SCOR may be exposed to credit risk in relation to amounts deposited with ceding companies in respect of reinsurance reserves which cover its liabilities.
3.1.5. LIQUIDITY RISKS Liquidity risk is the risk of not having sufficient financial resources available to meet obligations as they fall due, or only being able to secure them at excessive cost.
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.
Interest rate ranges < 1 year 1-5 years > 5 years* Total **
Various entities in the Group rent their office headquarters. The minimum payments relating to these operating leases are presented within Section 4.6 – Notes to the consolidated financial statements, Note 10 – Miscellaneous Assets (Tangible assets and related commitments).
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 (risks related to external fraud, cyberattacks ).
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. They could also be affected by legal or management decisions (e.g. due to pandemic or social conflict). 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.
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 26 – Litigation.
The level of legal, regulatory, tax or accounting requirements depends on several factors, including the type of business (e.g. primary insurance or reinsurance business), the location and the legal structure of SCOR. The large number of different regulatory environments in which SCOR operates, as well as changes in present and future regulations increase the complexity and risks of the related Group processes.
Following the UK’s departure from the European Union and the end of the transition period on December 31, 2020, the direct P&C insurance activities for European Economic Area (EEA) clients cannot be carried by SCOR UK. In order to prepare for the possibility of this outcome, SCOR Europe SE, a P&C direct insurance company, was created in France to serve its continental clients, while maintaining the insurance company SCOR UK for its other clients. Also, SCOR will apply to the UK Prudential Regulation Authority for any required approvals in order to allow the continuation of the activity of its reinsurance branches in the United Kingdom after the “Temporary Permissions Regime” has expired. At this stage, there is uncertainty on the evolution of the future regulatory framework in the United Kingdom and its impact on SCOR’s operating entities in the UK. The branches were notified that they are subject to the temporary regime, allowing them to continue their activities until the final agreement is granted.
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.
3.1.6.6. RISKS RELATED TO CYBER-ATTACKS SCOR is exposed to cyber-attacks which can be very diverse in their sophistication and execution. The main targets are system functions, data and cash management. Immediate repercussions include: • systems could be slowed down, corrupted or stopped potentially resulting in loss of productivity, corrupted data and remediation costs; • funds could be stolen through fraudulent wire transfers; • data could be stolen, deleted or corrupted, or made public in contradiction with SCOR’s regulatory or contractual obligations.
3.2.1.3. MANAGEMENT OF VALUATION RISKS RELATED TO SCOR’S INTANGIBLE ASSETS AND DEFERRED TAX ASSETS
3.2.1.4. MANAGEMENT OF RISKS RELATED TO THE COMPETITIVE ENVIRONMENT As for risks related to the macro-economic environment, risks related to the competitive environment are monitored via a robust strategic planning approach and regular risk reporting mechanisms throughout the Group, including complementary risk analyses on ad hoc topics, where deemed necessary. For more details on risk reporting mechanisms and roles and responsibilities of SCOR’s main governance bodies, see Section 3.3 – Internal control and risk management procedures.
3.2.1.5. MANAGEMENT OF DOWNGRADE RISK SCOR’s current ratings are at the highest levels within the reinsurance sector. it is currently rated by Standard & Poor’s and Fitch at “AA-/Stable“, by Moody's at “Aa3/Negative” and by AM Best at “A+/Stable. 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.
3.2.1.6. MANAGEMENT OF RISKS RELATED TO CAPITAL Risks related to capital are managed via specific principles and processes throughout the Group. SCOR ensures maximum capital fungibility within the Group through: • a reduced number of subsidiaries enhancing fungibility while supporting local business presence. It is facilitated by the “Societas Europaea” (SE) structure supported by an efficient branch set-up in Europe, enabling integrated supervision at Group parent company level through SCOR SE, focusing on communication with a limited number of supervisors with whom
SCOR can share its global strategy, while taking advantage of diversification benefits; • an integrated supervision of regulatory constraints at Group level and an optimal capital allocation.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Management of main risks 3.2.1.7. MANAGEMENT OF RISKS RELATED TO ACQUISITIONS SCOR adheres to high internal standards for acquisition processes, governance and integration, based on an approach approved by its Executive Committee.
SCOR retains outside legal, accounting, tax, actuarial, regulatory and financial counsel for its due diligence, valuation and integration assessments and execution, led by experienced employees in various multi-jurisdictional disciplines, including but not limited to underwriting, structuring, valuation, accounting, tax, actuarial, risk management, legal, audit, strategy, claims management, regulatory, rating agencies, and asset management. SCOR’s governance includes a Group Steering Committee and the involvement of members of SCOR’s Executive Committee. All progress, assessments and any offers made to third parties are generally presented and approved by the Strategic Committee of SCOR’s Board of Directors.
3.2.2.1. MANAGEMENT OF UNDERWRITING RISKS RELATED TO THE P&C BUSINESS SCOR’s Risk Management area and the P&C business unit are organized to enable them to assess and control P&C risks at each level of its business.
• The Property and Casualty Treaty underwriters manage client relationships and offer reinsurance support after a careful review and assessment of the cedents’ underwriting policies, portfolio profiles, exposures and management procedures. They are responsible for writing treaty business as well as associated support on small and medium-size facultative risks in their respective territories within the limits of their individually delegated underwriting authority and the scope of underwriting guidelines.
03 RISK FACTORS AND RISK MANAGEMENT MECHANISMS Management of main risks
• In relation to climate change, the models used to price natural catastrophe business (both new and renewing) are calibrated using recent claims data. In this way, changes in frequency and severity of the natural perils that SCOR underwrites, whether related to climate change signals or not, are considered in the pricing of contracts. In terms of managing climate transition risks, SCOR has already made certain underwriting commitments that make a start towards reducing the company’s exposure to certain carbon-intensive sectors. In addition, SCOR has introduced referral procedures and Environmental, Social and Governance (ESG) scoring components for the underwriting of insurance and facultative reinsurance within the mining and energy sectors.
• In order to mitigate its property exposure, the Group retrocedes a portion of the risks it underwrites. See 3.2.3 – Retrocession and other risk mitigation techniques for further information on how these instruments are managed.
• The adequacy of the P&C business unit’s reserves is controlled based on specific procedures. For further information on how risks related to reserves are managed, see Section 3.2.2.4 – Management of reserving risks.
• Risk-related topics of the P&C Business unit are discussed at the quarterly P&C Risk and Capital Committee.
SCOR’s Life business unit is organized in order to be able to assess and control its risks at each level of its business. • Generally, the Life reinsurance business is underwritten throughout the year and is monitored on a quarterly basis against prior year development. In addition, the business plan and regular updates are provided to the Executive Committee.
• Guidelines and other documents defined by the Life business unit specify the underwriting rules and principles to be complied with, underwriting capacities delegated to the underwriters and pricing actuaries in each of the markets in which the Group operates, as well as maximum acceptable commitments per risk and per event. These guidelines outline contract types and terms and conditions of acceptance. Furthermore, they set out the level of retention of the Life business unit for various risks and types of cover (for more information, see Section 3.2.3 – Retrocession and other risk mitigation techniques). Revisions and updates follow a formalized approval process.
Specifically designed retrocession programs aim at protecting the Life reinsurance business. One program protects assumed catastrophe excess of loss acceptances; another one protects the net retained lines in respect of proportional and per risk acceptances. SCOR uses the RMS model for infectious diseases in order to assess the potential exposure to risk arising from global pandemics.
• Maximum underwriting capacities are established to limit the Life business unit’s exposure from various types of treaties underwritten, proportional and non-proportional, covering individual or Group policies. These capacities are reviewed each year, taking into account the capacities obtained by retrocession coverage. The exposure is monitored throughout the year against SCOR’s defined risk limits and used for decisions on mitigating measures. Monitoring of peak exposures is included in Life regular risk reporting.
• Claims handling is performed by local claims teams that handle and monitor claims. Claims exceeding a predefined threshold are reviewed by the Life business unit’s global medical underwriting and claims specialists. In addition, where deemed appropriate, audits are conducted on claims or specific lines of business at the ceding companies’ offices.
• The adequacy of Life’s business unit’s reserves is monitored based on specific procedures. For further information on how risks related to reserves are managed, see Section 3.2.2.4 – Management of reserving risks.
• A review of technical results is performed on a quarterly basis. • Risk-related topics of the Life business unit are discussed at the quarterly Life Risk Committee.
3.2.2.4. MANAGEMENT OF RESERVING RISKS The adequacy of P&C and Life reserves is checked on a quarterly basis by internal actuaries at business unit level as well as at the Group level by the Group Chief Actuary who signs off on the adequacy of reserves and reports to the Executive Committee and the Audit Committee.
3.2.3. RETROCESSION AND OTHER RISK MITIGATION TECHNIQUES Reinsurers typically purchase reinsurance to cover their own risk exposures. Reinsurance of a reinsurer’s business is called retrocession. SCOR remains primarily liable to the direct insurer on all risks reinsured although the retrocessionaire is liable to the Group to the extent of the cover limits purchased.
For further information on how counterparty default risk related to retrocessionaires is managed, see Section 3.2.5 – Management of Credit risks.
An analysis of the share of retrocessionaires in contract liabilities by rating of the retrocessionaires and collateral from retrocessionaires in favor of SCOR at December 31, 2020 and 2019 is presented in Section 4.6 – Notes to the consolidated financial statements, Note 16 – Net contract liabilities and Note 20 – Net retrocession result.
Investment Guidelines at Group and local levels outline the investment universe and limits, including concentration limits, in line with the objectives of the strategic plan. They are approved by the Group Board/local Board or Executive management.
In currency and geographic terms, SCOR is mainly exposed to the US and especially to US government or government assimilated bonds.
3.2.4.1. MANAGEMENT OF INTEREST RATE RISKS The Group aims to maintain an appropriate mix of fixed and variable rate instruments. It also manages the maturities of interestbearing financial assets.
Interest rate risk is managed within the Group primarily at two levels. At the level of each entity, the Group takes account of regulatory and accounting constraints. At the Group level, SCOR reviews its consolidated investment portfolios in order to identify the overall level of risk and return. It uses analytical tools which guide both its strategic allocation and local distribution of assets.
In addition, SCOR has entered into interest rates swaps to cover its exposure to financial liabilities with variable interest rates. For further details on these swaps, see Section 4.6 – Notes to the consolidated financial statements, Note 8.9 – Derivative instruments.
3.2.4.2. MANAGEMENT OF CURRENCY RISKS SCOR has a balance sheet hedging approach whereby the objective is to match monetary assets and liabilities in each foreign currency so that the fluctuation in the exchange rate has no material impact on the reported net income. The policy is to closely monitor the net monetary currency positions and, where appropriate, execute either cash arbitrages or forward hedges.
The Group’s equity selection is predominantly based on a bottomup fundamental analysis with the goal to develop a diversified portfolio of stocks and convertible bonds directly or through mutual funds. Due to the inherent volatility of equities, this asset class (direct positions and mutual funds) is monitored on a daily basis, facilitating quick arbitrage or portfolio re-allocation decisions. On a Group level, the equity exposure is set and reviewed at least quarterly by the Group Investment Committee. Equity risk is also monitored by establishing maximum exposures per stock or mutual fund and is reviewed regularly (e.g. exposure to large-cap stocks will generally be greater than exposure to mid-cap stocks). The holding’s ratios on mutual funds are also reviewed regularly, based on the mutual fund’s portfolio.
3.2.4.5. MANAGEMENT OF REAL ESTATE RISKS SCOR has adopted an active strategy to select core buildings and takes environmental quality into account during the decision-making process.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Management of main risks 3.2.4.6. MONITORING OF SENSITIVITY TO MARKET RISKS The following table summarizes the accounting sensitivity of the Group’s consolidated income and consolidated equity to market risks based on reasonably possible movements in key variables with all other variables held constant. The assumptions included are: • for interest rate: The interest rate sensitivities for shareholders’
equity presented in the table below include movements on the bond portfolio, cash and cash equivalents, structured notes, the impact of changes in interest rates on variable rate financial liabilities and the Guaranteed Minimum Death Benefit business. The interest rate sensitivities of income presented in the table below show the impact of changes in fair value of financial assets at fair value through income held at closing date, and changes in income on variable rate financial assets held at the closing date, following an increase/decrease in interest rates of 100 basis points. An estimate of the impact on the future income following a change of 100 basis points is therefore included. However, SCOR does not include in this analysis the potential impact of change in interest rates on the reinvestment of future cash flows, as future cash flows of SCOR business are difficult to predict and asset allocations might change over time; • for equity price risks: SCOR conducted an analysis of the sensitivity of net income and shareholders’ equity to the price of equity securities. The analysis considers the impact on both equities at fair value through the income statement and on equities classified as available for sale. For equities classified as available for sale, the impact on impairment is computed by applying the accounting policy and application guidance set out in Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments, to theoretical future market value changes. SCOR estimates that, excluding any impairment arising from duration, a further uniform decline of 10% from December 31, 2020 market values would generate no further impairment of equity securities (2019: EUR 0 million; 2018: EUR 0 million). It should be noted that, the potential further impairment should not be scaled up or down as the impairment rules are not a linear function of market value. For example, a scenario with a market value decline of 20% would not double the potential further equity impairment.
