arrco (France) • Operational Manager of Mutuelle Malakoff Humanis (France) • Operational Manager of Energie Mutuelle (France) • Operational Manager of MHN, Malakoff Humanis Nationale (France) • Director of la Fondation Malakoff Humanis Handicap (France)
Thomas Saunier, a French citizen, is a graduate of the Ecole Polytechnique, ENSAE and the French Institute of Actuaries. Actuarial Director and Director of Steering and Management Control at CNP Assurances from 2000 to 2003, he spent more than 10 years at Generali France, initially as Deputy Chief Executive Officer in charge of products, operations and information and finance systems. In 2005, he was promoted to Chief Executive Officer in charge of the individuals’ market, IT and services, before taking charge of the companies, professionals and individuals markets in 2011. Appointed CEO of the Malakoff Médéric group in an environment characterized, for all players in the social protection sector, by unprecedented challenges in the management of supplementary pensions and in the development of life and health insurance business, he took up his post within the group on June 1, 2016. Following the merger of Humanis and Malakoff Médéric groups, Thomas Saunier became Chief Executive Officer of the Malakoff Médéric Humanis group on January 1st, 2019, now known as Malakoff Humanis group.
British – Age: 51 – SCOR SE, 5 avenue Kléber, 75116 Paris, France
Claude Tendil Director Member of the Strategic Committee, Risk Committee, Compensation and Nomination Committee and Corporate and Social Responsibility and Environmental Sustainability Committee
Claude Tendil, a French citizen, began his career at the Union des Assurances de Paris (UAP) in 1972. He joined the Drouot Group in 1980 as Chief Operating Officer. He was promoted in 1987 to Chief Executive Officer, before being appointed Chairman and Chief Executive Officer of Présence Assurances, a subsidiary of the AXA Group. In 1989, he was appointed Director and Chief Executive Officer of Axa-Midi Assurances, Chief Executive Officer of AXA from 1991 to 2000, then Vice-Chairman of the Management Board of the AXA Group until November 2001. During this same period, he was also Chairman and Chief Executive Officer of the AXA Group’s French insurance and assistance companies. Claude Tendil was appointed Chairman and Chief Executive Officer of the Generali Group in France in April 2002 until October 2013, when he became the Chairman of the Board of Directors, holding this position until June 2016.
Positions that expired during the last five years • Director of Munich Re Greater China Advisory Board (China)
American and British – Age: 61 – Leaders’ Quest Ltd, 11/13 Worple Way, Richmond Upon Thames, Surrey – TW 10 6DG, United Kingdom
• Director of BNP Paribas (France)* • Director of SCOR UK (UK)** • Non-executive Member of the Board of the Department of Digital, Culture, Media and Sport of the UK Government (UK) • Director of Prudential plc (UK)*
Male67 1,546,040French No 17 years2 2021Denis KESSLER (Chairman and Chief Executive Officer)
French < 1 yearYes 20221Fabrice BRÉGIER • Member of the Strategic Committee
April 27, 2016Male60 1,159Swiss 3 yearsYes 61 1,119French 4 yearsYes 20190Jean-Marc RABY • Member of the Strategic Committee
April 27, 2017 2 yearsMalakoff Médéric Assurances, (Holding Malakoff Humanis since January 1, 2020), represented by Thomas SAUNIER
Term of office expires 74 5,526French 16 yearsNo 20211Claude TENDIL • Member of the Strategic Committee
• Member of the Crisis Management Committee 22,251 April 25, 2013Yes61 6 yearsFields WICKERMIURIN
The mandates of four of the twelve directors (not including the directors representing the employees) on the Board will expire at the end of the 2020 Annual General Meeting.
As at December 31, 2019, the skills represented on the Board of Directors were as follows: Accounting Financial markets Digital
X -XX ---Kory SORENSON X-X - -Claude TENDIL --X -X -XX -X
Thus, for several years now, SCOR has been complying with the legal requirements and those of the AFEP-MEDEF Code in terms of diversity. Indeed, in its composition, the Board of Directors of SCOR makes sure to maintain a balanced representation between men and women, as well as a balance between age and seniority of the members on the Board. It also ensures, on the basis of a skills matrix, that directors have varied and complementary experience and skills. This allows a great openness during debates and a high degree of quality in the decision-making process at the board level. Given the global dimension of the Group, a strong diversity of nationalities is also sought.
Fields Wicker-Miurin April 26, 2019 American and BritishFApril 25, 2013 Renewal
Internal Regulations of the Board of Directors The Board of Directors’ meeting held on March 31, 2004 adopted a Board Internal Charter (the “Board Internal Charter”) in order to enhance or specify the rules governing the Board. This Board Internal Charter was amended by successive decisions of the Board of Directors with the last one being dated February 26, 2020. It is available on the website of the Company (www.scor.com). The main provisions of the Board Internal Charter are provided below.
— below this threshold, the Board, based on a report of the Compensation and Nomination Committee, systematically takes into account the structure of the Company’s capital and the existence of a potential conflict of interest when evaluating independence; 9. if the person is a non-executive corporate officer, he or she cannot be considered independent if he or she receives variable compensation in cash or in the form of shares or any compensation linked to the performance of the Company or the group.
The table below presents the results of the detailed review, criterion by criterion, of the independence of each director carried out by the Board of Directors in February 2020, based on the proposal of the Compensation and Nomination Committee, with regard to the criteria stated above: NoDenis Kessler, Chairman of the Board YesNoNo NoNo YesYesNo Yes
(1) Representing Malakoff Médéric Assurances (Holding Malakoff Humanis since January 1, 2020), director.
Group; • Claude Tendil, Chairman of the Board of Directors of Generali
The Board of Directors has noted that none of the companies mentioned above have business activities with SCOR that generate revenues higher than the threshold indicated in the Internal Regulations of the Board of Directors of SCOR SE and that the business relations were not significant. During its analysis, the Board of Directors also took into account the criteria of continuity, economic dependence and the exclusivity of the business relationships. It is specified that Marguerite Bérard, member of the Executive Committee of BNP Paribas SA, is in charge of the retail banking sector in France and that there is no business relationship between SCOR and BNP Paribas SA in this area.
With the approval of the Chairman and CEO, he may represent the Company. In particular, he can answer to questions from shareholders, on behalf of the Board of Directors, on corporate governance topics. These meetings or contacts will be conducted in close coordination with the General Secretary which will be informed beforehand. He shall report on this mission to the Board of Directors.
Directors undertake to hold no more than four other corporate officer positions in listed companies, including foreign companies, outside of the Group. They are required to consult the Lead Independent Director and the Chairman of the Compensation and Nomination Committee prior to their prospective appointment date as Director, Chairman and Chief Executive Officer, Chairman of the Board of Directors, Chief Executive Officer, member of a Supervisory Board or Management Board or Chairman of an
Should there be any doubt as to the existence of a conflict of interest, Directors may consult with the Lead Independent Director, the Chairman of the Compensation and Nomination Committee or the General Secretary, who shall advise them.
2.1.3.6. Meetings of the Board of Directors The Company’s Board of Directors held nine meetings in 2019 and they lasted on average two hours and a half.
During its meetings in 2019, the main topics which were discussed were: • financial and compliance matters: review and approval of the quarterly, half-year and annual financial statements, review and approval of the half-year interim report, 2019 budget and operating plan, review of the 2018 Registration Document, annual review of the system of governance, of the Group Policies and of the Corporate Governance Manual of the Group and SCOR SE; • risk matters: quarterly review of the risk dashboard, approval of the regulatory reports (RSR and SFCR), update on Solvency II and update on the prudential developments, review of the Group internal model results, review and approval of the 2019 ORSA report, hearing of the actuarial key function holder report; • governance and human resources matters: review of the Group compensation policy and of the related recommendations of the Compensation and Nomination Committee, review and approval of stock-options and free shares allocation plans, compensation of the executive corporate officer, review of the “say on pay”, human resources briefing and outlook, assessment of the operations of the Board of Directors, annual review of the independence, fitness and properness of directors and persons effectively running the Company, composition of the Board of Directors and of its specialized Committees; • review of the corporate and social responsibility matters: annual deliberation on professional gender equality and equal pay, review and approval of the Company’s statement with regard to the UK Modern Slavery Act; • annual shareholders’ meeting: convening of the annual shareholders’ meeting and approval of the related reports, review of a draft resolution proposed by a shareholder, answer to written questions; • strategic matters: review and approval of the new Quantum Leap strategic plan; • business matters: 2019 investment strategy, demonstration of tools used by the business units; • other various topics: annual review of the related party agreements, review and approval of the modifications made to the Internal Regulations of the Board of Directors, review and approval of the merger of SCOR SE, SCOR Global P&C SE and SCOR Global Life SE, review and approval of the creation of a branch in South Africa.
Fields Wicker-Miurin 89 * Director appointed by the Shareholders’ Meeting on April 26, 2019 or director whose term of office began at the end of the Sharerholders’ Meeting on April 26, 2019. Fabrice Brégier was absent and excused to one Board of Directors meeting due to other commitments made prior to his appointment. ** Representing Malakoff Médéric Assurances (Holding Malakoff Humanis since January 1, 2020), director.
During the 2019 financial year, the Chairman of the Board of Directors participated in numerous national and international events, during which he represented the company. In May, he spoke on the subject of cyber risks at the G7 conference on cyber security, which was held at the Banque de France and which brought together experts in the field as well as high-level officials from the public and private sectors. He also spoke on the subject of climate change and its associated risks on two occasions: first, at the Geneva Association’s General Meeting held in Buenos Aires in May, which brought together 30 (re)insurance company chairmen and CEOs from all over the world, and second, at a conference held at the annual September gathering of the reinsurance industry in Monte Carlo. During the IMC (International Monetary Conference) in June, he also spoke at a round table on the refragmentation of the world, i.e. the increasing sharpening of political, international and social tensions – a key topic for a global reinsurer like SCOR. During the Investor Day held in September, he presented the Group’s new strategic plan “Quantum Leap”. During this event, he also affirmed the Group’s ambitions and specified the ways and means used by SCOR to pursue its strong value-creating strategy over the coming years. In September, the Chairman of the Board of Directors also spoke at a conference in London organized by a major investment bank, during which he detailed the fundamental principles on which SCOR's risk management is based and which enable the Group to absorb shocks and create value from the raw material of risks. In October, during SCOR’s Annual Conference, he shared with around 150 Group clients his vision of the development of insurability, as driven by the growth of the "network effect”, i.e. the intensification and multiplication of interconnections between risks, which make them increasingly serial and global. The Chairman of the Board of Directors also expressed himself on several occasions in the national and international media. In addition, he met with many of the Group’s clients, investors and shareholders.
Fields Wicker-Miurin, member of the Compensation and Nomination Committee and independent director, agreed to lead this evaluation by means of a detailed questionnaire sent to the directors and in-depth interviews with them. The questionnaire focused in particular on the organization, operation and fields of activity of the Board, as well as on the operation and work of the Committees and on the compensation of Committee and Board members.
In addition to this questionnaire, Augustin de Romanet, Lead Independent Director and Chairman of the Compensation and Nomination Committee, conducted interviews with each director in order to discuss in particular their individual contribution to the work of the Board of Directors.
The directors expressed a consistently high level of satisfaction with the overall quality and functioning of SCOR’s governance. They consider that Board meetings are effective and well organized, that Committees function efficiently and that management is responsive to suggestions from directors. The directors also consider that the information, the timing and the access to the people in charge of the issues are appropriate for the decisionmaking within the Board. They also welcomed the relevance of the agendas with respect to the Board’s missions and the Company’s current challenges, the independence of spirit of the directors and the respect of the freedom of speech.
Directors appreciated the continuous improvement approach driving the Board’s operations and the consideration given to the requests made during the Board’s previous assessment, in particular, the request to appoint to the Board a director with expertise in new technologies, following the appointment the previous year of a Chinese director. They welcomed the strengthening of the Company’s conflict of interest policy.
Directors also welcomed the nature and quality of the analysis carried out by the Corporate Social and Societal Responsibility and Environmental Sustainability Committee, which enabled social and environmental issues to be taken into account in their decisionmaking process.
Among the areas for improvement highlighted in this evaluation, directors, conscious that the ever-increasing volume of documents is linked to legislative and regulatory developments, expressed their desire that a summary of the presentations be systematically included. They also mentioned the possibility of using external experts on some training sessions in order to save management’s time.
2.1.3.8. Negative disclosures about members of the Board of Directors and the Executive Committee
As at the issuance date of the Universal Registration Document, and to SCOR’s knowledge, there are no family relationships between the directors or between a director and a member of the Executive Committee.
The Strategic Committee met on five occasions in 2019, each meeting lasting approximately two hours (including two strategic seminars).
Its work dealt with various aspects of the strategy of the Group, especially the preparation of the Strategic Plan Quantum Leap.