The market sensitivities of the Group are estimated as follows: In EUR millions
(2) The reduction in equity represents the estimated net asset impact including the additional impairment recognized in the income statement. (3) Net of tax at an estimated average rate of 22% in 2020 (23% in 2019 and 21% in 2018).
Management of credit risk related to future cash flows of life reinsurance treaties SCOR monitors the development of its cedents financial situation through regular contact, which enables SCOR to take appropriate action when deemed necessary. In addition, credit risk on future cash flows from Life reinsurance policies is mitigated by industrywide protection solutions in several countries, such as “Protektor” in Germany.
Deposits with cedents are monitored through a quarterly analysis of exposure and associated risks. Actions aiming at reducing or limiting the exposure (e.g. ad hoc legal opinions, introduction of offset clauses) can be implemented where needed.
Impairment information relating to financial assets is included in Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments, Note 9 – Accounts receivable from and payable on assumed and ceded insurance and reinsurance transactions and Note 19 – Investment income.
Liquidity considerations over the long-term are assessed in a way which takes into consideration the possibility of various unexpected and potentially adverse business conditions where assets may not be sold for current market values. SCOR estimates the level of its immediately tradable assets (i.e. non-pledged assets) which could be sold within a reasonable timeframe.
Transferability In addition, SCOR monitors the level of transferability of immediately tradable assets between entities, depending on local and regulatory constraints.
The Group has also been granted credit facilities from several banks to support the reinsurance activities of various subsidiaries. The Group regularly adapts and renews these facilities to support its business needs.
Additional information on the timing of repayments and liquidity risk is included in Section 3.1.5 – Liquidity risks. For further information on liquid assets of SCOR Group, see Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments.
The structure of this Section is based on these components corresponding to the framework implemented by SCOR: • components 1 and 2 are addressed in the “Internal environment” and “Setting of objectives” sections; • components 3, 4 and 5 are described in the
SCOR’s ERM is mature and well established across the Group. Since November 2013, it has been rated “Very Strong” by Standard & Poor’s. However, like any risk management and internal control system, the Group’s system cannot guarantee that the risk of not achieving the internal control objectives will be completely eliminated. Among the various limitations inherent in the effectiveness of internal controls relating to the preparation of financial documents, those involving decision-making errors based on human judgment are particularly high in a reinsurance company: for example, the accounting data are subject to numerous estimates, primarily because of the evaluation by the reinsurer of claim reserves, either because the claims have not yet been declared to the ceding companies or the reinsurer, or because the claims development is uncertain or subject to a number of assumptions.
3.3.1.1. GENERAL ORGANIZATION OF THE GROUP The Group is organized around three engines comprising two main reinsurance businesses and one asset management activity: SCOR Global P&C, SCOR Global Life and SCOR Global Investments.
• Group Actuarial • Risk Coverage • Risk Governance • Risk Modelling • Prudential & Regulatory
Group Investment Office • ALM, Risk & Investment control • Investment Datawarehouse Strategic Planning & Investment • Strategic investments in private equity • Investment Financial
The Risk Governance department is supported in these tasks by the Risk Coverage department and the department in charge of risk management at SCOR Global Investments. Compliance with local regulations and constraints is ensured by Hub General Counsels.
3.3.3. IDENTIFICATION AND ASSESSMENT OF RISKS Different techniques and initiatives for identifying and assessing risks have been implemented to analyze risks from different angles and to deal with them in an exhaustive manner. These include: • a risk information process: every quarter, the Group Risk
Committee reviews the "Group Risk Dashboard" which describes and assesses the major risks the Group is exposed to. This report assembles various risk assessments from different identification and assessment processes for all risk categories; • a process for the monitoring of risk exposures compared to risk tolerances, i.e. the limits established in order to ensure that the Group’s risk profile remains aligned with the risk level validated by SCOR SE’s Board of Directors. The Group uses various risk measures to define these exposures, which are measured based on either model outputs and/or expert opinions, depending on the technical constraints and the level of information available. This includes: — a “risk driver” system that enables the Group to manage the annual aggregate exposure to each major risk. The objective is to avoid overconcentration of risk and hence maximize diversification benefits. For the majority of SCOR’s risk drivers, the amount of post-tax retained annual exposure per main risk driver (with a probability of 1 in 200 years) is limited to a percentage of the Group’s available capital. Other risk drivers have limits expressed in terms of reduction in the Group’s solvency ratio or duration for invested assets,
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Internal control and risk management procedures 3.3.4. MAIN CONTROL ACTIVITIES Because of its activities, SCOR is exposed to many risks: reinsurance and insurance related risks, market risks and other risks (e.g. liquidity, rating). These risks are detailed in Section 3.1 – Main risks of this Universal Registration Document. These activities rely on the control mechanisms including adequate reporting mechanisms to the main governance bodies throughout the Group (see section 3.3.1.1).
• The Group Reporting department encompassing consolidation, Investment accounting and Solvency II quantitative reporting plays a major role in both internal management reporting and external financial reporting, and the analysis thereof.
03 RISK FACTORS AND RISK MANAGEMENT MECHANISMS Internal control and risk management procedures
Risk Management • The Risk Coverage and Risk Governance departments’ primary focus is to develop and manage ERM mechanisms, and to promote ERM concepts throughout the Group, in addition to providing risk management challenge and support for reinsurance underwriting and asset management.
• The Prudential & Regulatory Affairs department advises the Group on prudential regulations. It ensures the Group actively positions itself in relation to the different jurisdictions and requirements to which it is exposed, or could be exposed and continuously develops and promotes SCOR’s leading risk management expertise through regular dialogue with internal and external stakeholders, including our staff, clients, supervisors, the (re)insurance industry, academia and the public. Prudential and Regulatory Affairs also provides specialist expertise to SCOR colleagues via the Solvency II Centre of Excellence and prepares the Group for the adoption of major new prudential regulations.
3.3.4.2. ACTIVITIES RELATED TO REINSURANCE The operating and control procedures concerning underwriting, pricing, administration of reinsurance contracts and claims management are validated by SCOR Global P&C and SCOR Global Life and are applied to all underwriting segments of the company in question, regardless of location.
3.3.4.3. ASSET MANAGEMENT The Group invests in assets through its business unit SCOR Global Investments, composed of an asset management company regulated by the French Autorité des marchés financiers (SCOR Investment Partners SE) and of two services: Investment Business Performance and Group Investment Risk & Sustainability.
The Group Investment Committee meets at least once every quarter. Its role is to define the investment strategy on a Group level and to supervise the implementation of this strategy regarding the regulatory and contractual constraints. At local level, local investment committees supervise the implementation of the investment strategy relating to their legal entities as well as the compliance of the portfolios positioning with the local investment guidelines.
While, • preserving the Group liquidity and level of solvency; • protecting the capital; • allowing the Group to operate on a day-to-day basis as well as over the long term; • contributing to the well-being and resilience of society; • complying with legal entities investment regulations, risk appetites and regulatory capital requirements (level of capital and type of admissible assets), and Group and local investment guidelines; • implementing strict assets and liabilities management and in accordance with policy congruence on currency.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Internal control and risk management procedures
Operational framework As a general rule, and in compliance with local regulations, legal entities of SCOR appoint the Group to supervise and implement the investment and reinvestment of all of their invested assets. This relationship is put in place through an Investment Management Agreement (“IMA”) which includes local investment guidelines.
Assets owned by all Group entities are monitored in one central information system under the responsibility of SCOR Investment Business Performance. The information systems of SCOR Investment Partners monitor transactions on publicly traded securities (audit trail, valuation of securities). Investment Business Performance controls the consistency and the completeness of the data used for the valuation of the assets.
This new intranet is part of the Office 365 environment and is constructed around SharePoint, a platform that also hosts collaborative sites where SCOR staff can share documents, retain document archives, and collect and centralize information pertaining to certain subjects (e.g. emerging risks) from various sources.
3.3.6. MONITORING OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM The monitoring of the internal control and risk management systems is ensured by a number of complementary mechanisms with the support of several departments across the Group.
SCOR implements dedicated processes and tools to identify, assess and monitor its risk exposures on a regular basis. See Section 3.3.3 – Identification and assessment of risks.
In addition, SCOR implements dedicated risk management mechanisms in the three business units in order to evaluate the appropriateness and effectiveness of controls and propose riskmanagement and mitigation measures. See Section 3.1.2 – Underwriting risks related to the Life and P&C reinsurance businesses for further details on these risk management mechanisms.
The approach used to develop and maintain the internal control system is specified in the ICS Group Policy. The policy sets out the reference framework and details the Group principles, the responsibilities of the different participants in internal control and the quality requirements. The principal characteristics of the internal control system are as follows: • a risk-based approach, i.e. addressing critical operational risks that, if not controlled, could significantly impact SCOR’s franchise, balance sheet or statement of income and indirectly its solvency. The optimal risk response is obtained through appropriately designed key controls; • on a process level, appointment of process owners responsible for documenting processes, identifying the related critical risks, defining the appropriate key controls and ensuring their deployment and application either at Group, business unit or legal entity levels. Process owners are also responsible for assessing processes, risks and key controls; • monitoring, upon completion of the initial documentation, through a self-assessment procedure on the maturity (quality) of control processes based on pre-defined criteria by their owners.
In addition, and in accordance with its risk-based audit plan and through its periodic assignment, Group Internal Audit provides independent and objective assessments on the adequacy, effectiveness and efficiency of the internal control system. Any findings and risks lead to recommendations and management remediation actions which are followed up by Group Internal Audit.
Furthermore, the Finance Department manages the “internal management representation letters” process, detailed in Section 3.3.7 on financial reporting, which also incorporates certain points relative to internal control of accounting and financial reporting.
The Chief Financial Officer relies on the finance departments of operating companies, which provide him with quarterly consolidation packages, as well as on the finance departments of SCOR Global P&C, SCOR Global Life and SCOR Global Investments which assist him in coordinating aspects relating to the processes, methods and reporting.
SCOR Global Investments Monitoring of financial assets and cash flows is provided through various operating methods. The information systems used provide an audit trail of the transactions carried out. In certain entities, accounting activities are delegated to external service providers; controls implemented by these entities make it possible to verify the proper recording of accounting data and consistency of the figures. Cash reconciliations are made on a daily basis and security transactions are reconciled in less than 24 hours) with reports from the various custodians. Portfolios managed directly are monitored in real time.
Accounting and consolidation process Regarding the processes of preparation of consolidation packages and consolidation of accounting data by the Group Reporting department, internal control is ensured by: • the definition of a closing process, clear responsibilities and a detailed financial statement closing schedule, which is monitored, in the closing period, on a daily basis; • use of a market recognized consolidation software package ("SAP BFC”) common to all Group entities, which ensures the whole consolidation process through automated and formalized controls; • the use of a general accounting software tool (“SAP”) shared by all Group entities; • the centralized management of charts of accounts and the use of a single chart of accounts (with minimum local specificities, aligned with existing Group systems); • a definition of responsibilities for controlling the integration of auxiliary accounting systems; • the formalization of the reconciliations between auxiliary, general and consolidation accounting systems; • at least three levels of control of the consistency and completeness of the consolidation packages, one by the entity concerned, another by the finance departments of SCOR Global P&C and SCOR Global Life relative to technical accounting and the third by the Group Finance departments; • systematic analyses of results, shareholders’ equity, taxation and cash flow; • internal monitoring of changes in legislation and accounting standards, together with the Group’s external consultants and auditors; • the work of the IFRS Center of Excellence, whose objectives are to (1) communicate developments in accounting standards to all contributors, (2) determine IFRS accounting policies and (3) coordinate justification and documentation of accounting treatment for complex operations; • an audit performed by external auditors as at December 31, and a limited review as at June 30.
Since 2015, SCOR has implemented a single General Ledger (SAP), bringing the following advantages: • the use of a single chart of accounts (with minimum local specificities, aligned with existing source systems); • one system for one IT solution; • streamlined, integrated and standardized processes across the
In addition, and without calling into question the implementation of internal control rules by SCOR and its managers, Executive Management requests, within the framework of the reporting and quarterly consolidation procedure, that all local managers of Group entities, as well as Senior Managers of SCOR Global P&C, of SCOR Global Life and of certain Group functions such as tax and consolidation, prepare a specific quarterly statement for the Chairman and Chief Executive Officer, and for the Group Chief Financial Officer in internal management representation letters (IMRL) as to the reliability and fair presentation of the financial statements of the entities they manage and the effectiveness of the internal controls. Management of the SCOR Global P&C and SCOR Global Life business units review the individual entity level internal representation letters and submit a business unit letter. The results of all internal management representation letters are analyzed and monitored by a committee including the General Secretary of SCOR, the Group General Counsel, the Group Chief Accounting Officer and the Head of the IFRS Center of Excellence. The key points are communicated to the Group Chief Financial Officer and the Group Chief Executive Officer, and to the Head of Internal Audit.
3.3.8. CONCLUSION ON THE CONTROL PROCEDURES IMPLEMENTED SCOR believes that its risk management and internal control systems are appropriate and adapted to its activities and is engaged in an ongoing process to improve its internal control standards and their implementation.
Pursuant to Article 19 of Regulation (EU) 2017/1129 of June 14, 2017 of the European Parliament and Council, the following information is incorporated by reference in this Universal Registration Document (URD): • The consolidated financial statements as at December 31, 2019 are included from pages 157 to 240 and the Statutory Auditors’ report on these consolidated financial statements as at December 31, 2019 is included from pages 240 to 245 of the Universal Registration Document filed with the AMF on March 13, 2020 under Number D.20-0127 (and from pages 157 to 240 and from pages 240 to 245, respectively, of the free translation into English of the above mentioned Universal Registration Document. The translation is available on SCOR’s website www.scor.com); • The consolidated financial statements as at December 31, 2018 are included from pages 163 to 248 and the Statutory Auditors’ report on these consolidated financial statements as at December 31, 2018 is included from pages 249 to 255 of the Registration Document filed with the AMF on March 4, 2019 under Number D.19-0092 (and from pages 163 to 248 and from pages 249 to 255, respectively, of the free translation into English of the above mentioned Registration Document. The translation is available on SCOR’s website www.scor.com).
Accounts receivable from assumed insurance and reinsurance transactions Note 9 6,564 6,724
04 CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of income 4.2. CONSOLIDATED STATEMENT OF INCOME
Earnings per share (diluted) Note 22 1.25 2.25 1.70 164 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
04CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of comprehensive income 4.3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Items that will not be reclassified subsequently to income (12) (24) (18)
04 CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement of cash flows 4.4. CONSOLIDATED STATEMENT OF CASH FLOWS
Net cash flows provided by/(used in) operations Note 12 988 841 891
Acquisitions of consolidated entities Note 4 (2) (1) (13) (1) (75) (2)
Disposals of consolidated entities, net of cash disposed of - - 4 (3)
Cash used to redeem financial liabilities Note 14 (208) (99) (658) (7)
Cash and cash equivalents at January 1 Note 12 1,435 1,175 1,001
Net cash flows provided by/(used in) financing activities (41) (373) (638)
USD 625 million in 2018. (7) Cash used to redeem financial liabilities includes the redemption of two subordinated debts, CHF 315 million and CHF 250 million.
Allocation of prior year net income - - - 422 - (422) - - -
Net income for the year ended December 31, 2020 - - - - - 234 - (4) 230
Revaluation – Assets available for sale - - 199 - - - - - 199
Effect of changes in foreign exchange rates - - - (523) - - - - (523)
Net gains/(losses) on cash flow hedges - - - 22 - - - - 22
(1) Reduction of treasury shares for EUR 11 million mainly coming from the cancellation of shares related to the share-buy-back program. (2) Issuance of shares related to the exercise of stock options of EUR 4 million (EUR 2 million in share capital and EUR 2 million in additional paid-in capital).
This resulted in the creation of 189,700 shares during the year ended December 31, 2020. These movements were offset by a reduction in Group capital through the cancellation of treasury shares of EUR 21 million (EUR 4 million in share capital and EUR 17 million in additional paid-in capital).
Allocation of prior year net income - - - 322 - (322) - - -
Other comprehensive income net of tax - - 359 123 - - - - 482
Remeasurements of post-employment benefits - - - (31) - - - - (31)
(1) Effect due to first time application of IFRS 16 and IFRIC 23 (refer to Note 1.3 – IFRS standards applied for the first time and IFRS standards published but not yet effective).
(2) Reduction of treasury shares of EUR 284 million mainly due to the cancellation of shares related to the share-buy-back program. (3) Issuance of shares related to the exercise of stock options of EUR 9 million (EUR 3 million in share capital and EUR 6 million in additional paid-in capital).
This resulted in the creation of 509,135 shares during the year ended December 31, 2019. These movements were offset by a reduction in Group capital through the cancellation of treasury shares of EUR 248 million (EUR 51 million in share capital and EUR 197 million in additional paid-in capital).
Net gains/(losses) on cash flow hedges - - - (6) - - - - (6)
Comprehensive income net of tax - - (301) 119 - 322 - - 140
The consolidated financial statements as at and for the year ended December 31, 2020 will be presented for approval at the 2021 Annual Shareholders’ Meeting.
The financial statements of material subsidiaries are prepared for the same accounting period as for the parent company. All material intragroup balances and transactions, including the result of intercompany transactions, are fully eliminated.
Consequences of the United Kingdom’s referendum to leave the European Union
The impact of the referendum on the United Kingdom’s membership in the European Union has led to heightened financial market volatility and increased political and economic uncertainty. To prepare for Brexit the Group has set up a new entity, SCOR Europe SE. With effect from January 1, 2019, SCOR Europe SE, a 100%-owned subsidiary of SCOR SE, has started to underwrite new and renewed business relating to risks located in the EEA that can no longer be accepted by SCOR UK Company Ltd. after the end of the Brexit date. SCOR Europe SE will also take over all commitments from policies previously issued by SCOR UK Company Ltd. which the latter can no longer honor following Brexit and in absence of specific agreements to this extent.
The other key currencies in which the Group conducts business and the exchange rates used for the preparation of the consolidated financial statements are as follows: EUR per foreign currency unit Closing rate as at
As at December 31, 2020, 2019 and 2018, the Group has one net investment hedge in place (see Note 8.9 – Derivative instruments).
At each period end, the items on the balance sheet denominated in a foreign currency must be translated into the functional currency, using the following procedures: • monetary items and non-monetary items measured at fair value through income are translated at end of period exchange rates and the resulting gains and losses are recorded in the statement of income; • other non-monetary items are translated: — at the exchange rates in effect on the transaction date for items measured at historical cost, or — at the end of period exchange rates if they are measured at fair value, and
Certain specific reinsurance accounting principles are described directly within Notes 9 – Accounts receivable from and payable on assumed and ceded insurance and reinsurance transactions, 11 – Deferred acquisition costs, 16 – Net contract liabilities, and 20 – Net retrocession result. Further accounting principles and methods related to reinsurance activities are described below: Classification and accounting of reinsurance contracts
Unearned premium reserves represent the portion of premiums written that relate to the unexpired terms of contracts and policies in force. Such reserves are computed by pro-rata methods based on statistical data or reports received from ceding companies. Reinstatement premiums are estimated after the occurrence of a significant loss and are recorded in accordance with the contract terms based upon paid losses and case reserves reported in the period. Reinstatement premiums are earned when written.
For the measurement of deferred acquisition costs (DAC), value of business acquired (VOBA) and reserves recognized for different insurance portfolios, SCOR applies the shadow accounting principles stipulated in IFRS 4. As the amortization of DAC (for the Life business) and VOBA is calculated using expectations for estimated revenues from investments and the measurement of reserves is based on the discount rate reflecting directly the performance of assets, the corresponding portion of the unrealized gains and losses recorded under available-for-sale financial investments is considered as shadow DAC, shadow VOBA and shadow reserves and offset directly in shareholders’ equity.
Participations in syndicates operating at Lloyd’s of London are accounted for on an annual basis with a delay due to the transmission of information from syndicates that the Group does not control. The Group recognizes its proportionate share of the syndicates’ insurance and reinsurance premiums as revenue over the policy term, and claims, including an estimate of claims incurred but not reported. At the end of an underwriting year, typically three years after the policy’s inception, syndicates reinsure all remaining unsettled liabilities into the following underwriting year, a mechanism known as Re-Insurance To Close (“RITC”). If the Group participates in both accepting and ceding transactions and has increased its participation, RITC paid is reduced, which generates an RITC receivable. This reflects the fact that the Group has assumed a greater proportion of the business of the syndicate. If the Group has reduced its participation from one year of account to the next, the RITC receivable is eliminated, generating an RITC payable. This reflects the reduction in the Group’s exposure to risks previously written by the syndicates. The Group recognizes Lloyd’s RITC in claims and benefits to ensure consistency with other reinsurance transactions and to present a true and fair view.
These amendments are effective for annual periods beginning on or after January 1, 2021, with no restatement required. The EU endorsed these amendments on January 14, 2021.
• On June 25, 2020 the IASB issued Amendments to IFRS 17 with a new mandatory effective date of January 1, 2023. The IASB also decided to extend to 2023 the temporary exemption for insurers to apply IFRS 9, so that both IFRS 9 and IFRS 17 can be applied at the same time. This Amendment is yet to endorsed by the EU.
• During 2018, SCOR performed an initial impact assessment of classification and measurement of its financial assets under IFRS 9. This initial assessment was based on available information at the time and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information becoming available in the future. The tables below relate to the additional disclosures required when the IFRS 9 – Deferral Approach is applied. Disclosures are based on the current financial assets portfolio and on the assessment conducted in 2020.
Financial assets with contractual terms that meet the SPPI test definition 20,075 210
(2) Financial assets include those held by the Group on behalf of third parties as part of its asset management activities. The elimination of third party shares is presented as “Other liabilities”.
The following table presents information about the credit risk exposure related to financial assets that meet the SPPI criteria. The carrying amount under IAS 39 corresponds to the fair value for assets classified as AFS and FVPL and to the carrying amount before impairment for assets booked at cost or amortized cost: In EUR millions Carrying amount under IAS 39 as at December 31, 2020
The fair value for financial assets that meet the SPPI criteria and that do not have a low credit risk (i.e those rated < BBB or not rated) corresponds to the carrying amount before impairment shown in the table.
• On May 18, 2017, the IASB published IFRS 17 – Insurance
Contracts which will replace the current guidance in IFRS 4 – Insurance Contracts. After making a number of amendments, the final Standard IFRS 17 was issued by the IASB on June 25, 2020. The Standard has a mandatory effective date of January 1, 2023, with earlier application permitted. The amendments address targeted improvements and some of the concerns and implementation challenges that were identified after IFRS 17 – Insurance Contracts was published in 2017. The IASB also extended to 2023 the temporary exemption for insurers to apply IFRS 9, so that both IFRS 9 and IFRS 17 can be applied at the same time. The final Standard on Insurance Contracts still needs to be endorsed by the EU.
IFRS 17 will significantly change the accounting for insurance contracts as currently applied. IFRS 17 introduces a current fulfilment measurement approach as the general model for all insurance and reinsurance contracts. Insurance obligations will be the sum of current fulfilment cash flows and the unearned profit for a contract or group of contracts. Current fulfilment cashflows comprise the discounted expected future cash in- and outflows in the boundary of a contract or group of contracts, including a risk adjustment. The unearned profit is called CSM (Contractual Service Margin). Contracts that are onerous on initial recognition require an immediate loss recognition. Insurance contracts will be re-measured based on current market information at each reporting date. Under IFRS 17, the performance of the Group will mainly be depicted through the insurance service result (the profit earned from providing (re)insurance coverage) and the financial result (investment income from managing insurance assets and insurance finance expense from discounting insurance obligations). Gross written premiums will no longer be presented on the face of the income statement. Presentation of balance sheet and income statement will change under IFRS 17 compared to current practice. The new Standard also requires additional disclosures and reconciliations to enable users of the Financial Statements to understand the amounts recognized on the balance sheet and in total comprehensive income as well as the risks embedded in insurance contracts that the Group issues. IFRS 17 requires significant changes in systems and processes. SCOR continued to work on the implementation phase of the IFRS 17 project throughout 2020. The final effective date of IFRS 17, January 1, 2023 has been considered in the overall project planning.
Therefore, any of the impacts described below should be understood in this context as management judgments and estimates made based on evolving analysis and the wide range of theoretical hypothesis which are still highly evolutive. At this stage, none of the scenarios, assessments, impact analysis or figures can be considered as certain or definitive.
The Group consolidated financial statements are prepared under the going-concern assumption and include the current assessment of claim costs for SCOR’s P&C and Life business units (EUR 284 million and EUR 314 million Covid-19 related claims, net of retrocession and before tax, respectively), based on data currently available, information received from cedents to date and the results of models used. These impacts comprise notified claims (EUR 187 million for the Life business unit and EUR 104 million for the P&C business unit) and estimates of incurred but not reported claims, increasing insurance contract liabilities. The assessment performed as at December 31, 2020 is based on parameters that are still to a great extent estimated, even if taking information known at this stage into account. Clearer information about actual exposure is expected further in 2021.
For the Life business unit, the main exposure arises in the U.S, accounting for EUR 283 million of claim costs, net of retrocession and before tax. In other markets, Covid-19 related claims amount to EUR 31 million (net of retrocession and before tax) in 2020. Key assumptions in determining claims costs include epidemiological assumptions in relation to expected population impacts from Covid-19 and assumptions in relation to how this translates to the (re)insured population.
For the P&C business unit, the Group’s exposure comes mainly from Credit, Surety & Political risks and from Property Business
Interruption. Regarding Credit, Surety and Political Risks, limited cedent and insured information has been received to date, and the assessment is based upon models calibrated for forecasts of the impact of Covid-19 on growth and for the extensive intervention measures from governments and central banks. Regarding Property Business Interruption, SCOR has estimated that its exposures relate to a very small amount of affirmative pandemic coverage and nondamage Business Interruption, mostly in Western Europe, with non-damage Business Interruption scarce in the U.S. and largely sub-limited in APAC. Uncertainty remains in terms of estimating the cost of this business interruption notably in light of coverage and aggregation clauses.
SCOR Global P&C has further identified a decrease in gross written premium for the financial year 2020 by EUR 225 million attributable to Covid-19, which has an impact on the net result of EUR (6) million. For the Life business unit, no significant impact on gross written premiums has been identified in the reporting period.