The average attendance rate of the Committee members was 94%. The following table states the attendance rates of the members of the Strategic Committee in 2019: Attendance rate (%)Board members
2.1.4.2. The Audit Committee The Audit Committee is composed of Kory Sorenson (Chairman), Marguerite Bérard, Vanessa Marquette, Bruno Pfister and Fields Wicker-Miurin. Each of its members is independent.
The Audit Committee has two main missions: • accounting, financial and non-financial responsibilities, including the analysis of periodic financial statements, the review of the relevance of choices and correct application of accounting standards, the review of the accounting treatment of any material transaction, the review of the scope of consolidation, the review of significant offbalance sheet commitments, the control of the selection of Statutory Auditors, the review of any accounting and financial reporting documents before they are made public. The Group audit fees for services rendered during the year are subject to a quarterly review and approval by the Audit Committee, with a specific review for the services other than audit services. The Audit Committee approves the non-core audit fees to ensure that the auditors’ independence is not impaired; Corporate governance principles, shareholders’ meetings, corporate officers, executives, employees, information required by article L. 225-37-5 of the French Commercial Code
If applicable, the Audit Committee ensures the implementation of a mechanism to prevent and detect corruption and influence peddling. It receives all of the information needed for this purpose and reports, if applicable, to the Board of Directors. The Committee may consult the Chief Financial Officer, the Head of Internal Audit, the Heads of the actuarial and compliance functions and the Statutory Auditors on these issues, including in the absence of the Chairman and CEO. It may also call upon outside experts. During the 2019 financial year, and for each meeting, it met with the Statutory Auditors and the Group Chief Financial Officer (during the review of the financial statements), in the absence of the Chairman and CEO. The review of the financial statements was completed by a presentation made by the Statutory Auditors highlighting the main results of their work and the accounting methods used, as well as by a presentation made by the Group Chief Financial Officer describing risk exposure and material off-balance sheet liabilities.
The discussions focused primarily on the following matters: • accounting and financial responsibilities: the review of the quarterly, half-year and annual financial statements, the review of the half-year interim report, the review of the 2019 budget and operating plan, the review of the Statutory Auditors’ reports, the review of the 2018 Registration Document, the review of the financial resolutions for the Annual Shareholders’ Meeting, the review of some authorizations prior to their submission to the Board of Directors; • ethical, internal control and compliance responsibilities: the review of the quarterly internal audit reports and of the 2019 internal audit plan, the annual review of the Group Policies (especially those required by Solvency II), the actuarial key function holder report, the 2019 compliance plan and the annual review of compliance activities, the annual review of related party agreements, the annual reporting of the Audit Committees of SCOR subsidiaries, the review of the main litigation files, the review of the quarterly legal and compliance dashboard.
The average attendance rate of the Committee members was 95%. The following chart states the attendance of the Audit Committee’s members in 2019: Attendance rate (%)Board members
The Committee is responsible for examining, notably based on the Own Risk and Solvency Assessment (ORSA), the major risks with which the Company is confronted, both on the assets and liabilities side, and for ensuring that tools for monitoring and controlling these risks are in place. It examines SCOR’s risks and its Enterprise Risk Management (ERM) policy. It studies the Group's strategic risks (including emerging risks) as well as the Group’s main technical and financial commitments (underwriting, reserving, market, concentration, counterparty, asset-liability management, liquidity and operating risks as well as relating to changes in prudential regulations).
The average attendance rate of the Committee Members was 93%. The following chart states the attendance of the members of the Risk Committee in 2019: Attendance rate (%)Board members
The Committee presents to the Board of directors any questions related to the compensation of the executive corporate officer, share allocation plans and stock option plans and examines proposals related to the composition, organization and functioning of the Board of Directors and its Committees. Its missions are described in the Board Internal Charter.
The Compensation and Nomination Committee met five times in 2019, each meeting lasting approximately two to three hours.
The Committee mainly discussed the following matters: • compensation matters: analysis of the votes at the Shareholders' Meeting of April 26, 2019 and the opinions expressed by the shareholders as part of the active dialogue held with them, review and evolution of the Group compensation policy, review of the shares and stock-options allocation plans, compensation of the Chairman and Chief Executive Officer, of the other members of the Executive Committee and of the 4 key function holders of SCOR SE and the Group, review of the “say on pay”, HR review and outlook, compensation of the directors and review of the cost of the governance within the Group; • governance matters: renewal of the Board of Directors of SCOR SE and review of the composition of its Committees, annual review of the independence, fitness and properness of the directors and of the persons effectively running SCOR SE, assessment of the Board and its Committees, review of the corporate manual of governance of SCOR SE and the Group, review of the amendments made to the Internal Regulations of the Board of Directors, in particular to reflect legislative, regulatory and governance developments and review of the succession plan of the key executives of the Group.
The attendance rate of the Committee members was 100%. The following chart states the attendance of the members of the Compensation and Nomination Committee in 2019: Attendance rate (%)Board members 100Augustin de Romanet, Chairman 100Vincent Foucart 100Vanessa Marquette
Its mission is to: • examine the main corporate social, societal responsibility and environmental sustainability issues faced by the Company; • examine the corporate social and societal responsibility and environmental sustainability strategy and actions plans, including commitments made by the Company in this regard, to monitor their implementation and to propose any actions in this respect; • submit to the Board of Directors any proposals designed to take the corporate social and societal responsibility and environmental sustainability issues faced by the Company into consideration when determining its business orientations; • examine the corporate social and societal responsibility and environmental sustainability related reports submitted to the Board of Directors in accordance with applicable laws and regulations, particularly the extra-financial performance declaration referred to in Article L. 225-102-1 of the French Commercial Code; • study the extra-financial ratings obtained by the Company and to define, if necessary, objectives in this area; • ensure that the executive officers implement a policy of nondiscrimination and diversity, notably with regard to the balanced representation of men and women on the governing bodies and reports to the Board of Directors.
The Corporate Social and Societal Responsibility and Environmental Sustainability Committee met four times in 2019, each meeting lasting approximately two hours.
The average attendance rate of the Committee members was 92 %. The following chart states the attendance of the members of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee in 2019: Board members Attendance rate (%)
2.1.4.6. The Crisis Management Committee The Crisis Management Committee is composed of Augustin de Romanet (Chairman), Denis Kessler, Bruno Pfister, Kory Sorenson and Fields Wicker-Miurin.
The Crisis Management Committee meets only when necessary and as many times as it deems necessary.
The Crisis Management Committee meeting met four times in 2019, each meeting lasting approximately two hours.
The Committee mainly discussed the follow-up of the criminal and civil actions brought by SCOR against Thierry Derez and Covéa following Covéa's unsolicited offer in 2018.
The average attendance rate of the Committee members was 95%. The following chart states the attendance of the members of the Crisis Management Committee in 2019: Attendance rate (%)Board members 100Augustin de Romanet, Chairman 100Denis Kessler
Kory Sorenson 75 100Fields Wicker-Miurin 2.1.4.7. Non-executive directors’ session The non-executive directors’ session involves all the directors, with the exception of the employee directors and the executive corporate officer of the Company.
Corporate governance principles, shareholders’ meetings, corporate officers, executives, employees, information required by article L. 225-37-5 of the French Commercial Code
2.1.5.1. Corporate officers At its meeting on April 18, 2002 and in compliance with Article L. 225-51-1 of the French Commercial Code and Article 16 of SCOR’s bylaws (“Executive Management”), the Board of Directors of the Company decided that the management of the Company would be carried out under its responsibility by the Chairman of the Board of Directors, with the title of Chairman and Chief Executive Officer, who may be assisted by a Deputy Chief Executive Officer.
Denis Kessler joined the Group on November 4, 2002, with the objective of turning the Company around in the face of a very difficult financial situation. The Board of Directors considered that, in order to achieve this, it was preferable to entrust him with the powers of Chairman of the Board of Directors and of Chief Executive Officer. When his term was renewed in May 2011, the Board of Directors considered that Denis Kessler had demonstrated the benefit of combining the offices of Chairman of the Board of Directors and Chief Executive Officer during the turnaround period experienced by SCOR between 2003 and 2007, and then during the economic crisis between 2007 and 2011. The Board of Directors thus felt it was in the best interests of SCOR, its shareholders and all its employees, for Denis Kessler to be reappointed as Chairman and Chief Executive Officer and to continue the development of the Group. By combining the roles of Chairman and Chief Executive Officer, the Company benefits from a faster decision-making process and strategic alignment in terms of its governance bodies. On April 27, 2017, the Shareholders’ Meeting renewed Denis Kessler’s director term for a four-year duration and the Board of Directors held on April 27, 2017 reappointed him as the Chairman and Chief Executive Officer.
The Chairman and Chief Executive Officer has executive authority to manage SCOR’s business, subject to the prior authorization of the Board of Directors or the Shareholders’ Meeting for certain decisions as required by law and by the Company’s bylaws, and subject to compliance with the French Insurance Code according to which SCOR must be effectively run by at least two persons. The Chairman and Chief Executive Officer has the authority to act on behalf of and in the name of SCOR and to represent SCOR in dealings with third parties, subject to those powers expressly reserved by law to the Board of Directors or the shareholders. The Chairman and Chief Executive Officer determines, and is responsible for, the implementation of SCOR’s goals, strategies and budgets, which are submitted to the Board of Directors.
The Board of Directors has the power to appoint and remove, at any time and with or without cause, the Chairman and Chief Executive Officer, as well as to appoint separate persons to hold the positions of Chairman of the Board (Président du Conseil d’administration) and Chief Executive Officer (Directeur Général).
Upon a proposal made by the Chairman and Chief Executive Officer, the Board of Directors may also appoint a Deputy Chief Executive Officer (Directeur Général Délégué) to assist the Chief Executive Officer in managing the business. Moreover, the Board of Directors appoints the persons effectively running SCOR SE, in compliance with the French Insurance Code.
Furthermore, in addition to the Chairman and Chief Executive Officer of SCOR SE, two other persons effectively running SCOR SE and the Group have been appointed by the Board of Directors, pursuant to the requirements of the French Insurance Code: JeanPaul Conoscente, Chief Executive Officer of SCOR Global P&C, and Paolo De Martin, Chief Executive Officer of SCOR Global Life.
Moreover, several other elements of SCOR’s governance enable it to ensure a good balance of powers.
Lastly, as per the French insurance code and to requirements of the Solvency II Directive, four key functions holders (compliance, risk management, actuarial, internal audit) have been appointed for SCOR SE and the Group. They are heard at least annually by the Board or one of its committees, and may raise any issues directly to the Board.
2.1.6. EXECUTIVE COMMITTEE The Executive Committee is composed of executives of the Company and of its subsidiaries. It is responsible for implementing the strategy defined by the Board of Directors, under the Chief Executive Officer’s authority.
Paolo De Martin Paolo De Martin, an Italian citizen, graduated from Ca’ Foscari University, Italy, with a degree in Business Economics. He subsequently spent two years in the optical business as founder and managing partner of an eyewear manufacturer. He joined General Electric Company (GE) in 1995 as a finance trainee in London. In 1997, he joined GE’s internal auditing & consulting Group, charged with assignments in multiple GE businesses in the Americas, Europe and the Asia-Pacific region. In 2001, Paolo De Martin was promoted to Executive Manager for GE Capital Europe, before joining GE Insurance Solutions as Financial Planning and Analysis Manager for Global Property and Casualty Reinsurance. In 2003, he was appointed Chief Financial Officer of GE Frankona Group before becoming Chief Financial Officer of Converium Holding AG in July 2006. In September 2007, Paolo De Martin was appointed Group Chief Financial Officer of SCOR. In January 2014, Paolo De Martin was appointed Chief Executive Officer of SCOR Global Life.
Frieder Knüpling Frieder Knüpling, a German citizen, has been Group Chief Risk Officer of SCOR since January 2014, responsible for Risk Management, Actuarial, Risk Modeling, and Prudential and Regulatory Affairs. He became a member of SCOR’s Group
Executive Committee in 2010, after having held various actuarial, finance and risk management roles at Gerling Global Re, Revios and SCOR. Frieder Knüpling holds academic degrees in Mathematics and Physics, and a PhD in Economics. He is a fellow of the Deutsche Aktuarvereinigung (DAV), a Chartered Enterprise Risk Analyst (CERA) and Chairman of the CRO Forum since December 2019.
Mark Kociancic Mark Kociancic, a dual citizen of Canada and the USA, is a graduate of the University of Toronto and holds a Bachelor of Commerce degree. He also holds a Chartered Professional Accountant (CPA) designation and a Chartered Financial Analyst (CFA) designation. Upon graduation in 1992, Mark joined Ernst & Young within its Life and P&C insurance practice and has subsequently held successively senior positions within the insurance industry with St Paul Guarantee, Avalon Risk Associates and Tokio Marine, prior to joining SCOR US as Senior Vice-President and Chief Financial Officer in May 2006. He was appointed SCOR Americas Hub Chief Financial Officer in June 2008 and was promoted to Executive Vice-President in July 2010. He was appointed Deputy Chief Financial Officer of SCOR Group in October 2012 before being appointed Group Chief Financial Officer of SCOR SE and joining the SCOR Group Executive Committee on May 15, 2013.