In assessing potential impairment of non-financial assets management considered whether triggers for impairment were identified. No impairment triggers were identified for goodwill related to insurance and non-insurance business activities in the course of 2020 and the annual impairment tests performed did not identify impairments as recoverable amounts exceeded in all cases the respective carrying amounts. The VOBA impairment review did take into consideration potential impacts from the pandemics, not resulting in changes to the amortization plan.
Lease payments from SCOR in a lessee position, mainly related to leases of office buildings, were not impacted by Covid-19 as at December 31, 2020. Rent concessions granted by SCOR as a lessor did not have material impacts on the financial performance.
Certain non significant subsidiaries have been included within the Group financial statements under the equity method and are not fully consolidated on a line-by-line basis.
Investment funds and real estate entities are fully consolidated in accordance with the aforementioned principles. Noncontrolling interests in fully consolidated investment funds are presented in “Other liabilities” as the third-party holders have an unconditional right to sell their holdings to SCOR. 100% of assets (including insurance business investments and cash and cash equivalents), liabilities, cash flows and income statement of the fully consolidated funds, are therefore reflected in SCOR’s consolidated financial statements.
The Group sponsors a number of catastrophe bond (“Cat bond”) notes issued by Atlas special purpose vehicles (SPVs). In addition, SCOR uses a structured retrocession agreement with a protected cell company. These vehicles and entities are not consolidated by the Group as SCOR does not control them, is not liable for any residual risk or benefit of ownership and has no ability to affect their returns.
The table above is based on 2020 and 2019 provisional financial information.
In 2020, SCOR has sponsored a new catastrophe bond (“cat bond”), Atlas Capital Reinsurance 2020 DAC, which provides the Group with multi-year risk transfer capacity of USD 200 million to protect itself against storms in the U.S. and earthquakes in the U.S. and Canada. The risk period for Atlas Capital Reinsurance 2020 DAC will run from April 30, 2020, to May 31, 2024. The instrument is accounted for as a derivative instrument.
On December 18, 2019, as part of its policy of diversifying its capital protection tools, SCOR entered into a structured retrocession transaction with Mangrove Insurance PCC Limited, which provides the Group with a multi-year source of retrocessional capacity. The transaction covers longevity risks arising from nine existing in-force reinsurance treaties with clients in the United Kingdom. The risk period for Mangrove Insurance PCC Limited runs from October 1, 2019 until October 1, 2048.
On February 13, 2020, SCOR acquired a majority interest (60%) in AgroBrasil Administração e Participações Ltda (“AgroBrasil”), Brazil’s family-owned leading Managing General Agent distributing fruit and grain loss of crop quality and yield insurance protection to Brazilian farmers.
In accordance with IAS 39, the present value of the liability corresponding to the deferred purchase price for the remaining 40% is included in the purchase price and has been recognized in the Group’s liabilities.
SCOR obtained control of AgroBrasil at the closing date of the transaction. AgroBrasil has therefore been fully consolidated in the SCOR Group financial statements since February 13, 2020.
In 2019, the Group accounted for the following acquisition: Coriolis Capital
On September 10, 2019, SCOR Investment Partner SE acquired 100% of Coriolis Capital Limited (“Coriolis Capital”). Coriolis Capital is a London based fund manager specialized in the Insurance-Linked Securities (“ILS”), investing in catastrophe bonds, collateralized reinsurance and climate derivatives. This acquisition will enable SCOR to accelerate its development in the field of ILS.
Coriolis Capital has been fully consolidated in the SCOR Group financial statements since September 10, 2019, after SCOR obtained the regulatory approvals from the authorities, notably from the Financial Conduct Authority (FCA) in the UK.
The identifiable assets acquired and liabilities assumed have been recorded at their fair value for purposes of the opening balance sheet and included in the consolidated accounts of SCOR using the Group’s accounting principles in accordance with IFRS during the third quarter of 2019. The net assets amounted to GBP 2 million (EUR 3 million, based on the EUR/GBP exchange rate at the acquisition date).
Mathematical reserves, claims reserves and share of retrocessionaires in contract liabilities have been recorded based on best estimate assumptions at the time of acquisition.
No pro forma information is required since the financial situation of the Group is not significantly impacted by the consolidation of MutRé.
The purchase price was allocated based on the fair value of assets acquired and liabilities assumed at the date of acquisition, determined in accordance with IFRS 3 – Business Combinations. This resulted in overall loss impact of EUR (1.9) million recognized in the income statement on the acquisition date, including a gain from bargain purchase of EUR 0.9 million, and the revaluation of shares previously held (the step acquisition) of EUR (2.8) million.
Management reviews the operating results of the SCOR Global P&C and SCOR Global Life segments individually for the purpose of assessing the operational performance of the business and to allocate resources. The amount of inter-segment transactions, primarily in relation to gross written premiums, is not significant. Hub shared service costs are allocated to the business units using a headcount allocation key.
The following table sets forth the operating results for the Group’s operating segments and its corporate cost center for the financial years ended December 31, 2020, 2019, and 2018. Inter-segment recharges of expenses are eliminated at consolidation level.
Change in fair value of investments (1) 19 - 18 (1) 26 - 25 - (13) - (13)
Change in impairment and amortization of investments (5) (56) - (61) (6) (34) - (40) (3) (29) - (32)
OPERATING RESULT (BEFORE IMPACT OF ACQUISITIONS) 333 276 (130) 479 437 407 (131) 713 371 393 (132) 632
SCOR Global Life’s result reflects a robust flow of new business and the strategic expansion of the franchise in various key markets and product lines. The in-force book globally contributed positively to the results, despite the underlying US mortality claim experience being higher than expected, thanks to a strong overall reserve position, as well as successful premium rate increases on certain individual reinsurance treaties. Both claim experience and in-force management actions may vary over time.
In 2020, SCOR Global Life achieved a technical margin of 5.8%, compared to 7.5% in 2019. The 2020 technical margin is impacted by -3.7 pts. due to the Covid-19 pandemic. As part of the technical margin, the net technical result absorbed EUR 314 million claims caused by the Covid-19 pandemic, of which
For SCOR Global P&C the net technical result for the financial year 2020 reflects a net combined ratio (calculated by dividing the sum of Non-Life claims, including natural catastrophes, commissions and management expenses net of retrocession, by earned premiums net of retrocession) of 100.2% compared to 99.0% for the financial year 2019. Natural catastrophes had an impact of 6.8% on the net combined ratio, compared to 11.6% for the financial year 2019. Covid-19 had an impact of 4.7% on the net combined ratio for the financial year 2020.
December 31, 2018. Gross written premiums previously reported for EMEA were EUR 2,980 million for the year ended
Share of retrocessionaires in insurance and investment contract liabilities 1,341 392 48 1,781 1,706 485 36 2,227
Cash flows by segment are presented as follows: In EUR millions
Cash and cash equivalents at January 1 593 842 1,435 576 599 1,175 509 492 1,001
Net cash flows provided by/(used in) investing activities 2 (466) (464) 46 (265) (219) (93) (8) (101)
Effect of changes in foreign exchange rates on cash and cash equivalents (74) (40) (114) 5 6 11 6 16 22
Cash and cash equivalents at December 31 (1) 708 1,096 1,804 593 842 1,435 576 599 1,175
Net cash flows provided by operating activities amounted to EUR 988 million in 2020 (2019: EUR 841 million and 2018: EUR 891 million).
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized.
Goodwill represents the excess of (a) the aggregate of consideration transferred, the value of any minority interest in the acquiree, and, for business combinations achieved in stages, the fair value, at the acquisition date, of any investment previously held by the Group, over (b) the net amount of the identifiable assets acquired and liabilities assumed at the date of acquisition.
It is initially measured at cost which is calculated as the difference between the business combination consideration transferred and the fair value of the Group's share at acquisition date. The fair value is the net amount of identifiable assets and assumed liabilities at the acquisition date.
At least annually, goodwill is tested for impairment. For the purposes of impairment testing, goodwill acquired in a business combination is allocated by SCOR to the groups of cash generating units (CGUs) that are expected to benefit from the profitability and synergies of the business combination. SCOR groups its CGUs by operating segment, i.e. SCOR Global P&C and SCOR Global Life. This is consistent with the way SCOR manages and monitors its business and cash flow. Goodwill arising from non insurance activities is allocated to separate CGUs and tested for impairment at CGU level. As part of the impairment testing, SCOR assesses whether the recoverable amount of operating segments is at least equal to the total carrying amount of operating segments (including goodwill). If it is determined that an impairment exists, the total carrying amount is adjusted to the recoverable amount. Any impairment loss is allocated to goodwill first, is recorded in income in the period in which it arises and is not reversible.
(1) Relates to Coriolis Capital (See Note 4 – Acquisitions and disposals). (2) Relates to AgroBrasil (See Note 4 – Acquisitions and disposals).
Goodwill (carrying amount as at December 31, 2020: EUR 71 million) and trademark (carrying amount as at December 31, 2020: EUR 136 million, refer to Note 10.1. – Other intangible assets) of the CGU Château Mondot have been tested for impairment at year end 2020, using the value in use approach. The recoverable amount of the CGU has been valued on the basis of the present value of forecast cash flows determined in the context of a long-term business plan to reflect the wine industry specificities and notably the length of the production and distribution cycles of a vintage.
The annual growth rate applied beyond the business plan horizon is 1.50% (growth rate used in 2019: 1.50%). Future cash flows after taking tax into consideration have been discounted using a post-tax discount rate of 4.5% (rate used in 2019: 4.5%). A standard CAPM (Capital Asset Pricing Model) approach is used to determine the adequate weighted average cost of capital (WACC) of Chateau Mondot. Based on these assumptions, no impairment charge has been recognized.
However, subsequent impairment tests may be based upon different assumptions and future cash flow projections, which may result in an impairment of these assets.
(1) In 2020 there were no disposals and amortization of VOBA resulting from the derecognition of VOBA due to treaty terminations to report (2019: EUR 0 million). Regular amortization related to business in force amounts to EUR (57) million for the year ended December 31, 2020 and EUR (64) million for the year ended December 31, 2019.
Financial assets The Group classifies its financial assets in the following categories: available-for-sale, fair value through income, loans and receivables, derivative instruments and cash and cash equivalents. Currently no assets are classified as held-tomaturity. Sales and purchases of assets are recognized on the trade date. Once a financial asset has been recorded, it is measured according to its asset category, determined according to the methods set forth below. Financial assets are derecognized when the contractual rights to the cash flow of the financial asset expire or are transferred, and the Group has transferred substantially the risks and rewards incidental to the ownership of the financial asset.
The Group’s insurance business investments and cash by category and fair value hierarchy are presented below: In EUR millions
Cash and cash equivalents Note 12 1,804 1,804 - - -
Cash and cash equivalents Note 12 1,435 1,435 - - -
Total insurance business investments and cash include mutual funds that the Group manages and controls and which are also open to external investors. As at December 31, 2020, the carrying amount of assets under management eliminated in “Other liabilities” for consolidation purposes was EUR 3,131 million (December 31, 2019: EUR 2,625 million). Cash and cash equivalents include cash held on behalf of third parties as part of SCOR’s asset management activity for the amount of EUR 165 million as at December 31, 2020 (December 31, 2019: EUR 211 million).
In 2020 and 2019 respectively, there were no material gains or losses realized on the disposal of available-for-sale investments which were previously carried at cost.
Total impairment losses (net of reversal) recognized in 2020 amounted to EUR 39 million (2019: EUR 24 million), relating mainly to EUR 34 million on the equity portfolio (2019: EUR 13 million), EUR 0 million on loans and receivables (2019: EUR 2 million) and EUR 5 million on the debt securities portfolio (2019: EUR 9 million). Refer to Note 2 – Significant events and Covid-19 for information on the impact of the Covid-19 pandemic.
For unlisted equity instruments, fair value is determined according to commonly used valuation techniques.
• Level 2: models prepared by internal and external experts using observable market inputs.
The value of these instruments is neither supported by prices observable on current market transactions in the same instrument nor is it based on available market data. If a fair value measurement uses inputs based significantly on unobservable inputs, it is classified within level 3 of the fair value hierarchy. Level 3 instruments consist mainly of derivative instruments primarily relating to the Atlas catastrophe and mortality bonds.
Impairment of financial assets At each reporting date, the Group assesses whether there is any objective evidence of impairment. The amount of impairment is recorded by asset category, as set forth below.
For available-for-sale equity securities which are listed on an active market, a line-by-line analysis is performed when there has been a decline in fair value as compared to the initial purchase price of more than 30%, or a consistent unrealized loss over a period of more than 12 months. The different factors considered in this analysis include the existence or inexistence of significant adverse changes in the technological, market, economic or legal environment in which the issuer operates. After consideration of these factors, if a security remains unimpaired, the Group ultimately considers objective evidence of impairment, as per IAS 39, by reference to three further key criteria being the existence or not of: • a consistent decline of more than 30% for 12 consecutive months; or • a magnitude of decline of more than 50%; or • a duration of decline of more than 24 months.
For certain investments, in addition to the above impairment guidelines, SCOR takes into consideration other important factors such as: • the fact that the asset is specifically excluded from any actively traded portfolio; • its ability and intent to continue to hold the investment for a significantly longer period than a normal investment; • its business relationship with the investee; and • the estimated long-term embedded value of the investment.