(3) The Americas Hub covers employees in the United States, Mexico, Brazil, Canada, Chile, Colombia and Argentina. (4) The Asia-Pacific Hub covers employees in China, Hong Kong, India, Japan, South Korea, Malaysia, Singapore, Taiwan and Australia. (5) The “Group Functions and Support” division includes the departments reporting to the CFO, CRO and COO of the Group as well as the departments directly managed by the Chairman and Chief Executive Officer. ReMark (158 employees, fully consolidated entity), MRM (4 employees, fully consolidated entity), Château Mondot SAS (19 employees, fully consolidated entity), Les Belles Perdrix de Troplong Mondot EURL (9 employees, fully consolidated entity), Telemed (41 employees), ESSOR (79 employees) and Coriolis (7 employees) are all wholly-owned subsidiaries of SCOR SE excepting MRM of which SCOR SE has 59.9% of the capital. Due to their specific activities, their business models and their organizations, they are managed independently from the Group in terms of human resources and therefore not aggregated in the Group figures.
By the end of 2019, women held about 19% of the 10% of positions with the highest responsibilities (based on the highest levels of the Partners program). The policy to build a more mixed talent pool as well as the related 2019 achievements, are described in Section 6.2.1. – The human capital as key success factor for the group.
The information referred to in Article L. 225-37-5 of the French Commercial Code is made public in the Report on corporate governance which is included in this Universal Registration Document (refer to Section 2).
2.2.1.1. Principles and rules stated for the determination of compensation and benefits in kind attributable to Mr. Denis Kessler as Chairman and Chief Executive Officer for the 2019 reporting period
2.2.1.2. Approval of the compensation items due or attributed to Mr. Denis Kessler as Chairman and Chief Executive Officer for the financial year ended December 31, 2019
In accordance with article L. 225-37-3 of the French Commercial Code, the compensation elements due or attributed to the executive corporate officer for the financial year ended December 31, 2019 are presented below. Those compensation items are compliant with the principles and rules stated for the determination of the compensation and benefits in kind attributable to Mr. Denis Kessler, Chairman and Chief Executive Officer for the 2019 reporting period as approved by the 2019 Shareholders’ Meeting.
In accordance with Article L. 225-100, II of the French Commercial Code, at the 2020 Shareholders' Meeting, the shareholders will vote on the aforementioned compensation items (fixed, variable and exceptional elements) paid or awarded to Mr. Denis Kessler in respect of the financial year ended December 31, 2019.
In accordance with the recommendations stated in the AFEPMEDEF corporate governance code (Section 24.3.) and pursuant to its implementation guide, the compensation elements due or attributed to the executive corporate officer for the financial year ended December 31, 2019 are presented below.
In accordance with the provisions of Article L. 225-100 of the French Commercial Code, the fixed, variable and exceptional items comprising the total remuneration and benefits in kind paid or allocated to the Chairman and Chief Executive Officer for the past financial year are subject to approval by the Shareholders' Meeting.
• 50% on the basis of the achievement of quantitative and qualitative personal objectives, set at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee.
In accordance with the Group compensation policy applicable to all Partners within the Group, the variable annual compensation of the Chairman and Chief Executive Officer may benefit, in the event of outperformance, from a multiplier applied to the financial objective (capped at a maximum of 130% of the target of the financial objective portion) and the personal objectives (capped at a maximum of 150% of the target of the personal objectives portion) which may increase the variable annual compensation of the Chairman and Chief Executive Officer up to a ceiling of 140% of his target variable annual compensation. Moreover, the Group policy states that, for participation and strong contribution to the success of specific strategic projects, an additional and exceptional bonus (“Exceptional Contribution Bonus” – ECB) may be granted; the ECB can reach a maximum of 25% of the target variable annual compensation of the Chairman and Chief Executive Officer. The total variable annual compensation of the Chairman and Chief Executive Officer may not exceed 165% of his target variable annual compensation of EUR 1,200,000, and consequently cannot exceed 165% of his fixed annual compensation.
The Board of Directors determined, on the proposal of the Compensation and Nomination Committee a percentage of achievement for the objectives of 90.35%.
EUR 0 No exceptional compensation was granted during the year, as in previous years.Exceptional compensation
In accordance with the authorization by the Shareholders' Meeting on April 26, 2018 in its 23rd resolution, the Board of Directors decided at its February 19, 2019 meeting, on a proposal from the Compensation and Nomination Committee at its February 19, 2019 meeting, to allocate on March 7, 2019, stock options to the Chairman and Chief Executive Officer and to the other members of the Executive Committee. On this plan, 100,000 stock options have been granted to the Chairman and Chief Executive Officer. These stock-options are 100% subject to performance conditions. The performance conditions are defined as follows and are assessed and validated annually by the Compensation and Nomination Committee: Half of the options will be exercisable from March 8, 2023, provided: (1) that the conditions set out in the plan of March 7, 2019 are met and in particular that the beneficiary remains a corporate officer of SCOR Group until March 7, 2023 inclusive, except as otherwise stated by the Plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; therefore, in case of actual misconduct as per the Code of Conduct, for instance in the event of fraud, the beneficiary will lose all of his stock options (clawback policy); (3) that the training obligation in terms of corporate social responsibility (CSR) is met; (4) that the average SCOR ROE over three years (from January 1, 2019 to December 31, 2021) is equal to the average of SCOR ROE strategic target (the “Target ROE”) over the period.
Proportion of the options that can be exercised under this criterion Ratio between the observed average ROE and the Target ROE
The other half of options will be exercisable from March 8, 2023, provided: (1) that the conditions set out in the plan of March 7, 2019 are met and in particular that the beneficiary remains a corporate officer of SCOR Group until March 7, 2023 inclusive, except as otherwise stated by the Plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; therefore, in case of actual misconduct as per the Code of Conduct, for instance in the event of fraud, the beneficiary will lose all of his stock options benefits (clawback policy); (3) that the training obligation in terms of corporate social responsibility (CSR) is met; (4) that the average solvency ratio over three years (from January 1, 2019 to December 31, 2021) is at least equal to the average of SCOR's solvency ratio target over the period (the "Target Solvency Ratio").
Aside from the mandatory conditions (1), (2) and (3), if the observed average solvency ratio (condition (4)) is lower than the “Target Solvency Ratio” *, the options will be exercisable according to the sliding scale set out in the table below: Proportion of the options that can be exercised under this criterion Difference between the average solvency ratio and the “Target Solvency Ratio”*
100%higher than or equal to 0 percentage point linear sliding scalebetween 0 and up to -35 percentage points 0%lower than or equal to -35 percentage points * If the strategic plan sets a target or "optimal" range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio.
In accordance with the authorization by the Shareholders' Meeting on April 26, 2018 in its 24th resolution, the Company's Board of Directors decided at its February 19, 2019 meeting, on a proposal from the Compensation and Nomination Committee of February 19, 2019, to grant performance shares to the Chairman and Chief Executive Officer and to the other members of the Executive Committee. On this plan, the Chairman and Chief Executive Officer was granted 125,000 performance shares.
Benefits in kind EUR 6,868 In addition to the deferred amount, an amount of EUR 111,438 was paid by the Company in 2019 with regard to social security schemes and individual health coverage
As the Company representative, the Chairman and Chief Executive Officer is granted a company car with a shared driver. The insurance, maintenance, fuel and all costs related to the driver are paid by the Company.
The Chairman and Chief Executive Officer also benefits from a health insurance policy under the terms of a contract dated September 16, 1988.
Moreover, in accordance with the decision taken by the Board of Directors on March 21, 2006, repeated on December 12, 2008, May 4, 2011 and July 30, 2014, the Chairman and Chief Executive Officer benefits from specific life insurance in an amount equivalent to three years of fixed and variable compensation; this insurance policy is taken out by the Company. To this end, an individual insurance policy has been underwritten to complement the “all causes” death or permanent disability insurance policy for senior executives, dated June 30, 1993, as renewed or renegotiated annually, and for which the latest version is compliant with the collective compulsory welfare plan, specific to SCOR, which benefits to an objective category of employees who have an annual gross base compensation equal to or exceeding three times the social security ceiling. It is specified that these individual and collective “all
Amounts or accounting valuation causes” death insurance policies are renewed or renegotiated on an annual basis so that the Chairman and Chief Executive Officer will benefit from any policies that may replace the existing ones.
This guarantee is calculated according to a reference income based on his average compensation received over the last five years within the Group considered as “traitements et salaires” under French tax laws.
No amount is payable in respect of the financial year ended
The ROE achieved in 2019 is 7.0%. The target ROE for 2019 is 800 basis points above the 5-year risk-free rate, i.e. 8.65%. The achieved ROE / target ROE ratio is therefore 80.9%. Given the decision by the Board of Directors to retroactively apply the new tiered scale for 2019 (which is systematically less advantageous than the linear scale previously used) as proposed in the remuneration policy for the 2020 financial year (see section 2.2.1.4.2.), the achievement rate for achievement of this objective is 80%.
Solvency ratio equal to or higher than the lower limit of the optimal range defined in the strategic plan
The “Vision in Action” strategic plan, launched in July 2016 for a period of three years, was executed during a period marked by many headwinds. A high frequency of catastrophes, a P&C reinsurance cycle that has only recently recovered, a persistently low interest rate environment, regulatory shocks such as the Ogden reform in the United Kingdom, the tax reform in the United States and geopolitical uncertainties are all factors that weighed on the sector's performance. In this environment, SCOR has achieved the targets of its strategic plan on a standardized basis: • average normalized ROE (1) of 876 basis points above the 5-year riskfree rate over the duration of the plan, against a target of 800 bps (average non-normalized ROE of 683 bps); • average solvency ratio of 219% over the course of the plan against a target range of 185% - 220%; • P&C: average annual premium growth of 8.0% at constant exchange rates, against a target of 5% - 8%, and average normalized net combined ratio (1) of 94.6%, against a target of 95% - 96% (average non-normalized net combined ratio of 95.8%); • Life: average annual premium growth of 5.9% at constant exchange rates, against a target of 5% - 6%, and average net technical margin
• cost ratio: average ratio of 5.0%, against a target of ~ 4.9% - 5.1%. During this period, the Group considerably extended and deepened its presence worldwide, both geographically and by sector, in targeted markets and business lines.
The Board of Directors notes that the strategic plan targets have been achieved or exceeded (however, on a standardized basis only with regard to ROE).
The “Quantum Leap” plan was presented on September 4, 2019, following approval by the Board of Directors on July 24, 2019. With this plan, SCOR pursues strong growth of around 4 to 7% per year, and sets equally weighted profitability and solvency targets that are ambitious in the current financial and economic environment: • a high return on equity, above 800 basis points over the 5-year riskfree rates over the cycle; • an optimal solvency ratio of between 185% and 220%.
This plan is also a transformational plan that aims to create the reinsurance company of tomorrow by accelerating, via an investment of EUR 250 million, SCOR’s use of new technologies – such as artificial intelligence, robots, blockchain, big data, multi-cloud and satellite imagery – to innovate, expand its product and services offering and increase its efficiency, for the benefit of its clients throughout the world. This new plan has been well received by analysts and investors • 4.5% increase in the share price between September 3 and
September 24, 2019; • recommendation to buy or hold from nearly 90% of analysts; • positive comments from analysts: “SCOR is well-placed to grow and continues to invest in the future” (Bank of America Merril Lynch), “solid continuation of the previous ViA plan” (Deutsche Bank), “unchanged profitability and solvency targets offering an attractive risk rewards in the current environment" (HSBC), "the plan is very rational laying out a path for closer cooperation with primary insurers combined with realistic financial ambitions "(Goldman Sachs).
The Board of Directors considers that the preparation and communication to the market of the “Quantum Leap” plan has been a success and that its positive reception demonstrates its alignment with the challenges of the Group and the expectations of stakeholders. The Board therefore considers that the objective has been achieved.
100%Preparation and communication to the market of a new strategic plan in line with the Group's challenges and stakeholder expectations
The IFRS17 project is currently the most complex project implemented by SCOR. Its objective is to enable the Group to comply with this standard in 2022 while using this opportunity to continue to invest heavily in its information systems for even more granular risk management.
The Board of Directors notes that the two projects are in line with the objective of compliance in 2022, while enabling the digitalization of the Group to continue. It considers that the objective has been achieved at 95%.
In 2019, the Chairman and Chief Executive Officer pursued a very active policy in favor of the fight against climate change, marked in particular by his support for the French Business Climate Pledge and his intervention during the General Assembly of the Geneva Association on the role of insurance with regard to climate, alongside the leaders of the world’s largest (re)insurers.
Under his leadership, SCOR has reached significant new milestones (see in particular Section 6.4. - Taking social and environmental issues into account in the Group's activities).
The Board of Directors notes compliance with the Group's Climate Policy as well as the momentum set in motion by the Chairman and Chief Executive Officer on this subject. It considers that the objective has been achieved at 95%.
In 2019, all employees completed at least one training course. In particular, leadership programs for high-potential employees have been rolled out both at global level, for Global Partners (Stepping Up to Leadership) and at regional level, for Associate Partners (Aspire), these regional programs having been introduced in 2019. These programs, whose participants reflect the diversity of the Group's employees, aim to create a pool of tomorrow's leaders and to strengthen transversality within the company through the development of internal networks. In terms of training, SCOR has entered a new phase with the worldwide rollout of a new training platform (Learning Management System) that gives all Group employees access to an extensive training offering (13,000 online courses and 5,000 video tutorials). With this new tool, SCOR strengthens its expertise-based culture, by enabling its employees to become agents of their own development and by allowing its best experts to share their knowledge through the creation of specific contents.
Co-optation of new recruits by employees has been encouraged, notably with the rollout of a dedicated platform in France. 16% of recruitments finalized in 2019 were filled by cooptation, compared to 12% in 2018, which translates into lower recruitment costs and better integration of new hires.
In view of these elements, the Board of Directors considered that the objective was partially achieved.
Stock options granted to the executive corporate officer by the issuer or by another company of the Group
Presence condition until March 4, 2017 and performance conditionsDenis Kessler March 4, 2015125,000
Achieved result Achievement rate 72.7%Ratio between the observed average ROE over 2015-2017 and the average target ROE 70%
Furthermore, the Chairman and Chief Executive Officer acquired performance shares in 2017, but they became available only in 2019. These performance shares were granted as part of the plan of March 4, 2015 and the LTIP plan of September 1, 2011.
SCOR Global Life’s technical margin ≥3% on average in 2015 and 2016 7.1% 100%
Difference between the average solvency ratio over 2011-2016 and the average Target Solvency Ratio 100%+34 percentage points
Average compensation paid or granted on a full-time equivalent basis to the SCOR SE and branches* employees other than the executive corporate officer 128,044127,704
Median compensation paid or granted on a full-time equivalent basis to the SCOR SE and branches* employees other than the executive corporate officer 75,439 14,78913,826Gross written premium (in million EUR) 16,34115,25813,421
* Following the nomenclature of SCOR SE and branches as of December 31, 2019.
Except the Chairman and Chief Executive Officer and the employee directors, members of the Board are not entitled to Company stock option plans or free share allocation plans, nor to any variable compensation other than the compensation attributable to their attendance to meetings.
Compensation of the directors The compensation paid to directors in 2019 and 2018 is broken down as follows: 20182019In EUR
Mr. Vincent Foucart (3) 48,00076,000 129,000138,000Mrs. Vanessa Marquette 150,000165,000Mr. Bruno Pfister 74,000Mr. Jean-Marc Raby 71,000 140,000Mr. Augustin de Romanet 125,000 58,000Malakoff Médéric Assurances, represented by Mr. Thomas Saunier 58,000
(1) Pursuant to the decision made by the Board of Directors on March 21, 2006, the Chairman and Chief Executive Officer receives compensation along with the other members of the Board of Directors of the Company, based on the same conditions. (2) Director appointed by the Shareholders’ Meeting on April 26, 2019 or director whose term of office began at the end of the Shareholders' Meeting on
Moreover, some of the directors in place are, or have been, members of the Boards of Directors of subsidiaries of the Group and they have received compensation for 2019 and/or 2018 as follows: SCOR UK Company Ltd
Number of shares as at 12/31/2019Directors and Officers 1,546,040Mr. Denis Kessler Mrs. Marguerite Bérard 1,469 266Mr. Fabrice Brégier 75Mrs. Fiona Derhan 34,610Mr. Vincent Foucart Mrs. Vanessa Marquette 1,469 1,159Mr. Bruno Pfister 1,119Mr. Jean-Marc Raby 1,469Mr. Augustin de Romanet
This compensation policy is based on the principles described below, which are consistent with the principles set forth in the overall compensation policy in force within the SCOR Group. This policy is rigorously applied by the Compensation and Nominations Committee in the context of its work.
The compensation policy takes into account the social interest of the Company and its subsidiaries and contributes to the business strategy as well as to the sustainability of the Company by allocating, for the directors, a variable part subject to effective presence at the meetings of the Board of directors or of the committees of the Board of Directors, and for the Chairman and Chief Executive Officer, a variable compensation subject to the achievement of performance objectives. The compensation policy encourages the active contribution of corporate officers to the Group's business, by rewarding either their effective participation in meetings of the Board of Directors and its committees, or their direct contribution to the Group's performance.
Every year, the conditions of compensation for the corporate officers are made public through the documents released for the Shareholders’ Meeting.
Finally, the employee directors benefit from an employment contract under which they receive remuneration in accordance with the principles of the Group's compensation policy. They also fall under the policy presented above as part of their mandate as employee director.
For information relating to the term of office of Mr. Denis Kessler and its conditions of dismissal, please refer to Section 2.1.5.1. – Corporate Officers.
As part of the preparation of the compensation policy for the Chairman and Chief Executive Officer for the 2020 financial year, the Compensation and Nomination Committee and the Board of Directors paid particular attention to taking into account the votes of the shareholders on the remuneration policy during the General Meeting of April 26, 2019 as well as the opinions expressed by certain shareholders as part of the active shareholder dialogue with them.
During their deliberations on his personal situation, in which the Chairman and Chief Executive Officer does not take part, the Compensation and Nomination Committee and the Board of Directors ensure that the compensation policy of the Chairman and Chief Executive Officer is in line with the social interest of the Company, contributes to its sustainability and is part of its business strategy.
Exhaustiveness Each element composing the compensation and benefits is analyzed individually and then collectively, in order to reach the appropriate balance between fixed and variable, individual and collective, short- and long-term components, including the benefit at the end of the mandate resulting from the supplementary pension scheme.
The compensation policy for the Chairman and Chief Executive Officer is aligned with the compensation policy applied to employees. For all Partners of the Group around the world, the compensation items follow a similar structure and include several dimensions: a fixed part and a variable part, an immediately paid part and a deferred part, an individual part and a collective part.
The Group's compensation policy favors performance shares and stock options over cash compensation, which distinguishes SCOR from most of its peers. This policy allows maximum alignment with the interests of shareholders, during the performance measurement period (three or six years) and beyond through the holding of SCOR shares over time. In particular, it encourages longterm performance. It also allows costs to be kept under control, since taxation and employer charges on performance shares are, in France, lower than those on cash compensation.
The performance conditions, both for the collective portion of the annual variable compensation and for the performance shares and stock options, are perfectly aligned with SCOR's strategic objectives: profitability and solvency.
The performance condition based on solvency, consistent with the Group's risk appetite, notably avoids encouraging excessive risktaking.
The individual objectives of the Chairman and Chief Executive Officer are proposed each year by the Compensation and Nomination Committee and set by the Board of Directors with the ambition of guaranteeing the resilience of the company and the creation of value for shareholders. Individual objectives are assigned to the Chairman and Chief Executive Officer in terms of corporate social responsibility.
Fixed compensation Determination The fixed compensation of the Chairman and Chief Executive Officer, payable in 12 monthly installments, is determined on the basis of: • the level and complexity of his responsibilities; • his career path, professional experience and expertise; • market analysis with regard to comparable functions (external competitiveness); • consistency with regard to other Group functions (internal equality).
Evolution The Board of Directors has decided that the fixed compensation of the Chairman and Chief Executive Officer may only evolve in the event of a significant development in his scope of responsibility, or a discrepancy in terms of his positioning on the market. In these specific situations, any adjustment to the fixed compensation, along with the motives behind such adjustment, will be made public.
For the financial year 2019, the Board of Directors decided at its February 26, 2020 meeting that the fixed compensation would remain at EUR 1,200,000.
Variable annual compensation Objective This variable compensation is designed to encourage the Chairman and Chief Executive Officer to achieve the annual performance objectives fixed by the Board of Directors on the proposal of the Compensation and Nomination Committee, in line with the Company’s strategy.
This variable annual compensation is determined as follows: • 50% on the basis of the achievement of financial objectives, defined at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee; and
The personal objectives are essentially defined on the basis of the following categories: • Solvency; • Strategy; • Risk management; • Corporate Social Responsibility.
Performance thresholds The target variable annual compensation represents 100% of the fixed compensation.
In accordance with the Group compensation policy applicable to all Partners within the Group, the variable annual compensation of the Chairman and Chief Executive Officer may benefit, in the event of outperformance, from a multiplier applied to financial objectives (capped at a maximum of 130% of the target of financial objectives portion) and personal objectives (capped at a maximum of 150% of the target of the personal objectives portion) which may increase the variable annual compensation of the Chairman and Chief Executive Officer up to a ceiling of 140% of his variable annual target compensation.
In order to take into account the most recent shareholders votes on compensation policy as well as the opinions expressed by certain shareholders, the Board of Directors has decided to make the calculation of the portion of annual variable compensation relating to the financial objective more demanding, and to pay it in accordance with the table below: Proportion of the target paidRatio between the observed ROE and the Target ROE
It should be noted that this method of calculation is systematically more demanding than that provided for in the compensation policy applicable to the Group's Partners, which provides for a linear payment equal to the ratio observed ROE / target ROE, with a floor at 30% and a ceiling at 130%. It is this method of calculation which has until now also been applied to the Chairman and Chief Executive Officer.
Moreover, the Group policy states that, for participation in and strong contribution to the success of specific strategic projects, an additional bonus (“Exceptional Contribution Bonus” - ECB) may be granted; the ECB can reach a maximum of 25% of the target variable annual compensation of the Chairman and Chief Executive Officer.
Payment conditions The variable compensation for year “Y” is paid during the year “Y+1”. Applying the applicable regulatory provision, the payment of the variable annual compensation is subject to the approval of the Shareholders’ Meeting.
Exceptional compensation No exceptional remuneration of this sort has been paid by the Company over the past few years.
Long-term variable compensation The Board of Directors considers that long-term variable compensation, which is a significant component of the remuneration of all Group Partners (around 25% of the workforce), is particularly well suited to the function of Chairman and Chief Executive Officer, given the expected level of his direct contribution to the long-term, overall performance of the Company. This compensation policy favors stock options and performance shares over variable cash compensation, thereby promoting a strong alignment of the interests of beneficiaries with those of shareholders, both during the performance measurement period and beyond, through holding of those shares.
At its February 26, 2020 meeting, the Board of Directors decided that the Chairman and Chief Executive Officer would be granted a maximum of 125,000 performance shares and 100,000 stock options in 2020.
The performance shares would require a vesting period of three years after the grant date and would be subject to performance conditions over three calendar years, i.e. 2020, 2021 and 2022 for the plans granted in 2020.
For 50% of the allocation: • Achievement over the period used to measure the performance conditions (three years), of a level of average return on equity (“ROE”) equal to the average of SCOR’s strategic target ROE for the period (the “Target ROE”).
In any case, if the average ROE is lower than 5%, the portion of shares definitively acquired / the portion of stock options that could be exercised based on this criterion would be at 0%.
For the remaining 50%: • Achievement, during the period used to measure the performance criteria (three years), of an average solvency ratio that is at least equal to the average of SCOR’s strategic target solvency ratio over the period (the “Target Solvency Ratio”)*.
In no case the application of these performance conditions may lead to an acquisition of more than 100% of the original grant.
In addition, notwithstanding the total or partial achievement of the two conditions described above, the definitive acquisition of shares and the right to exercise the stock-options would be subject, in any event, to strict compliance by all the beneficiaries with the Group’s ethical principles as set out in the Group’s code of conduct (the “Group Code of Conduct”). The Group Code of Conduct covers mandatory aspects of corporate responsibility, including: integrity, data protection and privacy protection, combating corruption, strict compliance with sanctions and embargos, prevention of money laundering, transparency, promoting equal opportunities in all areas of employment, encouraging the notification of ethical issues via an alerts procedure, together with the promotion of and respect for the principles of the United Nations Global Compact. In the event of a breach of the Code of Conduct, for instance in the event of fraud, no shares will be definitively acquired, and no stock options could be exercised (claw back policy).
In order to take into account the most recent shareholders votes on compensation policy as well as the opinions expressed by certain shareholders, the Board of Directors, on the proposal of the Compensation and Nomination Committee, decided to abolish the full waiver of the condition of presence in the event of forced departure for reasons other than misconduct or insufficient performance, and to apply a pro rata measure from now on (see "Severance Pay" below).
Holding shares The Board of Directors has decided that the Chairman and Chief Executive Officer is required to hold as registered shares at least 10% of the shares resulting from the exercise of stock options granted and at least 10% of the performance shares, during the entire duration of his mandate.
Moreover, the Chairman and Chief Executive Officer has made a formal commitment not to use hedging instruments on the stock options and/or performance shares that have been granted to him, for the entire duration of his mandate.