For debt securities and loans and receivables, an objective indicator of impairment relates primarily to proven default credit risk. Different factors are considered to identify those debt securities potentially at risk of impairment, including significant financial difficulty or default in payments, to enable the Group to conclude whether there is objective evidence that the instrument or group of instruments is impaired.
For financial instruments whose fair value cannot be measured reliably and which are measured at cost, a regular analysis is completed to determine if this remains appropriate given the nature of the investment and factors such as amounts realized and the appearance or re-appearance of a market or reliable value. Impairment assessments are completed dependent on the underlying nature of the investment and the expected future cash flows.
The following table shows the reconciliation between the opening and closing balances for assets categorized within level 3: In EUR millions Equity securities Debt securities Loans and receivables Derivative instruments Total
(1) Movements in derivative instruments are due to the change in fair value of Atlas Capital UK 2019 PLC and Atlas Capital Reinsurance 2020 DAC derivatives recorded in other operating expenses, and of the contingent capital facility, recorded in investment income.
Income and expense recognized in statement of income - - - (40) (1) (40)
(1) Movements in derivative instruments are due to the change in fair value of Atlas IX Series 2016-1 and Atlas Capital UK 2019 PLC derivatives recorded in other operating expenses, and of the contingent capital facility, recorded in investment income.
Investment properties Real estate held by the Group is classified as investment property when it is held to earn rental income, for capital appreciation or both. Properties are measured at cost, net of accumulated depreciation and impairment losses. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Category Useful life
Repair and maintenance costs are charged to the statement of income during the financial period in which they are incurred. All costs directly associated with purchases or construction of property are capitalized. All subsequent value-enhancing capital expenditures are classified as acquisition costs and capitalized when it is probable that the future economic benefits related to the item will flow to the Group and the cost of the investment property can be measured reliably.
Every five years, each investment property is subject to an indepth analysis of its market value by an independent appraiser with recent experience in the location and category of the investment property assessed and approved by the domestic regulators (Autorité de Contrôle Prudentiel et de Résolution in France). Annually, the appraised market value is updated by the same independent appraiser according to changes in the local market and/or the property’s rental and technical situation.
At the end of each reporting period, an impairment test is required when there is an indication of possible impairment. One such indicator is that the building’s market-value is below its carrying amount. If any impairment indicator is present, the Group assesses the recoverable amount of the building in question. The recoverable amount is the higher of the property’s fair value less cost to sell and its value in use. The value in use is assessed using an internal discounted cash flow model based on current market assumptions and considers rental situation, completeness of construction and renovation work, as well as recent developments within the local real estate market. If the recoverable amount is greater than 20% below the carrying amount, the resulting impairment loss is recognized in the statement of income.
The movements in real estate investments are analyzed as follows: In EUR millions Real estate investments Finance leases Total
In 2019, increase in real estate investments related to the costs of existing buildings currently under construction and renovation work for a total of EUR 64 million. Disposals related to the sale of four buildings, resulting in a gain on sale of EUR 49 million.
The fair value of real estate investments is categorized within level 3. The valuation techniques and unobservable inputs were as follows as at December 31, 2020 and 2019: Real estate
The rental income related to investment property was EUR 31 million in 2020 (2019: EUR 38 million) and the related direct operating expenses amounted to EUR 9 million (2019: EUR 10 million).
Note•8.5 BREAKDOWN OF SECURITIES AVAILABLE-FOR-SALE AND AT FAIR VALUE THROUGH INCOME
As at December 31, 2020, the increase in loans and receivables of EUR 198 million compared to year-end 2019 is mainly due to the increase of infrastructure and real estate loans partially offset by the decrease funds held by ceding companies (mostly linked to Life business).
Derivative instruments and hedging instruments Derivative instruments are recorded and classified at fair value through income unless they are designated as hedging instruments.
The accounting method varies according to whether or not the derivative instrument is designated as a hedging instrument, as described below in “Hedging instruments”.
For hedges of net investments in a foreign operation, the portion of gains or losses on the hedging instrument considered as the effective portion of the hedge is recorded directly in shareholders’ equity. Any ineffective portion of the hedge is recognized in the statement of income.
(1) The risk period for Atlas IX 2016-1 ended on December 31, 2019.
Atlas Capital UK 2019 PLC provides the Group with multi-year risk transfer capacity of USD 250 million to protect itself against named storms in the US, earthquakes in the US and Canada, and windstorms in Europe. The risk period for Atlas Capital UK 2019 runs from June 1, 2019, to May 31, 2023.
Expected loss US and Canadian earthquake based on AIR model 4.21% 3.51%
SCOR has entered into interest rates swaps to cover its exposure to financial liabilities with variable interest rates relating to real estate investments. The fair value of these swaps is obtained from the banking counterparty and is based on market inputs. As part of the usual analysis of accounts processes, these third-party valuations are checked for reasonableness against internal models. The total notional amount relating to these swaps is EUR 44 million as at
Net interests paid under these swaps is not material in 2020 (2019: EUR 1 million).
Cash-flow hedge accounting is applied when the hedging relationship is determined to be highly effective throughout the term of the hedge. Effectiveness testing is performed at the inception of the hedging relationship and at each reporting date throughout the term of the hedge relationship. Where hedge effectiveness is not attained, the hedging instrument (interest rate swap) is measured at fair value through income from the date the hedge relationship ceases to be effective. As at December 31, 2020, the fair value of the interest rate swaps was a liability of EUR 2 million (December 31, 2019: liability of EUR 2 million). The amount recognized in other comprehensive income in 2020 is not material (2019: EUR (1) million). The amount recognized in the statement of income in 2020 is not material (2019: EUR 0 million).
SCOR purchases and sells forward currency contracts to reduce its overall exposure to balances held in currencies other than the functional currencies of its subsidiaries. The contracts are recorded at their fair value based on valuations provided by banking counterparties using market inputs.
See Note 13 – Information on share capital, capital management, regulatory framework and consolidated reserves, for the details on the issuance of warrants to J.P. Morgan in the context of the contingent capital facility program.
Amounts related to this transaction are recorded in the balance sheet as assets, recognized at fair value through income, and as other liabilities representing the amount of commission payable. In the absence of observable market inputs and parameters to reliably determine a fair value for these derivative instruments, the best measure of fair value is the expected cost of the instrument, corresponding to the total annual fees payable under the arrangement net of the warrants’ subscription amounts received, amortized over the life of the instrument. These assets are disclosed as level 3 investments within insurance business investments (see Note 8.1 above).
Note•9 ACCOUNTS RECEIVABLE FROM AND PAYABLE ON ASSUMED AND CEDED INSURANCE AND REINSURANCE TRANSACTIONS
A reinsurance asset is recognized to reflect the amount estimated to be recoverable under the reinsurance contracts in respect of the outstanding claims reported under reinsurance liabilities assumed. The amount recoverable from reinsurers is initially valued on the same basis as the underlying claims provision except in the case of non-proportional retrocession whether by risk or by event, where it is SCOR’s policy to only recognize recoveries, including IBNR recoveries upon confirmation of the occurrence of a loss booked which triggers the retrocession contract.
Gross receivables from ceding companies 48 400 448 514 443 957
Accounts receivable from ceded reinsurance transactions 150 136 286 126 225 351
Amounts payable on assumed insurance and reinsurance transactions (375) (335) (710) (536) (374) (910)
Estimated premiums payable to retrocessionaires, net of commission (477) (284) (761) (359) (373) (732)
The Group conducted its annual assessment of the amortization periods and amortization methods of these finite useful life intangible assets and concluded that both the amortization periods and existing amortization methodology are appropriate. The amortization expense recognized for other intangible assets with finite useful life was
The prices of the Lloyd’s syndicate participations from the Lloyd’s auction process are key inputs in the impairment tests conducted. In 2020 no depreciation has been recognized. In 2019, an impairment of EUR 5 million was recognized due to the nonrenewal of two participations in Lloyds syndicate.
SCOR uses the exemptions for certain short-term leases and leases of low-value assets and continues to recognize the lease payments for those contracts as an expense on a straight-line basis. IFRS 16 is not applied to leases for intangible assets (for example IT licenses).
The right-of-use assets amounted to EUR 161 million as of December 31, 2020. They correspond mainly to EUR 159 million in leased office space and EUR 2 million in car leases and office equipment.
CARRYING VALUE AS AT DECEMBER 31, 2019 81 78 1 2
CARRYING VALUE AS AT DECEMBER 31, 2020 161 159 1 1
In 2020, increases are mainly due to the recognition of two new real estate rental contracts in Switzerland and the United States and decreases mainly relate to the corresponding previous contracts that have expired.
In the period under review, no significant expense relating to short term leases and to leases of low-value items has to be reported.
Revenues coming from sublease contracts represent EUR 3 million (2019: EUR 4 million, 2018: EUR 4 million) and are related to Switzerland, France and US.
Refer to Note 14 – Financial liabilities for further information on lease liabilities.
Change in scope of consolidation and contract portfolio exchanges - - - - - - - 12 12
Other changes (including change in shadow accounting) (26) - (26) (67) - (67) 36 - 36 208 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
The Group’s liquidity, defined as cash, cash equivalents, bank overdrafts and short-term government bonds with maturities of more than three months and less than twelve months, which is well diversified across a limited number of banks, amounts to
EUR 1,988 million as at December 31, 2020 (December 31, 2019: EUR 1,532 million). It includes EUR 184 million of short-term governments bonds as at December 31, 2020 (December 31, 2019: EUR 97 million).
Net cash flows provided by/(used in) operations, excluding changes in working capital 1,643 942 740
Note•13 INFORMATION ON SHARE CAPITAL, CAPITAL MANAGEMENT, REGULATORY FRAMEWORK AND CONSOLIDATED RESERVES
Share issue costs External costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax from the proceeds of the issue in the line “Additional paid-in capital”.
Treasury shares Treasury shares and any directly related costs are recorded as a deduction from shareholders’ equity. When treasury shares are subsequently sold or reissued, any consideration received is included in consolidated shareholders’ equity net of any directly related costs and tax effects. Accordingly, there is no related income, gain or loss recognized in the statement of income.
The authorized share capital of the Company is composed of 186,730,076 shares at December 31, 2020, 187,049,511 shares at the end of 2019 and 193,085,792 shares at the end of 2018 with a par value of EUR 7.8769723 each.
• the issuance of new shares relates to the exercise of stock options for EUR 4 million (EUR 2 million in share capital and EUR 2 million in additional paid-in capital). This resulted in the creation of 189,700 new shares throughout the year.
In 2019, the movements are due to the following operations: • the Board of Directors’ meeting held on April 26, 2019 decided to reduce the Group’s share capital by cancellation of 6,545,416 treasury shares for EUR 248 million (EUR 51 million in share capital and EUR 197 million in additional paid-in capital); and
The shares issued in 2020, 2019 and 2018 were issued at a par value of EUR 7.8769723 per share.
The resolution to be presented to the Annual Shareholders’ Meeting called to approve, during the first half of 2021, the financial statements for the financial year 2020, sets out the distribution of a dividend of one euro and eighty cents (EUR 1.80) per share for the financial year 2020.
Shareholders’ Meeting scheduled to be held on April 17, 2020, that a gross dividend of EUR 1.80 per share be distributed for the 2019 fiscal year.
Retrocession used by the Group includes a wide range of protections including proportional and non-proportional covers. The Group selects the level of its retrocession to third parties once a year to ensure that its retained risk profile is in line with its predefined risk tolerance limits, to help the Group achieve its return on capital and solvency objectives.
SCOR’s solvency is actively monitored and managed through a solvency scale coupled with a clear escalation process. The solvency scale includes an optimal solvency range targeted by the Group as a solvency ratio between 185% and 220%, as well as the management initiatives which could be carried out to steer the solvency position back to the optimal range if need be.
On December 3, 2019, SCOR arranged a contingent capital facility with J.P. Morgan taking the form of a contingent equity line, providing the group with EUR 300 million coverage in case of extreme natural catastrophes or life events impacting mortality. Under this arrangement, SCOR issued 9.4 million warrants in favor of J.P. Morgan, each warrant giving J.P. Morgan the right to subscribe to two new SCOR shares. J.P. Morgan has undertaken to exercise accordingly the number of warrants necessary for the subscription of up to EUR 300 million (issuance premium included)
Included in other changes in consolidated reserves for the financial year 2020 is a net impact of EUR 5 million (net of tax) resulting from unrecognized intercompany expenses and overstated claims payments in prior years.
The following table presents an overview of the debt issued by the Group: In EUR millions Maturity
(1) Includes EUR 39 million in accrued interest at December 31, 2020 (December 31, 2019: EUR 38 million). (2) These debts are not publicly traded. Therefore the carrying amounts are reflective of their fair value.
On October 20, 2020, SCOR redeemed the CHF 125 million undated subordinated notes issued on October 20, 2014 on the first call date. These CHF 125 million were already refinanced from the proceeds of the USD 125 million notes issued in 2019.
On October 1, 2014, SCOR issued EUR 250 million in perpetual subordinated notes, redeemable by SCOR on each interest payment date from October 1, 2025. The coupon has been set at 3.875% (until October 1, 2025), and resets every 11 years at the prevailing 11-year EUR mid-swap rate +3.7%.
In March 2018, in order to hedge the foreign exchange risk associated with this new debt issued, SCOR entered into crosscurrency swaps which exchange the principal and the coupons on the notes into Euro and mature on March 13, 2029. See Note 8 – Insurance business investments (Derivative instruments).
In December 2019, in order to hedge the foreign exchange risk associated with this new debt issued, SCOR entered into crosscurrency swap which exchanges the principal and the coupons on the notes into Euro and mature on March 13, 2029. See Note 8 – Insurance business investments (Derivative instruments).
On June 5, 2015, SCOR issued EUR 250 million in dated subordinated notes on the Luxembourg Euro market, redeemable by SCOR at each interest payment date, from June 5, 2027. The coupon has been set at 3.25% (until June 5, 2027, the first call date), and resets every 10 years at the prevailing 10-year EUR midswap rate +3.20% (until June 5, 2047, final redemption date).
Some provisions in the terms and conditions of notes allow for early redemption under certain conditions other than the liquidation of the issuer (e.g. tax, accounting and regulatory reasons). However, these early redemption cases are always (i) at the option of the issuer and no reimbursement can be imposed on the issuer by the noteholders; and (ii) subject to prior approval by the relevant supervisory authority.
In 2020, the main variation in property debts is due to the reimbursement of the loan subscribed by the SAS Pershing following the sale of one building and the amortization of the existing loans.
Where the Group expects the provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain.
The following table summarizes the amounts included in contingency provisions: In EUR millions Reserves for post employment benefits Other reserves Total
Pension liabilities The Group provides retirement benefits to its employees, in accordance with the laws and practices of each country. The main plans are in France, Switzerland, the US and Germany. Group employees in some countries receive additional pension benefits, paid as an annuity or in capital upon retirement. The benefits granted to Group employees are either in the form of defined contribution or defined benefit plans. Plan assets are generally held separately from the Group’s assets.
Defined contribution plans include plans whereby an employer makes periodic contributions to an external institution which manages all administrative and financial aspects. These institutions relieve the employer from all future obligations and manage the payment to employees of all amounts due (e.g. statutory pension scheme, complementary pension schemes (AGIRC/ARRCO in France), defined contribution retirement plans).
The defined benefit pension plans and other long-term benefits are mainly located in Switzerland, North America, France and Germany. These locations represent 45%, 22%, 15% and 13% respectively, as at December 31, 2020, (43%, 20%, 20% and 11%, respectively, as at December 31, 2019), of the Group’s obligation under defined benefit plans.
Duration as at December 31, 2020 19 years 27 years 11 years 14 years 9 years 16 years
Duration as at December 31, 2019 19 years 25 years 9 years 13 years 8 years 15 years
Service cost, net of plan amendments (2) (7) 5 - 11 6 5 - 7 4 3 -
Interest income on plan assets (3) - (1) (2) (5) (2) (1) (2) (4) (1) (1) (2)
In EUR millions As at December 31, 2020 As at December 31, 2019 As at December 31, 2018
The following table reconciles movements in the balance sheet amounts for the years ended December 31, 2020, 2019 and 2018: In EUR millions Total
Fair value of assets as at January 1 266 174 35 57 248 159 30 59 242 154 30 58
Asset gains/(losses) due to experience 10 1 - 9 20 10 2 8 (8) (3) (1) (4)
Fair value of assets as at December 31 281 182 35 64 266 174 35 57 248 159 30 59
NET DEFINED BENEFIT OBLIGATION AS AT DECEMBER 31 – DEFICIT 194 33 123 38 237 43 149 45 202 28 134 40 220 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
Funded or partially funded obligation as at December 31 371 209 66 96 372 213 63 96 326 184 49 93
Unfunded obligation as at December 31 104 6 92 6 131 4 121 6 124 3 115 6
Actuarial (gains)/losses immediately recognized in other comprehensive income (OCI) 16 3 12 1 31 14 13 4 24 1 23 -
The following table includes the allocation of plan assets as at December 31, 2020 and 2019: In EUR millions Total Switzerland Europe North America
As at December 31, 2020, employer contributions for the year ahead are expected to amount to EUR 13 million (2019: EUR 51 million).
At December 31, 2020, other provisions (EUR 33 million; at December 31 2019: EUR 31 million) include mainly EUR 22 million related to provisions for litigation (2019: EUR 23 million) and EUR 4 million covering contingent liabilities related to the Generali U.S. acquisition in 2013 (2019: EUR 4 million). For more information on litigation, refer to Note 26 – Litigation.
Life business In the Life business, treaty linked liabilities include mathematical reserves, unearned premium reserves and claim reserves.
Retrocessionaires’ share (Non-Life and Life business) The share of retrocessionaires in insurance and investment liabilities is calculated according to the contractual conditions on the basis of gross reserves. Allowances are established for estimated credit risks.
Embedded derivatives Derivatives embedded in reinsurance contracts that meet the definition of an insurance contract and are closely linked with the features and risks of the reinsurance host contract are not separated and are measured in accordance with the reinsurance host contract.
Ceded claims reserves & claims expense reserves (624) (971) (1,595) (685) (1,300) (1,985)
An aging analysis of reinsurance assets is included in the Universal Registration Document, in Section 3.2.5 – Management of credit risks.
The first table of this section presents the net claims reserves, net unearned premiums reserves and net deferred acquisition costs with ten years of history, recorded at the exchange rates applicable at each corresponding reporting date.
The first part of the table shows net incurred losses which is the sum of paid claims, the change in claims reserves and incurred but not reported reserves and the claims handling provisions, net of external retrocession.
The second part of the table shows net paid claims at constant exchange rates.
Gross claims reserves & estimates – end of year (1) 9,696 10,602 10,857 10,691 11,088 11,750 11,784 12,318 12,815 13,253 13,001
Ceded UPR – end of year 51 84 93 101 142 187 167 160 208 275 242
Net UPR – end of year 1,333 1,432 1,590 1,562 1,796 2,052 2,094 2,110 2,288 2,705 2,589
The table below presents a reconciliation of the opening and closing liability for claims reserves and claims estimates of SCOR Global P&C for the years ended December 31, 2020 and 2019.
GROSS CLAIMS RESERVES AND CLAIMS ESTIMATES AS AT JANUARY 1 13,253 12,815
Ceded claims reserves and claims estimates as at January 1 (1,300) (1,283)
Net claims reserves and claims estimates as at January 1 11,953 11,532
Net claim reserves and claims estimates as at December 31 12,030 11,953
Gross reserves, including IBNR reserves (in EUR millions) 49 68 5 8
Actual number of claims notified under non-proportional and facultative treaties (in units) 11,268 11,176 8,641 8,612
Average cost per claim (in EUR) (1) 20,114 21,533 4,892 5,223
(1) Does not include claims which do not incur any cost and claims notified only for precautionary reasons and whose amount is not evaluated.
The change in SCOR Global Life mathematical reserves for the years ended December 31, 2020 and 2019 is as follows: In EUR millions 2020 2019
The liability adequacy test conducted at each closing date did not detect any deficiency for either SCOR Global P&C or SCOR Global Life.
Share of retrocessionaires contract liabilities - 631 1,089 38 6 463 2,227
Total collateral from retrocessionaires in favor of SCOR (1) - 185 490 28 - 995 1,698
Share of retrocessionaires contract liabilities net of collateral - 446 599 10 6 (532) (2) 529
The total amount recognized over the vesting period is measured by reference to the fair value of long term compensation instruments granted, and by reference to the number of instruments expected to vest, taking into account presence conditions and performance conditions when they are not linked to the stock price. At each closing date, the number of instruments that are expected to vest is reviewed and the impact of any adjustments to initial estimates is recognized in the income statement with a corresponding increase in equity over the remaining vesting period.
The Group grants its employees and Corporate Executive Officers stock purchase or subscription option plans under the following terms: Plan Date of award by the Board Options exercisable on Date of expiration of plan Exercise price
The stock options can be exercised after four years regardless of whether the employee is still actively employed by the Group.
The average weighted remaining life of the options is 5.30 years in 2020 (5.55 years in 2019).
Expected life 4 years 4 years 4 years 4 years 4 years 4 years
All grants under the free share plans of April 28, 2020 and November 5, 2020 (except LTIP) are subject to a 3-year presence condition, and to performance conditions which are based on the strict compliance with the Group's ethical principles as set out on the Group's code of conduct, on the fulfilment of the corporate social responsibility (CSR) training obligation, on the solvency ratio and the SCOR Group’s ROE in fiscal year 2020, 2021 and 2022. The plan of November 5, 2020 also provides for a performance condition on the Total Shareholder Return (TSR) of SCOR among a panel of peers. It also provides for a two-year sale restricted period following the vesting period for 664,074 shares, grouped together in the plan entitled Plan 2 below.
The fair value of the free shares corresponds to the market value adjusted for dividends and non-transferability costs, estimated using a forward acquisition/disposal method. The following table lists the characteristics used in 2020, 2019 and 2018: November 5,
Corporate income tax (expense)/benefit reported in statement of income (106) (147) (107)
Impact from us tax reform reported in statement of income - - (68)
TOTAL INCOME TAX (EXPENSE)/BENEFIT REPORTED IN STATEMENT OF INCOME (106) (147) (175)
INCOME TAX (EXPENSE)/BENEFIT REPORTED IN EQUITY (32) (103) 96 232 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
A reconciliation of the income tax expense, obtained by applying the French tax rate of 32.02% for 2020, 34.43% for 2019 and 2018 to income (loss) before corporate income taxes and excluding share in results of associates, to the actual corporate income tax expense recorded in the consolidated statement of income is presented in the table below. The effective tax rate in 2020 is
Corporate income taxes from prior years result mainly from extended tax loss carry back of US entities to prior periods with 35% corporate tax rate (2017 and earlier) compared to the actual tax rate of 21% (Coronavirus Aid, Relief, and Economic Security Act, CARES Act) and timing differences between the date of approval of financial statements and the corporate tax returns filing dates.
For 2020, the French corporate income tax rate is 32.02% for companies with a turnover exceeding EUR 250 million as provided by the 2020 French Finance Bill.
On December 22, 2017, the US Congress enacted the Tax Cuts and Jobs Act (the “TCJA”), introducing a new minimum tax regime, referred to as the Base Erosion and Anti-Abuse Tax (“BEAT”) which acted almost as a 5% tax on all deductible payments to non-US affiliates – and gross premiums specifically – starting in 2018. The BEAT increased to 10% for fiscal years beginning in 2019 and will further increase to 12.5% for taxable years beginning in 2026 or later. More precisely, BEAT is payable if, calculated on a modified taxable income base, it is higher than the regular federal corporate tax in a given year.
The standard tax rates for the primary locations in which the Group has operations are as follows: Note•18.3 CORPORATE INCOME TAX EFFECTS RELATING TO OTHER COMPREHENSIVE INCOME
Effects of changes in foreign exchange rates (523) (3) (526) 126 (3) 123 145 2 147
Items that will be reclassified subsequently to profit income (372) (36) (408) 616 (110) 506 (254) 90 (164)
Deferred tax assets and liabilities and the related expense or benefit as at and for the years ended December 31, 2019 and December 31, 2020, were generated by the following items: In EUR millions
Net operating losses for carry forward 438 69 - - 4 511 41 - - (14) 538
As at December 31, 2020, the operating tax losses available for carryforward expire as follows: In EUR millions Available tax loss carryforwards
The recognition of deferred tax assets for tax loss carryforwards is assessed based on the availability of sufficient future taxable income and local tax rules, e.g. unlimited carry forward in France but the utilization of tax losses is capped at EUR 1 million plus 50% of the remaining current year’s taxable result, 20-year carryforward period for US Non-Life companies, 15-year carryforward for losses incurred before 2018 and unlimited carry forward for losses incurred after 2018 for US Life companies.
Interest income on funds withheld and contract deposit 165 164 157
Interest expense on funds withheld and contract deposit (2) (6) (6)
Other (including from cash and cash equivalents), net of other investment expenses 124 (67) (28)
Change in ceded unearned premiums reserves - (16) (16) - 61 61 - 35 35
Allocation of expenses by function In accordance with IAS 1 – Presentation of Financial Statements, the Group has opted to present expenses by function in the statement of income. The costs are allocated to four categories
Basic earnings per share is calculated by dividing net income available to ordinary shareholders by the weighted average number of ordinary shares outstanding over the year, excluding the average number of ordinary shares purchased by the Group and held as treasury shares.
At December 31, 2020 At December 31, 2019 At December 31, 2018
The exercise of stock options has consistently led to treasury shares being cancelled as decided by the Shareholders’ Meeting of the Company in order to avoid any dilutive effect of such exercise upon the share capital.
The total gross compensation of key management personnel, allocated or paid, which includes short-term employee benefits, postemployment benefits, other long-term benefits, termination benefits and share-based payments, for the years ended December 31, 2020, 2019, and 2018 is outlined below: TOTAL COMPENSATION AND BENEFITS 26,848,287 39,235,271 29,547,888
(1) Amounts paid during the year. (2) It should be noted that the figures stated above do not represent paid compensation but correspond to actuarial estimates in line with AFEP-MEDEF
corporate governance code for the allocation of free shares and subscription options during the reference period. The value is calculated according to the same assumptions as those used for the Group accounts (IFRS 2).