Severance Pay Since 2011, the Chairman and Chief Executive Officer benefits from a severance pay scheme that was last reviewed by the Board of Directors at its meeting of February 21, 2018 and approved by the Combined Shareholders' Meeting of April 26, 2018 in its 5th resolution.
Moreover, in the cases referred to in paragraphs (ii) and (iii) above, and excluding the case referred to in paragraph (i), the rights to the performance shares and options that would have been granted to him before his departure would be maintained on a pro rata temporis basis of his presence within the Group during the acquisition period while remaining subject, in their entirety, to the performance conditions of each of the plans.
This rule, which is more restrictive than the one approved by the Combined General Meeting of April 26, 2018, was decided by the Board of Directors in order to take into account the most recent shareholder votes on compensation policy as well as the opinions expressed by certain shareholders.
The performance condition (C_n), approved by the Board of Directors, upon the recommendation of the Compensation and Nomination Committee, will be met if both criteria below are fulfilled: (A) SCOR's average return on equity "ROE" for the three financial years preceding the date of departure of the Chief Executive Officer exceeds 50% of the average of the strategic objective of ROE (defined in the strategic plan) of SCOR calculated on the same period (the "Target ROE"); (B) the average solvency ratio of SCOR for the three financial years preceding the date of departure of the Chief Executive Officer exceeds the average of the strategic solvency ratio target (defined in the strategic plan) of SCOR calculated over the same period (the "Target Solvency Ratio"); it being specified that in the event that the strategic plan sets a target or "optimal" range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio.
Recruitment The Board of Directors has decided that, in the event of the nomination of a new CEO, the conditions of his/her severance pay will not be more favorable than those currently in force.
Supplementary pension plan Since he joined the Group in 2020, and like all the Group’s senior executives based in France and employed by the Group as at June 30, 2008, the Chairman and Chief Executive Officer is entitled to a guaranteed pension plan of 50% of his reference income, less any pension benefits acquired under other collective and mandatory pension schemes. Moreover, this amount may under no circumstances exceed 45% of the benchmark compensation, pursuant to the AFEP-MEDEF Corporate Governance Code. It should be noted that, given his seniority within the Company, the Chairman and Chief Executive Officer has reached the ceiling of 45% set by the plan. Consequently, the legal provision which limits the annual increase in potential rights to 3% of the compensation of the beneficiary has no practical implications in his case.
This plan was approved by the Board of Directors at its meeting of February 21, 2018 and by the Combined Shareholders' Meeting of April 26, 2018 in its 4th resolution.
Deputy Chief Executive Officer In the event of the appointment of one or more Deputy Chief Executive Officers (Directeurs Généraux Délégués), the remuneration components, principles and criteria set out in the Compensation Policy and the benefits granted to the Chairman and Chief Executive Officer would also apply to them. It would be the responsibility of the Board of Directors, on the recommendation of the Compensation and Nomination Committee, to adapt the objectives, performance levels, parameters and structure, bearing in mind that the target amounts expressed as percentages of the fixed compensation may not be higher than those of the Chairman and Chief Executive Officer.
Non-Executive Chairman In the event of the appointment of a Non-Executive Chairman, the compensation principles set out in the Compensation Policy granted to the Chairman and Chief Executive Officer would be used as a reference. It would be the responsibility of the Board of Directors, on the recommendation of the Compensation and Nomination Committee, to adapt the structure to align it with market practices and the recommendations of the AFEP-MEDEF Code (Article 24.2). It is mentioned in particular that the NonExecutive Chairman may not be awarded variable compensation, performance shares or stock options.
2.2.2.1. Principles and rules stated for the determination of compensation and benefits in kind for the Executive Committee members (other than the Chairman and Chief Executive Officer)
Governance The structure of the compensation of Executive Committee members is mainly composed of cash compensation, including a fixed part and an annual variable part, as well as variable long-term compensation in the form of stock-options and performance shares.
The Compensation and Nomination Committee is informed about the compensation policy of the members of the Executive Committee and proposes to the Board of Directors the conditions and the amount of the stock-options and performance shares programs granted to the members of the Executive Committee.
The variable portion of the compensation depends on the achievement of the Group’s return on equity (ROE) objective, and on the achievement of individual objectives.
If within a 12 month period following a change of control, a member of the Executive Committee were dismissed (except for serious or gross misconduct) or decided to resign, he/she would benefit from an indemnity equal to the sum of fixed and variable compensation and non-exceptional cash benefits paid by the Group during the two years preceding his/her departure. However this indemnity shall not be payable if SCOR’s average solvency ratio over the three financial years preceding the date of departure is less than SCOR’s strategic solvency ratio target average (defined in the strategic plan), calculated over the same period (the “Target Solvency Ratio”) (it being specified that, if the strategic plan defines a target or “optimum” range, the lower end of this range shall be considered the Target Solvency Ratio for the purposes of the calculation). The concept of “change of control” referred to above includes any significant capitalistic change in SCOR, including, inter alia, one that may lead to a change in the composition of the Board of Directors or a change in the Chief Executive Officer of SCOR. Moreover, the rights to the performance shares and options granted before the departure would be maintained whilst remaining subject, in their entirety, to the performance conditions of each of the plans.
For Executive Committee members under French contracts and hired before June 30, 2008 or under a Swiss contract, the amount of the additional pension guaranteed by the Group varies from 5% to 50% (with a maximum growth of 5% per year) of the average compensation over the last five years, depending on seniority acquired in the Group at retirement, less any pension benefits acquired under other collective and mandatory pension schemes. Moreover, this amount may under no circumstances exceed 45% of the average compensation over the last five years.
2.2.2.2. Compensation of the Executive Committee members (other than the Chairman and Chief Executive Officer) for the financial year ended December 31, 2019
The following table presents the aggregate gross compensation in respect of financial years 2019, 2018 and 2017 due and paid to the members of the Executive Committee (including and excluding the executive corporate officer): Amount paidAmount dueIn EUR Amount dueAmount paid Amount dueAmount paid
(1) Executive Committee members include Laurent Rousseau and Brona Magee since 2018. Benjamin Gentsch and Simon Pearson left the Executive Committee in 2018. Executive Committee members include Jean-Paul Conoscente since 2019. Victor Peignet left the Executive Committee in 2019.
For information on stock options and performance shares held by the members of the Executive Committee, see Section 2.2.3. – Stock options and performance shares.
Mark Kociancic 03/18/2010 to03/19/2014 -03/18/20207,500 7,50018.40 to 13,000-03/23/201213,000 03/24/201620.17 03/23/2022 31.58 03/10/2026to --03/10/201650,000 03/11/2020 03/10/2017 to03/11/2021 -03/10/202760,000 -33.78 to --03/07/201948,000 03/08/202338.66 03/07/2029
Jean-Paul Conoscente 5,000-03/23/2009 to 5,0001,00003/18/20106,000 03/19/201418.40 03/18/2020 to --12/01/20172,250 12/02/202134.75 12/01/2027 3,294 12/23/202240.81 12/22/2028to --12/22/2018 -38.6603/07/2019 to03/08/2023 -03/07/202940,000 to
Laurent Rousseau 7,500-10/12/2010 to 4,000-03/22/20114,000 03/23/201519.71 03/22/2021 03/24/2016 -03/23/20224,000 4,00020.1703/23/2012 to 4,00022.2503/21/2013 to03/22/2017 -03/21/20234,000 03/10/2016 to03/11/2020 -03/10/20263,750 -31.58 to --12/22/201825,026 12/23/202240.81 12/22/2028 32,000 03/08/202338.66 03/07/2029to --03/07/2019 4,500 03/21/201929.98 03/20/2025to
The annual reports published by the company on previous years show the information related to the plans for which the exercise period ended before 2019.
Paolo De Martin 45,60048,000 1,651,6322011-2019 Long Term Incentive Plan 36.22 09/02/2019 2013-2021 Long Term Incentive Plan - 03/06/2021--48,000 2019-2025 Long Term Incentive Plan -- 02/20/2025-30,000
Brona Magee -6,0002014-2022 Long Term Incentive Plan - -2017-2023 Long Term Incentive Plan (1) --1,500 02/12/2023 2019-2025 Long Term Incentive Plan - 02/20/2025-20,000 -
• of which number of potential new shares from outstanding free share plans (free shares allocated but not vested) (1)
0• of which number of potential new shares from outstanding warrants
• of which potential shares from other securities convertible or redeemable into new shares (2)
(1) The free share allocation plans currently in force only allocate existing shares. (2) 19,198,044 shares underlying the warrants issued on December 16, 2016 under the contingent capital facility with an exercise period starting on January 1, 2017 and expiring on May 1, 2020 and which coverage period expired on December 31, 2019, and 18,700,051 shares underlying the warrants issued on December 3, 2019 under the contingent capital facility with an exercise period starting on January 1, 2020 and expiring on May 1, 2023.
If, despite the absence of the dilutive effect mentioned above, free shares were taken into account in the calculation of the potential volume of new shares from outstanding share-based compensation plans and unused part of the authorizations, the fully diluted share capital would stand at 237,013,514 on December 31, 2019.
See Section 4.6. – Notes to the consolidated financial statements, Note 14. – Employee benefits and other provisions and Appendix C – 5 – Notes to the corporate financial statements, Section 5.3.6. – Employee share ownership plans.
Stock option plans Pursuant to provisions of Article L. 225-184 of the French Commercial Code, information provided in this section constitutes the special report of the Board of Directors on the allocation of stock options in order to inform the Shareholders’ Meeting of transactions completed under the provisions of Articles L. 225-177 to L. 225-186-1 of the same code.
On April 26, 2019, the Shareholders’ Meeting authorized the Company's Board of Directors, in its 23rd resolution, under the provisions of Articles L. 225-177 to L. 225-186-1 of the Commercial Code, upon proposal of the Compensation and Nomination Committee, on one or more occasions, to grant employees of the Company and related companies or groups in terms of Article L. 225-180 of the Commercial Code, as well as the executive corporate officer, options giving the right to the subscription of new shares of the Company to be issued to increase the capital, as well as options giving the right to purchase shares of the Company repurchased by the Company as authorized by the law and within the limits of a number of options giving right to a maximum of one million five hundred thousand (1,500,000) shares. This authorization was given for a period of 24 months from April 26, 2019 and cancelled and replaced, for the unused portion thereof, the previous authorization of April 26, 2018.
Those options can be exercised at the earliest four years after the grant date, if the presence condition (four years) is respected. The exercise price is calculated without a discount, based on the weighted average opening price of SCOR’s shares on Euronext Paris over the 20 trading days preceding the grant date. The stock options can be exercised on one or more occasions from the beginning of the exercise period on March 8, 2023 until March 7, 2029 inclusive. After this date, the exercise right shall expire.
Half of the options will be exercisable provided that SCOR’s average return on equity “ROE” over three years (from January 1, 2019 to December 31, 2021) is equal to SCOR's average strategic ROE target (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the stock options will be exercisable according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the options that can be exercised under this criterion 150%From 125%
In no case may the application of these performance conditions lead to an exercisability of more than 100% of the original grant.
All the options awarded are subject to the satisfaction of performance conditions (for the description of the performance conditions, refer to the section related to March 7, 2019 stock option plan).
Stock option plans currently in force within the Group The options granted since the financial year ended December 31, 2005 are stock subscription option plans.
The exercise of stock options allocated since 2008 is subject, as applicable, to the satisfaction of performance conditions. Thus, half of the options awarded under the March 23, 2009 plan and all the options awarded since the March 18, 2010 plan are subject to performance conditions. All the options allocated since the March 23, 2009 plan to the Chairman and Chief Executive Officer are subject to the satisfaction of performance conditions.
On April 26, 2019, the Shareholders’ Meeting of the Company, in its 24th resolution, authorized the Company’s Board of Directors, under the provisions of Articles L. 225-197-1 to L. 225-197-6 of the French Commercial Code, to grant, upon a proposal of the Compensation and Nomination Committee, on one or more occasions, in favor of employees of the Company and of companies or groups affiliated with it pursuant to Article L. 225197 -2 of the French Commercial Code, as well as in favor of the corporate officers as defined under Article L. 225-197-1-II of the French Commercial Code, free allocations of existing ordinary shares of the Company and resolved that the Company's Board of Directors would determine the identity of the beneficiaries of the allocation as well as the rights and conditions attached to the conditional entitlement to receive the shares.
Moreover, these resolutions set forth that each performance share allocation should have a neutral impact in terms of dilution. To
achieve this, performance share allocation plans have to be covered through the allocation of existing shares taken from the treasury shares held by the Company under its share buy-back program, and not via the creation of new shares. Thus, there is no capital dilution related to the grant of performance shares.
February 19, 2019 performance shares plan Pursuant to a decision taken by the Board of Directors on February 19, 2019, following a proposal from the Compensation and Nominations Committee at its February 19, 2019 meeting in accordance ,with the authorization granted to it by the Combined Shareholders' Meeting of April 26, 2018, 125,000 performance shares were granted to the Chairman and Chief Executive Officer and 410,000 performance shares were granted to other members of the Executive committee.