Each member of the Executive Committee benefits from the use of a vehicle for business purposes. The Chairman and Chief Executive
Irrevocable purchase and disposal commitments of assets, as well as investment or lending commitments are disclosed in this note as commitments.
As security for the Group’s technical liabilities, various financial institutions have provided sureties for the Group in the form of letters of credit. The total amount, not included in the table above, as at the reporting date was EUR 1,434 million (2019: EUR 1,364 million). In accordance with the terms of these letter of credit facilities, the Group must meet certain minimum requirements relating to net worth. The Group currently meets all such requirements.
SCOR is committed to grant loans and to invest in various investment funds for a total amount of EUR 357 million (2019: EUR 258 million). Those amounts do not include the commitments taken by SCOR on behalf of third parties as part of its asset management activity.
Minimum payments under operating lease commitments, estimated future minimum rental income amounts as part of SCOR’s real estate investment activities and commitments to purchase or dispose real estate properties are not included in the table above but are disclosed within Note 10 – Miscellaneous assets and Note 8 – Insurance business investments.
Note•25 INSURANCE AND FINANCIAL RISKS All of the following paragraphs form an integral part of the Group consolidated financial statements. They are disclosed in Section 3 – Risk factors and risk management mechanisms.
Please see Section 3.1.2 – Underwriting risks related to the P&C and Life reinsurance businesses and Section 3.2.2 – Management of Underwriting risks related to the P&C and Life reinsurance businesses.
Please see Section 3.1.5 – Liquidity risks and Section 3.2.6 – Management of liquidity risks.
Litigation gives rise to an accrual when it meets the recognition requirements of a provision under IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. See Note 15 – Employee benefits and other provisions for details of accruals booked. In certain instances, in accordance with IAS 37.92, some required information, in particular the amount of accruals, is not disclosed as they could seriously prejudice the position of SCOR in a dispute with other parties.
In the claim against Barclays for breach of confidence and trade secrets, the High Court of Justice of London has declined, by judgment delivered on January 30, 2020, Barclays’ application to stay the proceedings until the judgment of the Paris Criminal Court (“Tribunal correctionnel de Paris”) in the criminal proceedings. The trial before the High Court of Justice of London is expected to take place in June 2021.
04 CONSOLIDATED FINANCIAL STATEMENTS Information on holdings 4.7. INFORMATION ON HOLDINGS
SCOR Global Life Americas Reinsurance Company 101 South Tryon Street, Suite 3200 – 28280 Charlotte – United States Reinsurance 100%
Date of the Shareholders’ Meeting called to approve the financial statements for the financial year ended 4.8.2. ALTERNATIVE AUDITORS None 4.8.3. RESIGNATION OR NON-RENEWAL OF AUDITORS The term of office of the firm ERNST & YOUNG, titular Statutory Auditor, has expired at the end of the General Meeting called to approve the financial statements for the financial year ended December 31, 2019, which took place on June 16, 2020.
In application of EC Commission Regulation No. 809/2004, the following information is included by reference in this Universal Registration Document: • The report of the Statutory Auditors on the consolidated financial statements for the financial year ended December 31, 2019 published on pages 240 to 245 of the Universal Registration Document filed with the AMF on March 13, 2020 under Number D.20-0127 (and from pages 240 to 245 of the free translation into English of such Universal Registration Document, such translation being available on SCOR’s website www.scor.com).
Opinion In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of SCOR SE for the year ended December 31, 2020.
In our opinion, the consolidated financial statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at December 31, 2020 consisting of the persons and entities included in the consolidation and of the results of its operations for the year then ended in accordance with IFRS accounting principles as adopted in the European Union.
Our responsibilities under those standards are further described in the “Statutory Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements” section of our report.
It is in this complex and evolving context that, in accordance with the requirements of Articles L.823-9 and R.823-7 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the financial statements of the current period, as well as how we addressed those risks.
Measurement of technical reserves related to reinsurance contracts (Please refer to notes 1 and 16 of the notes to the consolidated financial statements)
Technical reserves related to Life business are estimated using actuarial methods based on the present value of projected future payments to cedents less the present value of projected future premiums to be paid by cedents.
Gross written premiums in 2020 amount respectively to EUR 9 208 million for the Life segment SCOR Global Life and EUR 7 160 million for the Non-Life segment SCOR Global P&C, as stated in note 5 of the notes to the Consolidated financial statements.
The reinsurance entities of the Group record accounts transmitted by ceding companies upon receipt. Accounts not yet received from ceding companies at the end of the 2020 financial year are estimated, in order to better reflect the Group’s reinsurance commitments in the financial statements.
Written and earned reinsurance premiums are also estimated. As stated in note 1 of the notes to the Consolidated financial statements: gross written and earned premiums are based upon reports received from ceding companies, supplemented by the Group’s own estimates of premiums for which ceding companies’ reports have not yet been received.
Management reviews its estimates and assumptions periodically, based on experience and other factors. Actual premiums can turn out to be different from management estimates.
Valuation of Goodwill on the Non-Life Business unit and Value of business acquired (VoBA) on Life reinsurance portfolios (Please refer to notes 5, 6 and 7 of the notes to the consolidated financial statements)
The Group’s intangible assets are mainly composed of goodwill on the Non-Life Business unit and Value of Business Acquired net of amortization of Life reinsurance portfolios respectively for EUR 755 million and EUR 1 099 million as at December 31, 2020.
Value of Business Acquired (VoBA) represents the value of Life reinsurance portfolios acquired in a business combination. It corresponds to the present value of expected future cash flows for the assumed and the retroceded reinsurance business. As stated in note 7 of the notes to the Consolidated financial statements, VoBA is amortized over the lifetime of the underlying reinsurance portfolio based on schedules derived from the run-off patterns of expected profit. These projections are assessed and updated regularly.
Deferred tax: measurement of deferred tax assets on tax losses carried forward (Please refer to note 18 of the notes to the consolidated financial statements)
Deferred tax assets are recognized on net operating losses carried forward to the extent that it is probable that future taxable income will be available against which they can be offset. As stated in note 18 of the notes to the Consolidated financial statements, management makes assumptions and estimates related to income projections to determine the availability of sufficient future taxable income. To the extent that net operating losses carried forward could not be utilized or would expire, deferred income tax expenses may be recorded in the future to reduce corresponding deferred tax assets
We consider deferred tax assets on losses carried forward to be a key audit matter, given the Management’s judgement related to their recognition in the balance sheet.
Specific verifications We have also performed, in accordance with professional standards applicable in France, the specific verifications required by laws and regulations of the Group’s information, given in the management report of the Board of Directors
We have no matters to report as to its fair presentation and the consistency with the consolidated financial statements, reminded that it is not our responsibility to conclude on the fairness or consistency with the financial statements of the solvency related information required by article L. 356-23 of the French Insurance code (Code des assurances).
We attest that the consolidated non financial statement required by Article L. 225 102-1 of the French Commercial Code is included in the Group’s management report, it being specified that, in accordance with the provisions of article L. 823-10 of this Code, the information contained in this statement has not been the subject of verifications of fairness or consistency of our means with the consolidated financial statements and must be reported by an independent third party
We were appointed as statutory auditors of SCOR SE by the annual general meeting held on June 22, 1990 for MAZARS and on June 16, 2020 for KPMG S.A.
The Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risks management systems and where applicable, its internal audit, regarding the accounting and financial reporting procedures.
As part of an audit conducted in accordance with professional standards applicable in France, the auditor exercises professional judgment throughout the audit and furthermore: • Identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for the audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Assesses the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of the audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the consolidated financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein.
• Collects information related to persons and entities included in the scope of consolidation that it deems sufficient and appropriate to express an opinion on the consolidated financial statements. The auditor is responsible for the management, supervision and execution of the audit of the consolidated financial statements and for the opinion expressed on these consolidated financial statements.
We submit a report to the Audit Committee which includes in particular a description of the scope of the audit and the audit program implemented, as well as the results of our audit. We also report, if any, significant deficiencies in internal control regarding the accounting and financial reporting procedures that we have identified.
We also provide the Audit Committee with the declaration provided for in Article 6 of Regulation (EU) N° 537/2014, confirming our independence within the meaning of the rules applicable in France such as they are set in particular by Articles L.822-10 to L.822-14 of the French Commercial Code (Code de commerce) and in the French Code of Ethics (code de déontologie) for statutory auditors. Where appropriate, we discuss with the Audit Committee the risks that may reasonably be thought to bear on our independence, and the related safeguards.
SCOR SE’s corporate accounts for the financial years ended December 31, 2020, 2019 and 2018, included respectively in Appendix B of this Universal Registration Document, in Appendix C of the Universal Registration Document filed with the AMF on March 13, 2020 under the number D.20-0127 and in Appendix C
5.1. SCOR SHARES 254 5.1.1. Trends in the SCOR SE share price throughout 2020 254 5.2. SHARE CAPITAL & SHAREHOLDERS 255 5.2.1. Capital ownership 255 5.2.2. Operations on the share capital 261 5.2.3. Potential share capital 262 5.2.4. Financial authorizations 264 5.2.5. Amount of convertible securities, exchangeable securities or securities with subscription warrants 266 5.2.6. Information about and terms and conditions of any acquisition rights and/or obligations oversubscribed but unissued capital or an undertaking to increase the capital 266 5.2.7. 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 267 5.2.8. Information about the main shareholders 267 5.3. GENERAL INFORMATION 268 5.3.1. SCOR Group 268 5.3.2. Charter and bylaws 269 5.3.3. Third-party information and statements by experts and declarations of any interest 275 5.3.4. Published information 275 5.3.5. Material contracts 275
As at the date of this Universal Registration Document, SCOR SE’s shares are listed on the Euronext Paris stock market and on the SIX Swiss Exchange (formerly SWX Swiss Exchange) in Zurich, where they were admitted for trading on August 8, 2007.
The ordinary shares are included on the following indices: SBF 120, SBF TOP 80 EW, CAC Next 20, CAC Large 60, CAC Large 60 EW, CAC All-Shares, CAC All Tradable, CAC Financials, Euronext FAS IAS, Next 150 Index, Euronext France Next 40 EW, Ethibel® Sustainability Index Excellence Europe (ESI EXC Europe and ESI EXC Europe VM), CAC® Large 60 Responsible Investment SW, Euronext Europe 500, Euronext Eurozone 300, and Euronext Core Europe 100 ESG EW.
5.2.1.1. MAIN SHAREHOLDERS As of December 31, 2020, SCOR’s shareholders are mainly institutional as they represent 81% of SCOR’s share capital. Institutional shareholders come mainly from Europe (73%), the
United States (25%) and Asia (2%). The rest of the share capital is split between treasury shares (less than 1%), employees (5%), retail (2%), brokerage (3%) and others (9%).
There is no covenant stipulating preferential terms for the sale or purchase of SCOR ordinary shares and representing 0.5% or more of the Company’s share capital or voting rights that has been notified to the Company and the AMF.
To SCOR’s knowledge, the percentages of share capital and voting rights held by its directors and Executive Committee members were 4.32% of the capital and 4.33% of the voting rights as at
On March 27, 2020, Allianz Global Investors GmbH declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,329,612 shares or 4.99% of the capital and 9,329,612 voting rights or 4.99% of the voting rights in SCOR SE.
On April 17, 2020, Allianz Global Investors GmbH declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,383,272 shares or 5.01% of the capital and 9,383,272 voting rights or 5.01% of the voting rights in SCOR SE.
Public threshold notifications of Norges received in 2020 On July 13, 2020, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,464,852 shares or 5.07% of the capital and 9,464,852 voting rights or 5.07% of the voting rights in SCOR SE.
On July 15, 2020, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 8,015,617 shares or 4.29% of the capital and 8,015,617 voting rights or 4.29% of the voting rights in SCOR SE.
On July 31, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,013,406 shares or 4.83% of the capital and 9,013,406 voting rights or 4.83% of the voting rights in SCOR SE.
On August 4, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,494,739 shares or 5.09% of the capital and 9,494,739 voting rights or 5.09% of the voting rights in SCOR SE.
On August 6, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 8,944,342 shares or 4.79% of the capital and 8,944,342 voting rights or 4.79% of the voting rights in SCOR SE.
On August 26, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 8,864,229 shares or 4.75% of the capital and 8,864,229 voting rights or 4.75% of the voting rights in SCOR SE.
On November 2, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,536,145 shares or 5.11% of the capital and 9,536,145 voting rights or 5.11% of the voting rights in SCOR SE.
On November 11, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,355,811 shares or 5.01% of the capital and 9,355,811 voting rights or 5.01% of the voting rights in SCOR SE.
On November 16, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,464,727 shares or 5.07% of the capital and 9,464,727 voting rights or 5.07% of the voting rights in SCOR SE.
On November 17, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 8,950,564 shares or 4.79% of the capital and 8,950,564 voting rights or 4.79% of the voting rights in SCOR SE.
On November 19, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,468,841 shares or 5.07% of the capital and 9,468,841 voting rights or 5.07% of the voting rights in SCOR SE.
On November 23, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,673,118 shares or 5.18% of the capital and 9,673,118 voting rights or 5.18% of the voting rights in SCOR SE.