All the shares awarded to the Chairman and Chief Executive and to the Executive Committee members will be vested provided: (1) that the conditions set out in the February 19, 2019 Plan are met and in particular that the beneficiary continuously remains an employee or a corporate officer of the SCOR Group until February 19, 2022 inclusive, except as otherwise provided by the Plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met in case of completion of a SCOR group e-learning course on CSRrelated topics and if the corresponding test has been passed.
October 23, 2019 performance shares plan Pursuant to a decision taken by the Board of Directors on October 23, 2019 following a proposal from the Compensation and Nominations Committee at its October 23, 2019 meeting, in accordance with the authorization granted to it by the Combined Shareholders’ Meeting of April 26, 2019, 890,800 performance shares were awarded to Partners and specific Non Partners employees of the Group (818 employees).
The provisions of the plan provide for a vesting period of three years for all beneficiaries, and vesting conditions similar to those of the February 19, 2019 performance shares plan.
All the shares awarded to Executive Global Partners and Senior Global Partners, and half of the shares awarded to other Partners (below Senior Global Partners) and to the specific Non-Partners are subject to the satisfaction of performance conditions. The performance conditions are identical to those of the February 19, 2019 performance shares plan. However, it should be noted that the outperformance of the ROE criterion cannot offset underperformance of the solvency criterion.
All the shares awarded will be vested provided: (1) that the conditions set out in the February 19, 2019 Plan are met and in particular that the beneficiary continuously remains an employee or a corporate officer of the SCOR Group until February 19, 2025 inclusive, except as otherwise provided by the Plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met in case of completion of a SCOR group e-learning course on CSRrelated topics and if the corresponding test has been passed.
In no case may the application of these performance conditions lead to an acquisition of more than 100% of the original grant.
The provisions of the plan provide for a vesting period of six years for all beneficiaries, and vesting conditions similar to those of the February 19, 2019 performance shares plan.
Achieved resultPerformance condition Achievement rate 89.9%Ratio between the observed average ROE over 2013-2018 and the target ROE 90%
The plans for which shares have finally vested and for which the holding period ended before December 31, 2018, are not presented below.
See also Section 4.6. – Notes to the consolidated financial statements, Note 16 – Stock options and share allocations.
Employee savings plan The employees with a French work contract (excluding corporate officers) may invest in the employee savings plan. An agreement specifies the principle, financing, and conditions of the plan. The employee savings plan has five mutual investment funds, one of which is entirely dedicated to SCOR employees. An employer’s contribution is provided for on two funds. Sums may be transferred into the funds in several different ways: sums received from profitsharing plans or any other voluntary contributions.
On April 26, 2019, the Shareholders’ Meeting of the Company, in its 25th resolution, delegated its authority to the Company’s Board of Directors in order to increase the share capital by issuing shares reserved for employees of the Company and of French and foreign companies affiliated with it pursuant to Article L. 225-180 of the French Commercial Code, who are participants in savings plans and/or mutual funds. This new authorization replaces the authorization granted by the Shareholders’ Meeting of April 27, 2018.
2.2.4. SUMMARY OF TRANSACTIONS IN SECURITIES BY PERSONS DISCHARGING MANAGERIAL RESPONSIBILITIES AND PERSONS CLOSELY ASSOCIATED PURSUANT TO ARTICLE L. 621-18-2 OF THE FRENCH MONETARY AND FINANCIAL CODE
Operations made in 2019 for a greater amount than EUR 20,000
Acquisition of shares for a total amount of EUR 172,045 Sale of shares for a total amount of EUR 336,818Mr. Jean-Paul Conoscente
Acquisition of shares for a total amount of EUR 3,808,338Mr. Victor Peignet
(3) Overall number of shares held by employees (including performance shares granted prior to the publication of Law No. 2015-990 of August 6, 2015). (4) As at December 31, 2019, employee shareholdings, as defined in Article L. 225-102 of the French Commercial Code, amount to 1.29% of the capital. (5) On January 6, 2020, Allianz Global Investors GmbH declared to have exceeded the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,371,027 shares or 5.01% of the capital and 9,371,027 voting rights or 5.01% of the voting rights in SCOR SE. On January 23, 2020, Allianz Global Investors GmbH declared that its shareholding fell below the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,275,061 shares or 4.96% of the capital and 9,275,061 voting rights or 4.96% of the voting rights in SCOR SE.
On February 14, 2019, Allianz Global Investors GmbH declared to have exceeded the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,681,499 shares or 5.01% of the capital and 9,681,499 voting rights or 5.01% of the voting rights in SCOR SE.
On April 12, 2019, Allianz Global Investors GmbH declared that it went below the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,650,753 shares or 4.99% of the capital and 9,650,753 voting rights or 4.99% of the voting rights in SCOR SE.
On April 17, 2019, Allianz Global Investors GmbH declared to have exceeded the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,694,112 shares or 5.01% of the capital and 9,694,112 voting rights or 5.01% of the voting rights in SCOR SE.
On November 6, 2019, Allianz Global Investors GmbH declared that it went below the registered threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,323,203 shares or 4.99% of the capital and 9,323,203 voting rights or 4.99% of the voting rights in SCOR SE.
2.3.1.2. Statement as to the absence of differences between the voting rights of various shareholders
Since January 3, 2009 and the completion of the Company’s reverse stock split, no further shares with a par value of EUR 0.78769723 are in existence and each share with a par value of EUR 7.8769723 entitles the holder to one vote subject to the applicable legal provisions.
Changes in the share capital The table below provides for the evolution of SCOR SE’s share capital since the beginning of the financial year 2016: Date of operation
672,638 1,512,224,741.93Situation on according to the decision of the Board of Directors on 5,298,350.89April 27, 2016Reduction of the share capital by cancellation of self-owned shares to neutralize the dilutive effect resulting from the exercise of stock-options 191,980,4577.8769723 1,516,589,466.80Situation on December 31, acknowledged by the Board of Directors on February 21,
Directors on February 21, 1,510,864,057.98Situation on April 26, according to the decision of the Board of Directors on April 26,
• April 25,2013 1,520,931,435.11Situation on December acknowledge d by the Board of
Directors on February 19, 7.87697236,545,416 1,469,373,374.58Situation on April 26, according to the decision of the Board of Directors on April 26, 51,558,060.53April 26, 2019Reduction of the share capital by cancellation of self-owned shares (i) in the framework of the share buy back program of stock shares for up to 200 M€ and (ii) to neutralize the dilutive effect resulting from the exercise of stock-options 186,540,376 4,010,4427.8769723Increase of the share capital resulting from the exercise of stock-options as from January 1 to 31 December 2019 187,049,5111,473,383,816.88Situation on December acknowledge d by the Board of
Given the exercise of 89,350 options for the subscription of shares since January 1, 2020, on the date of the Universal Registration Document, SCOR SE’s existing share capital amounts to EUR 1,474,087,624.36 divided into 187,138,861 shares with a nominal value of EUR 7.8769723 each.
Stock option plans 11/25/20137,00011/25/2009 7,0007,000 11/25/2019 10/12/2010 6,8008,500 10/13/202010/12/20146,800 09/01/201551,00009/01/2011 51,00062,000 09/02/2021 03/21/2013 394,500555,500 03/22/202303/21/2017396,500 11/21/2017-11/21/2013 -5,000 11/22/2023 12/01/2014 2,2506,000 12/02/202412/01/20182,250 12/19/20193,75012/18/2015 3,7503,750 12/19/2025 12/01/2016 750750 12/02/202612/01/2020750 12/02/2021140,69412/01/2017 140,694145,410 12/03/2027 12/22/2018 195,670195,670 12/23/202812/23/2022198,088 10/25/2023-10/23/2019 148,140148,140 10/25/2029
See paragraph of this Section 2.3.6.1. – Amount of convertible securities, exchangeable securities or securities with subscription warrants for a description of the warrants issued.
DELEGATIONS OF AUTHORITY GRANTED BY THE EXTRAORDINARY SHAREHOLDERS' MEETING OF APRIL 26, 2019 13th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding upon the incorporation of profits, reserves or premiums into the share capital)
25,390,466 shares 26 months 25,390,466 shares 14th 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 the capital or giving entitlement to debt instruments, with pre-emptive subscription rights) (1)
77,234,316 shares77,234,316 shares 26 months 19,308,579 shares 26 months 15th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding on the issuance, in the context of a public offering, of shares and/or of securities granting access to the capital or giving entitlement to debt instruments, without pre-emptive subscription rights) (1)
19,308,579 shares 26 months 19,308,579 shares 16th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding on the issuance, in the context of an offer referred to in paragraph II of Article L. 411-2 of the French Monetary and Financial Code, of shares and/or of securities granting access to the capital or entitling the holder to debt instruments, without pre-emptive subscription rights) (1)
19,308,579 shares 19,308,579 shares 26 months 17th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding on the issuance of shares and/or securities granting access to the capital or entitling the holder to debt instruments, as compensation for shares contributed to the Company in the context of any public exchange offer launched by the Company, without pre-emptive subscription rights) (1)
19,308,579 shares 26 months 19,308,579 shares 20th resolution (Delegation of authority granted to the Board of Directors for the purpose of issuing warrants for the issuance of ordinary shares of the Company, with cancellation of shareholders’ preferential subscription rights to the benefit of one or several investment services providers authorized to provide underwriting investment services) (1)
October 25, 25th resolution (Delegation of authority granted to the Board of Directors in order to issue shares reserved for the members of savings plans (plans d’épargne), without pre-emptive subscription rights) (1)
AUTHORIZATIONS GRANTED BY THE EXTRAORDINARY SHAREHOLDERS’ MEETING OF APRIL 26, 2019 26 months
24 months 23rd resolution (Authority to issue shares for stock option plans) (1)
1,351,860 shares1,500,000 shares 24th resolution (Authorization granted to the Board of Directors to grant shares under free share allocation plans)
(1) Included for the calculation of the overall ceiling referred to in the 26th resolution of the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2019.
The total number of new shares authorized at the date of the Universal Registration Document, including the shares that could be issued in connection with the implementation of (i) stock option plans, (ii) securities granting access to the capital and (iii) the current delegations and authorizations is 145,344,459.
Such transactions are carried out in accordance with applicable regulations, at any time, in one or several times. By way of exception, the Board of Directors shall not, unless previously authorized by the Shareholders’ Meeting, use this authorization during any public bid initiated by a third party on Company shares until the end of the offer acceptance period; it is however specified in this respect that the Company shall remain authorized to carry out the transactions covered by this resolution (i) if the public offering in question is to be completed entirely in cash and (ii) for the strict requirement of compliance with any undertakings made by the Company prior to the filing of the public offering in question, concerning the servicing or coverage of all stock options, other share allocations and, generally speaking, all forms of allocation in favor of employees and/or corporate officers (mandataires sociaux) of the Company and/or of any companies related thereto. Regarding the authorization granted under the conditions set out at (i) and (ii) above, it is also specified that should the transactions in question be liable to cause the public offering considered to fail, their implementation must be the subject of authorization or confirmation from the Shareholders’ Meeting.
It granted to the Board of Directors, with the option to subdelegate under the conditions provided for by law, in order to carry out all adjustments to the maximum price, including in the event of a capital increase by capitalization of reserves and the allocation of free shares, as well as in the event of a split or a reverse stock split of Company shares.
The authorization described above, still in force on the filing date of this Universal Registration Document, will expire at the time of the next Annual Shareholders’ Meeting held for the approval of the financial statements without, however, exceeding a maximum term of eighteen (18) months with effect from the date of the April 26, 2019 Ordinary and Extraordinary Shareholders’ Meeting, i.e. until October 25, 2020.
Summary of the transactions carried out by SCOR SE on its own shares in the course of the financial year 2019 In the context of the abovementioned buyback program, SCOR carried out, between January 1, 2019 and December 31, 2019: • the purchase of 1,814,137 treasury shares; • the purchase of 3,392,107 call options (European call options); • the sale of 1,796,061 treasury shares; • the transfer of 1,935,177 treasury shares; • the cancellation of 6,545,416 treasury shares.
On December 31, 2019, SCOR held 668,058 shares compared with 9,142,675 shares at December 31, 2018. The par value of these treasury shares is EUR 5,262,274.36 and their book value is
EUR 26,464,840. The average purchase price was EUR 37.96. The average sale price was EUR 38.01. The amount of fees was EUR 105,498.88.
Description of the new share repurchase program 2020/2021 submitted for authorization to the Ordinary and Extraordinary Shareholders’ Meeting which will approve the accounts for the financial year ended December 31, 2019 The stock buyback authorization described in the above paragraph will expire on October 25, 2020 at the latest, unless the Shareholders’ Meeting which will approve the accounts for the financial year ended December 31, 2019 approves the resolution described below, in accordance with the provisions of articles L. 225-209 and subsequent of the French Commercial Code.
This resolution is intended to authorize a new share repurchase program under the following conditions: This authorization would allow the Board of Directors, with the option to sub-delegate under the conditions provided for by applicable regulation, to buy, sell and transfer Company shares pursuant, inter alia, to the provisions of Regulation (EU) No. 596/ 2014 of the European Parliament and of the Council of April 16, 2014, Articles L. 225-209 et seq. of the French Commercial Code and to the General Regulation (Règlement général) of the French Financial Markets Authority (Autorité des marchés financiers).
• setting-up, implementation or hedging of any stock option plans, other plans for allocation of shares and, generally, any form of allocation to employees and/or corporate officers
The maximum purchase price would be EUR 60 (excluding acquisition fees). Based on the shares representing the Company’s share capital on December 31, 2019 as established by the Board of Directors on February 26, 2020 (without taking into account the number of treasury shares held by the Company), the theoretical maximum number of shares which may be acquired amounts to 18,704,951 and the theoretical maximum amount allocated to the share buy-back program pursuant to this resolution amounts to EUR 1,122,297,060 (excluding acquisition fees).
This authorization would be granted for a period expiring at the time of the Annual Shareholders’ Meeting which will approve the accounts for the financial year ending December 31, 2020 without, however, exceeding a maximum term of eighteen (18) months with effect from the date of such General Meeting. It would supersede the unused portion of the authorization granted by the shareholders at the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2019, in its 12th resolution.
Amount of convertible securities, exchangeable securities or securities with subscription warrants As part of the implementation of a contingent capital facility program, SCOR issued, on December 16, 2016, 9,599,022 Warrants for the benefit of BNP Paribas (which transferred them to UBS during the year 2018), each allowing UBS to subscribe, as from January 1, 2017 and no later than May 1, 2020, to two new SCOR shares (within the limit of an aggregate amount of subscription of EUR 300 million – issuing premiums included, without exceeding 10% of SCOR’s share capital) when the aggregated amount of (i) the estimated ultimate net losses resulting from eligible natural catastrophes incurred by the Group (in its capacity as an insurer/reinsurer) between January 1, 2017 and December 31, 2019 or (ii) the ultimate net claims amount recorded by SCOR Group Life segment (in its capacity as an insurer/ reinsurer) over two consecutive semesters over the period from July 1, 2016 and December 31, 2019 reaches certain contractual thresholds. In addition, subject to no drawdown having already been conducted under the facility, if SCOR’s daily volume-weighted average share price falls below EUR 10 an individual tranche of EUR 150 million will be drawn down out of the EUR 300 million facility.
Information about and terms and conditions of any acquisition rights and/or obligations oversubscribed but unissued capital or an undertaking to increase the capital See: • Section 2.2.3. – Stock options and performance shares; • Section 2.3.1.6. – Share capital; • Section 4.6. – Notes to the consolidated financial statements,
Information about the capital of any member of the Group which is under option or is to be put under option and characteristics of such options See: • Section 2.2.3. – Stock options and performance shares; • Section 2.3.1.6. – Share capital; • Section 4.6. – Notes to the consolidated financial statements,
Note 16 – Stock options and share allocations; and • Appendix C – Notes to the corporate financial statements, 5.3.5
Related party transactions Transactions with related parties as required by the regulations adopted under EC regulation No. 297/2008, entered into by the Group appear in Section 4.6.22., Note 22 – Related party transactions.
Related party agreements In accordance with Article L. 225-37-4 of the French Commercial Code, no agreements were concluded during the year 2019 directly or through a third party between, on the one hand, SCOR SE Chief Executive Officer, one of SCOR SE directors or one of its shareholders holding a fraction of the voting rights greater than 10% and, on the other hand, another company directly or through a third party controlled by SCOR SE within the meaning of article L. 233-3 of the French Commercial Code, unless such agreements were ordinary transactions entered into at arm’s length conditions.
Description of the procedure referred to in the second paragraph of article L. 225-39 of the French Commercial Code According to the new second paragraph of article L. 225-39 of the French Commercial Code resulting from the implementation of the
PACTE Law n°2019-486 of May 22, 2019 (Loi relative à la croissance et à la transformation des entreprises), the Board of Directors of the Company introduced a procedure ensuring that ordinary agreements entered into at arm’s length conditions continue to fulfil these conditions.
According to this procedure, the Group Legal Department, with the assistance of other departments (e.g. finance, cash management and operating departments) conducts an annual review of the agreements on ordinary transactions entered into at arm’s length conditions in order to verify whether they continue to meet the applicable criteria. The Company’s auditors may take part in this review. The Accounts and Audit Committee and Board of Directors of the Company are informed of the results of this review. If an agreement is no longer held to meet the criteria for ordinary agreements entered into at arm’s length conditions, the Company’s Board of Directors will review the agreement to decide whether it should be continued. As applicable, the agreement will be authorized by the Board of Directors, reported to the Company’s auditors and mentioned in the Statutory Auditor’s special report on regulated agreements. It will also have to be submitted for ratification by the next General Meeting of the Company’s shareholders.
According to this procedure, the Company reviewed at the end of the year 2019 the ongoing agreements and ensured that these agreements continue to meet the criteria of the agreements relating to ordinary transactions entered into at arm’s length conditions.
The result of the review was communicated to the Audit Committee dated February 25, 2020 and to the Board of Directors dated February 26, 2020.
In our capacity as statutory auditors of your Company, we hereby report on certain related party agreements referred to in article L. 225-38 of the French commercial code (Code de commerce) and on the information referred to in article R. 322-7 of the French insurance code (Code des assurances).
We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements indicated to us, or that we may have identified in the performance of our engagement, as well as the reasons justifying why they benefit the Company. We are not required to give our opinion as to whether they are beneficial or appropriate or to ascertain the existence of other agreements. It is your responsibility, in accordance with article R. 225-31 of the French commercial code (Code de commerce), to evaluate the benefits resulting from these agreements prior to their approval.
We performed those procedures which we deemed necessary in compliance with professional guidance issued by the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this type of engagement.
Agreements submitted for approval to the Annual General Meeting We hereby inform you that we have not been notified of any agreements authorized during the year ended on December 31, 2019 to be submitted to the Annual General Meeting for approval in accordance with Article L225-38 of the French Commercial Code (Code de commerce) and R. 322-7 of the French insurance code (Code des assurances).
Agreements previously approved by the Annual General Meeting We hereby inform you that we have not been notified of any agreements previously approved by the Annual General Meeting, whose implementation continued during the year ended on December 31, 2019.
See Appendix C – Unconsolidated corporate financial statements of SCOR SE – Section 6 – Certification of audit of historical financial information.
Audit report on the corporate governance report REPORT ON CORPORATE GOVERNANCE
The Group regularly conducts reviews of the risks that could have a material adverse effect on its activity, its financial situation or its results (or capacity to reach objectives). However, the risks described below are not the only risks that SCOR faces. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also materially adversely affect our business, financial condition, results of operations or cash flows. SCOR may also change its view of the relative importance of risk factors at any time, particularly if new external or internal facts come to light. With this in mind, this section outlines the management’s current view of SCOR’s main risks and main risk management mechanisms currently in place.
The Group has identified the following risk categories: • strategic risks; • underwriting risks related to the P&C and Life reinsurance businesses; • market risks; • credit risks; • liquidity risks; • operational risks.
SCOR’s ERM framework is further described in Appendix A – Internal control and risk management procedures which contains a description of the Group risk management procedures as well as the role and function of each administrative and management body and team involved in risk management and related control functions.
Even in the absence of a market downturn, SCOR remains exposed to a substantial risk of losses due to market volatility. See Section 3.1.3 – Market risks.
Impact on SCOR’s reinsurance business SCOR is also dependent upon customer behavior and premium growth. The Group’s premiums could decline in the case of an unfavorable macroeconomic environment and its profit margins could erode. In an economic downturn, the demand for SCOR’s and its clients’ products could be adversely affected. Factors such as government and consumer spending, corporate investment, the volatility and strength of both debt and equity markets, and inflation, all affect the business and economic environment and ultimately, the size and profitability of SCOR’s business. In addition, the ongoing low interest rate environment continues to stimulate the inflow of alternative capital, which has been contributing to the current soft market i.e. the reduction in (re)insurance premium rates.
The risk of deflation, defined as a fall in prices and usually associated with an economic slowdown, cannot be ruled out in the current environment, characterized by the imminent risk of recession and lack of room for maneuver in relation to economic policies.
A significant portion of SCOR’s assets consists of intangible assets, the value of which depends on its expected future profitability and cash flows. The valuation of intangible assets is largely based on subjective and complex judgments concerning items that are uncertain by nature. If a change were to occur in the assumptions underlying the valuation of its intangible assets (including goodwill, value of business acquired and deferred acquisition costs), SCOR would have to reduce their value, in whole or in part, thereby reducing shareholders’ equity and its results.
The recognition of deferred tax assets, i.e. the likelihood of recognizing sufficient profits in the future to offset losses, depends on the performance of each entity concerned as well as applicable tax laws, regulatory requirements and accounting methods. The occurrence of events, such as operational earnings lower than currently projected or losses continuing over a longer period than originally planned or changes in tax legislation, regulatory requirements, or accounting methods could lead to the derecognition of part of the deferred tax assets for accounting and/ or regulatory purposes.
3.1.1.5. Downgrade risk Credit ratings are very important to all reinsurance companies, including SCOR, as ceding companies wish to reinsure their risks with companies that have a satisfactory financial position. For more details on the current rating of the Group, see Section 1.2.4 – Ratings information.
Impact on SCOR’s reinsurance business Some of SCOR’s cedents’ credit models or reinsurance guidelines face regulatory capital requirements or depend on their reinsurers’ credit rating. If SCOR’s rating deteriorates, cedents could be forced to increase their capital requirement in respect of their counterparty risk on SCOR. This could lead to a loss of competitive advantage for SCOR.
Many of SCOR’s reinsurance treaties, notably in the US and in Asia, and also increasingly in Europe, contain clauses concerning the financial strength of the Company and/or its operating subsidiaries, and provide the possibility of early termination for its cedents if the rating of the Company and/or its subsidiaries is downgraded. Early termination may also occur when the net financial position of the Company falls below a certain threshold, or if it carries out a reduction in share capital.
3.1.1.6. Risks related to capital SCOR’s regulated legal entities must satisfy local regulatory capital requirements. There could potentially be some local regulatory constraints, which in certain circumstances could affect SCOR’s ability to transfer capital from one legal entity to another, and in particular from one subsidiary or branch to another, or to the parent legal entity. This may have negative consequences for the legal entity concerned and could have a material adverse impact on SCOR.
• Concentration of the business: in certain cases, e.g. SCOR’s acquisition of Transamerica Re’s mortality reinsurance portfolio from Aegon in 2011, SCOR may acquire a reinsurance portfolio from a company (the vendor) where not all underlying reinsurance agreements between cedents and the vendor are immediately novated. In such cases, SCOR could be at risk if the vendor becomes insolvent, since the vendor’s cedents could reduce or terminate reinsurance premium payments.
P&C long-tail risks Long-tail lines of business, such as all casualty lines (including general liability, professional liability and financial lines, and medical malpractice), inherent defect and construction warranty, motor (first and third-party liability) and workers' compensation, are exposed to material reserve deteriorations (or long-tail reserve deteriorations). This is due to the materiality of insured losses driven by man-made casualty loss events and to the long periods of time taken for claims materialization and settlement.
Depending on the type of man-made event triggering these casualty losses, property lines of business may also be affected simultaneously, e.g. if the explosion at a large industrial site destroys the industrial facility, but also pollutes the surrounding environment and causes property damages and bodily injuries affecting the population in the vicinity of the explosion.
Natural catastrophes SCOR’s property business underwritten by the P&C business unit is exposed to multiple insured losses arising from single or multiple natural events, which can be catastrophic. Natural catastrophes, such as hurricanes, typhoons, windstorms, floods, hail, severe winter storms and earthquakes can generate material insured losses in property, engineering and possibly other lines of business.
P&C other short-tail risks SCOR’s property business underwritten by the P&C business unit is exposed to multiple insured losses arising from single or multiple man-made events, which can be catastrophic. The short-tail lines of business mostly exposed to man-made catastrophe are Property (other than natural catastrophe), Marine, Credit and Surety, Aviation and Space.
SCOR is exposed to single or multiple terrorist attacks through some P&C treaties and national terrorism pools. The US market in particular is exposed to significant terrorism risks due to the insurance obligation stipulated by law. However, federal aid is also provided by the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”), which is currently scheduled to expire on December 31, 2020. Terrorism exposures are monitored on a worldwide basis as a fully integrated part of the Underwriting Management Framework. Underwriting guidelines stipulate the rules and procedures for terrorism risk for Reinsurance and Specialty Insurance. SCOR monitors this risk using a very conservative approach.
Systemic crises Historically, reinsurers have experienced significant fluctuations in operating income due to volatile and unpredictable developments, many of which are beyond the control of the reinsurer including general economic conditions, levels of capacity offered by the market, the level of competition with regards to pricing, and possible changes in regulations and societal attitudes regarding the support of industry sectors that contribute to climate change. In particular, some of SCOR's lines of business which are directly linked to financial activities, are more exposed to global economic recessions (e.g. the Global Financial Crisis), for example, global lines such as credit and surety or liability risk such as Errors & Omissions and Directors & Officers Liability. Those areas of SCOR’s business that are most exposed to climate transition risks are those related to re/insurance of carbon-intensive industries.
Concentration risk related to its broker business SCOR generates its P&C business both through brokers and through direct relationships with insurance company clients. The risk for SCOR is mainly the concentration of premiums written through a limited number of brokers. A significant reduction in the business generated through these brokers could potentially reduce premium volume and net income. For further information, refer to Section 1.2.5.4 – paragraph on Distribution by production source. for a breakdown of SCOR’s business though brokers.
3.1.2.2. Life reinsurance The main underwriting risks for SCOR’s Life business unit are described below.
Long-term mortality deterioration This risk refers to potential negative deviations in future mortality relative to current best-estimate assumptions, due to a higherthan -anticipated number of deaths (i.e. increased mortality rates) among the portfolio of lives reinsured by SCOR. This could result from inherent volatility, incorrect estimation of the expected claim level or an adverse long-term trend.
Longevity Longevity risk refers to the risk of a negative deviation from expected results due to the insured or annuitant living longer than assumed in the pricing or reserves. This risk could have an impact on longevity swaps, annuity and long-term care covers and on other longevity protection products.
Unforeseen events, such as natural catastrophes or man-made catastrophes, can make SCOR’s claims experience vary significantly from one year to the next, which can have a significant impact on its profitability and financial position. These types of risk primarily affect Non-Life business areas. However, in cases where SCOR faces a large number of casualties, the possibility of the losses also affecting its Life’s lines of business cannot be excluded. Similarly, unforeseen events such as terrorist attacks may materially impact the P&C business area, but also the Life business area, in the case of attacks resulting in many fatalities. Although in past events the Life claims incurred have been comparatively small in relation to the Non-Life claims incurred, a terrorist act might claim a large number of insured lives.
In the event of a very large natural catastrophe or terrorist attack, the losses generated in the P&C and Life business units could potentially accumulate, with losses on financial assets related to the potential reaction of markets (i.e. movements in interest rates, exchange rates, spreads and/or equity market prices). In the same way, a major pandemic event may cause financial market turmoil and/or business interruptions.
If some information were incorrect and/or incomplete, this could have an adverse effect on the Group. The Group is then dependent on the reserves assessment made by the companies with which it does business.
As is the case for all other reinsurers, the inherent uncertainties in estimating reserves are compounded by the significant periods of time that often elapse between the occurrence of an insured loss, the reporting of the loss to the primary insurer and ultimately to SCOR.
For more information on exposure to this line of business, refer to Section 3.1.2.1 – P&C Reinsurance.
During periods of declining interest rates, income from investments is likely to fall due to investment of net cash flows and reinvestments of redemptions at rates lower than those of the existing portfolio (dilutive effect of new investments). During such periods, there is therefore a risk that SCOR’s return on equity objectives are not met. For callable bonds for which the issuer has an option to redeem earlier than the ultimate maturity, the probability of having to reinvest the early proceeds at lower interest rates is increased. The current low yield environment increases the potential materialization of this risk.
On the other hand, an increase in interest rates could lead to a fall in the market value of fixed income securities that SCOR holds. In the case of a need for cash, SCOR may be obliged to sell fixed income securities, possibly resulting in capital losses.
The following types of currency risk have been identified by SCOR: • Transaction: fluctuations in exchange rates can have consequences on SCOR’s reported net income because of the conversion results of transactions expressed in foreign currencies, the settlement of balances denominated in foreign currencies and the lack of perfect matching between monetary assets and liabilities in foreign currencies. In this case, and to reduce the impact of imperfect matching, SCOR uses derivative financial instruments in order to hedge against currency fluctuations on sensitive currencies, particularly in times of greater volatility on the capital markets. Nevertheless, a perfect matching of monetary assets and liabilities can never be achieved and a potential profit or loss impact due to fluctuations in exchanges rates can arise.
• Translation: SCOR publishes its consolidated financial statements in euros, but a significant part of its income and expenses, as well as of its assets and liabilities, are denominated in currencies other than the Euro. Consequently, fluctuations in the exchange rates used to convert these currencies into euros may have a significant impact on its reported net income and net equity from year to year.
SCOR has issued debt instruments in currencies other than the Euro, currently Swiss Francs, and to the extent that these are not used as a hedge against foreign currency investments, it may be similarly exposed to fluctuations in exchange rates. Most debts are hedged. For more information on the forward sales and purchases and swaps of currencies used to hedge these risks see Section 4.6 – Notes to the consolidated financial statements, Note 7 – Insurance business investments. For more information on debts issued in different currencies, see Section 4.6 – Notes to the consolidated financial statements, Note 13 – Financial liabilities.
The Group recognized a net foreign exchange gain of EUR 3 million for the year ended December 31, 2019 (2018: loss of EUR 13 million and 2017: loss of EUR 27 million).
(1) This analysis excludes the impact of hedging activity, and the presentation has been adjusted to 2019 disclosures.
3.1.3.5. Real estate risks Real estate risks, either for properties owned directly or through funds, are risks arising from a variation in the real estate market valuation or a change in rental market conditions, the two being closely linked.
This includes Credit default risk which is the risk that one party to a financial instrument or other asset will cause a financial loss to the other party by unexpectedly failing to discharge, either partially or fully, an obligation. Credit risk also includes Credit migration risk, which is the risk of incurring a financial loss due to a change in the value of a contractual agreement following unexpected changes in the credit quality of our counterparties.
A deterioration in the financial situation of an issuer (sovereign, public or private) or borrower can, for example, lead to its insolvency and to the partial or total loss of coupons and of the principal invested or lead to a loss in value.
However, depositing these amounts does not a priori discharge the Group of its liability towards the cedent in cases where it is not
able to recover all or part of these amounts in the event of a cedent default or a deterioration in the financial situation of that cedent. Hence, it is at least in principle, possible that the Group may remain liable for paying claims due under the reinsurance treaty without being able to offset all or part of the corresponding deposits.
3.1.4.3. Other credit risks For special and highly-technical risk categories such as terrorism, nuclear, aviation or pollution, SCOR chooses to participate in various market dedicated groups of insurers and reinsurers (“pools”) aimed at pooling the relevant risks among the members of each group pools which offer best available expertise and risk sharing at market level. In the event of a total or partial default by one of the members of a group, it could be required to assume, in the event of joint liability of the members, all or part of the liabilities of the defaulting member.
The estimated maturity profile of the assumed contract liabilities for long-term Life reinsurance represents benefit payments that are typically settled net of premiums (for treaties with periodic premium payments). Where contract liabilities require to deposit cash to the cedent as collateral, the settlement normally also includes certain other account items, primarily the release of the deposits. For contracts where funds withheld are used to offset the amounts settled between SCOR and its cedents, funds withheld to cover the life insurance contract liabilities in the table below mature at the same date as the respective Life insurance contract liabilities.
The table below reflects gross cash outflows: Total< 1 year 1-5 years Life insurance contract liabilities In EUR millions > 10 years6-10 years
Financial liabilities Maturity profiles have been based on undiscounted contractual maturities and include contractual interest payments (including those from cross-currency and interest rate swaps). In the case of perpetual debt, or debt which is subject to multiple optional reimbursement dates, the analysis below has been prepared based on the assumption that the Company does not make use of any of the early optional reimbursement dates. Perpetual debts are classified in the column “over 5 years” (no maturity date).
Debt maturity profilesAs at December 31, 2018 Total**Interest rate ranges < 1 year > 5 years*In EUR millions 1-5 years 277 56748 242Real estate debt 0.79%-4.34%
* Accrued interest on perpetual debt as at December 31, 2019 of EUR 13 million (2018: EUR 12 million). ** Of the amounts above, EUR 20 million (2018: EUR 15 million) relate to variable rate debt. These amounts exclude debt which has been swapped from a variable interest rate to a fixed interest rate.
3.1.6. OPERATIONAL RISKS Operational risks are inherent to all businesses at SCOR. Operational risks can be split into two main groups: internal risks (risks related to system or facilities, to staff, to processes and to legal/regulatory environment) and external risks (external fraud, cyberattack).
3.1.6.1. Risks related to systems or facilities Risks related to systems or facilities can arise as follows: • a malfunction or a major breakdown in SCOR’s IT systems, outages, disruptions due to viruses, attacks by hackers and thefts or data breaches. This can occur within SCOR’s own environment or to a third-party providing services or data to SCOR; • interruption of any of SCOR’s IT systems leading to loss of data, delays in service or in a loss of efficiency of teams, which could lead to remediation costs, loss of contracts or damage to the Group’s reputation. In addition, these incidents could increase other operational risks such as external fraud or human error (e.g. delay in the recognition of adverse business development). The interruption of these systems could damage commercial activities including underwriting, pricing, reserving, premium and claims payment, commercial support, and asset management; • in addition, the facilities in which SCOR operates might be impacted by natural or man-made perils. The offices might need to be closed for a period of time potentially resulting in a loss of productivity and business opportunity, as well as remediation costs.
3.1.6.2. Risks related to staff Risks related to staff can arise as follows: • incidents due to mistakes or non-compliance with instructions, guidelines or policies; • internal staff mandated by SCOR having authorized access to SCOR’s offices or systems taking advantage of SCOR's assets for personal gain e.g. through misappropriation of assets, intentional mismarking of positions or bribery; • intentional damage to SCOR's assets (including data) required to perform its operations by internal or external staff, which could lead to significant remediation costs (including these released to rebuilding databases or systems); • the failure to attract or retain key personnel or the loss of crucial information/skills concentrated in a single person, or of a whole team.
3.1.6.3. Risks related to processes SCOR’s risk management policies, procedures and controls may not be appropriate or sufficient. In particular, any additional workload to the planned activities could reduce the effectiveness of some processes and controls. For example, the creation of a new entity, the development of a new Line of Business, or any other project, may lead to an accumulation of operational risks.
In addition, SCOR may be involved in legal and arbitration proceedings due to third parties challenging the terms of a contract, which could lead to an unfavorable outcome. For information on this issue, see Section 4.6 – Notes to the consolidated financial statements, Note 25 – Litigation.
Following Brexit, the direct P&C insurance activities for European Economic Area (EEA) clients currently carried by SCOR UK may need to be carried in the future by a legal entity based in the EEA in case insurers based in the United Kingdom would lose their European passport. In order to prepare for such an event SCOR has created a P&C insurance company in France to serve its continental clients, while maintaining the insurance company SCOR UK for its other clients. Also, SCOR stands ready to ask the Prudential Regulation Authority for any required approvals in order to allow the continuation of the activity of its reinsurance branches in the United Kingdom. For further details on current main regulatory developments which may have an impact on SCOR, see Section 3.1.1.2 – Risks related to legal and regulatory developments.
3.1.6.5. External frauds SCOR is exposed to external fraud which is characterized by the theft of certain SCOR assets by third parties. External frauds may be perpetrated by various means including cyber-attacks, and usually target cash or data. Should an act of fraud succeed in bypassing the controls or protection measures in place, this could generate a direct loss for the Group.
Refer to Appendix A – Internal control and risk management procedures.
SCOR monitors the legal and regulatory developments which could have an impact on the Group and its entities, ensuring in particular that it takes an active position in relation to the requirements to which it is exposed or could be exposed in the different jurisdictions where it operates and that it prepares in due time for their implementation.
3.3.1.3. Management of valuation risks related to SCOR’s intangible assets and deferred tax assets
See Section 3.1.6 – Operational risks for further details on SCOR’s Internal control system approach, Appendix A – Internal control and risk management procedures, Section 4.1 – Group functions for a description of some of the departments involved in the management of intangible assets and Appendix A – Internal control and risk management procedures, Section 7 – Financial reporting for further details on the production of SCOR’s technical and financial results, including intangible assets.
For further details on the management of valuation risks related to goodwill and Value of Business Acquired, see Section 3.3.1.7 – Management of risks related to acquisitions.
3.3.1.5. Management of downgrade risk SCOR’s current ratings are at the highest levels within the reinsurance sector after Standard & Poor’s and Fitch upgraded the Group’s ratings to “AA-/Stable“ from “A+/Positive” in 2015, followed by a Moody’s upgrade to “Aa3/Stable” in 2016 and the recent upgrade by AM Best to “A+/Stable” in 2017. Therefore, a downgrade by one notch would have a limited impact on its future business development, its liquidity position or its capacity to raise funds. For further information on SCOR’s current rating, see Section 1.2.4 – Ratings information.