On November 30, Norges Bank declared that its shareholding fell below the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,251,048 shares or 4.96% of the capital and 9,251,048 voting rights or 4.96% of the voting rights in SCOR SE.
On December 4, Norges Bank declared to have exceeded the threshold of 5.0% of the capital and voting rights in SCOR SE and that it held 9,651,803 shares or 5.17% of the capital and 9,651,803 voting rights or 5.17% of the voting rights in SCOR SE.
Such transactions on securities can be carried out for any purposes permitted or which would become authorized under applicable laws and regulations, including for purposes of the following objectives: • stimulation of the secondary market or provision of liquidity to the Company’s shares by an investment service provider through a liquidity contract in accordance with a code of practice recognized by the regulation; • 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 (mandataires sociaux) of the Company and/or of affiliated companies, including hedging of any Company stock option plan pursuant to the provisions of Articles L. 225-177 et seq. and L. 22-10-56 et seq. of the French Commercial Code, allocation of free shares of the Company in conjunction with the provisions of Articles L. 225-197-1 et seq. and L. 22-10-59 et seq. of the French Commercial Code, allocation of Company shares pursuant to a profit sharing scheme (participation aux fruits de l’expansion de l’entreprise) or allocation or transfer of Company shares within the framework of any employee savings plan (plan d’épargne salariale), including in conjunction with the provisions of Articles L. 3321-1 et seq., and L. 3332-1 et seq., of the French Labor Code; • purchase of Company shares for retention and subsequent remittance in exchange or as payment, in particular in conjunction with financial or external growth transactions, without exceeding the limit set by paragraph 6 of Article 22-10-62 of the French Commercial Code in conjunction with a merger, spin-off or contribution; • compliance with all obligations related to the issuance of securities granting access to capital; • cancellation of any shares repurchased, within the limits established by law, in conjunction with a reduction in share capital approved or authorized by the Shareholders’ Meeting.
The shares buy-back authorization described above is granted for a maximum duration of eighteen (18) months with effect from the Combined Shareholders’ Meeting dated June 16, 2020 expiring no later than December 15, 2021, unless the Annual General Meeting of Shareholders called to approve the financial statements for the fiscal year ended December 31, 2020, approves the resolution described below pursuant to Articles L. 22-10-62 et seq. of the French Commercial Code.
The maximum number of shares that could be bought back under this authorization would be set at 10% of the number of shares comprising the Company share capital as of the date of such purchases, it being specified that (i) when the shares are purchased to enhance liquidity of shares in the conditions set forth by applicable laws and regulations, the number of shares taken into account for calculation of the 10% limit shall correspond to the number of shares purchased less the number of shares resold during the period covered by the authorization, and (ii) the number of treasury shares shall be taken into account so that the Company never holds shares in excess of 10% of its share capital.
The shares buy-back authorization described above would be for a maximum duration of eighteen (18) months from its approval by the Shareholders’ Meeting of SCOR SE. It would supersede the unused portion of the authorization granted by the shareholders at the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020, in its 16th resolution.
5.2.1.3. EMPLOYEE SHAREHOLDING See Section 2.2.3.4 “Plans providing employee profit sharing”.
05 SCOR SHARES, SHARE CAPITAL AND GENERAL INFORMATION Share capital & shareholders 5.2.1.4. DESCRIPTION OF SCOR’S SHARE CAPITAL
For further details, see Section 4.6 – Notes to the consolidated financial statements, Note 13 – Information on share capital, capital management, regulatory framework and consolidated reserves and to Appendix B – 5.2.3 – Notes to the corporate financial statements – Shareholders' equity.
5.2.2.1. 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 2017: Operation
Increase of the share capital resulting from the exercise of stockoptions as from January 1 to 31 December 2017
Reduction 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 EUR 200 million and (ii) to neutralize the dilutive effect resulting from the exercise of stock-options according to the decision of the Board of Directors on April 26,
Situation on December 31, acknowledged by the Board of Directors on
5.2.3. POTENTIAL SHARE CAPITAL The potential volume of new shares from outstanding share-based compensation plans stood at 5,886,629 shares as of December 31, 2020, broken down as follows: Potential volume of new shares from outstanding share-based compensation plans linked to Group executive and employee compensation instruments 5,886,629 of which number of potential new shares from outstanding stock option plans (options allocated but not vested + options vested but not exercised) 4,575,955 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 0 of which unused authorizations still outstanding (2) 1,310,674
Notably, no new shares can be issued in relation to outstanding share-based compensation in the form of free shares, as these shares are derived exclusively from the purchase of existing shares and not from the issuance of new shares.
The Company's fully diluted issued share capital, as defined below, stood at 210,006,082 shares as of December 31, 2020, broken down as follows: Fully diluted issued share capital 210,006,082 of which total shares comprising the share capital 186,730,076 of which number of potential new shares from outstanding options 4,575,955 of which number of potential new shares from outstanding free shares (1) 0 of which number of potential new shares from outstanding warrants 0 of which potential shares from other securities convertible or redeemable into new shares (2) 18,700,051
As of December 31, 2020, the potential volume of new shares from outstanding share-based compensation plans and unused part of the authorizations linked to Group executive and employee compensation instruments stands at 2.80% of the fully diluted share capital.
5.2.4.1. NUMBER OF SHARES AUTHORIZED UNDER CONVERTIBLE SECURITIES AND STOCK OPTION PLANS
See paragraph of the Section 5.2.5 – Amount of convertible securities, exchangeable securities or securities with subscription warrants for a description of the warrants issued.
Duration of authorization and expiration date 29th resolution (Delegation of authority granted to the Board of Directors in order to carry out an increase in share capital by the issurance of shares reserved to the members of savings plans (plans d’épargne), with cancellation of preferential subscription rights to the benefit of such members) (1) 3,000,000 shares 3,000,000 shares 18 months
AUTHORIZATIONS GRANTED BY THE EXTRAORDINARY SHAREHOLDERS’ MEETING OF JUNE 16, 2020 23th resolution (Authorization granted to the Board of Directors for the purpose of increasing the number of shares issued in accordance with the 18th, 19th and 20th resolutions in the event of over-subscription to the share capital increase, with or without cancellation of pre-emptive subscription rights)
This resolution can only be used with the 18th, 19th and 20th resolutions and is in any case capped by the 30th resolution 26 months 27rd resolution (Authorization granted to the Board of Directors for the purpose of granting options to subscribe for and/or purchase shares with express waiver of preferential subscription rights in favour of salaried employees and executive corporate officers (dirigeants mandataires sociaux)) (1) 1,500,000 shares 1,314,574 shares 24 months 28th resolution (Authorization granted to the Board of Directors for the purpose of allocating free existing ordinary shares of the Company in favour of salaried employees and executive corporate officers (dirigeants mandataires sociaux))
24 months 30th resolution (Aggregate ceiling of the share capital increases) 97,770,187 shares 97,584,761 shares -
(2) The authorization of the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020 is limited to 3,000,000 existing shares (the remaining amount being on December 31, 2020 1,743,335 shares).
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 142,054,809.
See: • Section 2.2.3 – Stock options and performance shares; • Section 5.2.4 – Financial authorizations; • Section 5.2.5- Amount of convertible securities,exchangeable securities or securities with subscription warrants; • Section 4.6 – Notes to the consolidated financial statements,
Note 15 – Provisions for employee benefits and other provisions; • Section 4.6 – Notes to the consolidated financial statements, Note 17 – Stock options and share allocations; and
• Appendix B – Notes to the corporate financial statements, 5.3.5 – Stock options.
5.2.8.1. STATEMENT AS TO THE ABSENCE OF DIFFERENCES BETWEEN THE VOTING RIGHTS OF VARIOUS SHAREHOLDERS
Pursuant to Article 8 of the bylaws (“Rights attached to each share”), amended by the Company’s Ordinary and Extraordinary Shareholders’ Meeting on April 30, 2015 in its 28th resolution, each share entitles its holder to one vote at Shareholders' Meetings and the voting rights attached to shares of the Company are in direct proportion to the proportion of the capital thereby represented and no double voting rights, as described by Article L. 225-123 of the French Commercial Code, can be allocated or attached, in any manner whatsoever, to any share. Therefore, the shareholders of the Company do not currently have different voting rights.
5.2.8.3. AGREEMENT WHICH COULD RESULT IN A SUBSEQUENT CHANGE IN CONTROL Not applicable.
5.3.1.1. LEGAL NAME AND COMMERCIAL NAME OF THE ISSUER Legal name: SCOR SE Commercial name: SCOR
May 13, 1996, SCOR SA changed its name to SCOR. On June 25, 2007, SCOR changed its legal form to a European Company (Societas Europaea) and became SCOR SE. In 2012, the Company relocated its registered office from Paris-La Défense to Paris. On April 25, 2013, the Company’s term was extended for 99 years by decision of the Extraordinary Shareholders’ Meeting and will expire on April 25, 2112 unless extended or previously dissolved.
General The Company was converted into a European Company (Societas Europaea) in 2007. As such, SCOR SE is governed by the provisions of Council Regulation (EC) No. 2157/2001 (the “SE Regulation”) and those of European Council Directive 2001/86/EC of October 8, 2001 supplementing the Statute for a European Company with regard to the involvement of employees, and by the provisions of French law relating to European Companies, as well as for all other matters partially covered or not covered by the SE Regulation, by French legal provisions applicable to sociétés anonymes, as far as that they are not contrary to the specific provisions applicable to European Companies.
SCOR Group is subject to supervision by the ACPR which has extensive oversight authority as Group supervisor but also as the local supervisor for each French insurance or reinsurance company.
Evolution of the regulatory and compliance environment The legislative, regulatory and litigation environment in which the Group operates is constantly changing. In continental Europe, reinsurers, insurers, asset managers and other financial institutions could face a danger of increasing the number of legal disputes and associated costs, as a result of the introduction of class action.
5.3.2.2. SUMMARY OF THE BYLAWS AND INTERNAL REGULATIONS OF THE COMPANY CONCERNING THE MEMBERS OF ITS ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES
If a related party agreement is pre-approved by the majority of the non-related directors, the Chairman must then report the authorized agreement to the Statutory Auditors within one month following the date it is signed. The Auditors must then prepare a special report on the agreement to be submitted to the shareholders at their next Shareholders’ Meeting, during which the shareholders would consider the agreement for ratification (any interested shareholders would be excluded from voting). If the agreement is not ratified by the shareholders, it will not be rendered invalid, except in the case of fraud, but the shareholders may in turn hold the Board of Directors or interested Company representative liable for any damages suffered as a result thereof.
Under Article 10 of the Company’s bylaws, directors may hold office until the age of 77. A director reaching the age of 77 while in office must retire at the expiration of the term of his or her office, as determined at the Shareholders’ Meeting.
It will be proposed at the 2021 Shareholders' Meeting to align the age limit for performing the duties of Chairman of the Board of Directors with the age limit applicable for performing the duties of director, as part of the evolution of SCOR's governance described in Section 2.1.1.2
Voting rights (Articles 7, 8 and 19 of the bylaws) As of the date of this Universal Registration Document, the voting rights attached to shares are proportionate to the share of capital they represent.
At all Shareholders’ Meetings, each shareholder has as many votes as the number of shares he or she holds or represents without any limitations other than those which may result from legal requirements and the stipulations above. The difference between the distribution of share capital and the distribution of voting rights arises from the existence of treasury shares with no voting rights.
Where the shares are held by a beneficial owner, the voting rights attached to those shares belong to the beneficial owner at Ordinary Shareholders’ Meetings, and to the bare owner at Extraordinary Shareholders’ Meetings.
The payment of dividends is decided by the Shareholders’ Meeting at which the annual accounts are approved following the recommendation of the Board of Directors. If there are distributable profits (as shown on the interim balance sheet audited by the Statutory Auditors), the Board of Directors has the authority, subject to applicable French law and regulations to distribute interim dividends without prior shareholder approval.
The Company may also acquire its own shares without having to cancel them: • redemption with the aim of allocating them to employees or
Company officers (Article L. 22-10-61 of the French Commercial Code); • redemption as part of a share buyback program (Article L. 22-10-62 of the French Commercial Code).
Pre-emptive subscription rights for securities of the same class Under current French regulations, and in particular Article L. 225-132 of the French Commercial Code, any cash capital increase gives shareholders a pre-emptive right to subscribe to new shares proportionate to the amount of shares owned.
The Shareholders’ Meeting which decides or authorizes a capital increase may, under Article L. 22-10-51 of the French Commercial Code, eliminate the pre-emptive subscription right for the entire capital increase or for one or more tranches of said increase and may or may not allow a priority subscription period for shareholders. When the issue is carried out through a public offering or through an offer referred to in Article L. 411-2, II of the French Monetary and Financial Code without pre-emptive subscription rights, the issue price must be set according to Article L. 22-10-52 of the French Commercial Code.
In addition, the Shareholders’ Meeting which decides on a capital increase may reserve it for named persons or categories of persons corresponding to specific characteristics, in application of Article L. 225-138 of the French Commercial Code.
Jointly owned shares Subject to legal provisions concerning shareholders’ voting rights in General Meetings and their right to information, shares are not divisible with regard to the Company. This means that joint co-owners must be represented by one of said co-owners or by a single agent, appointed by the Court in the event of a dispute.
The court may be requested to appoint an agent either by shareholder(s) holding at least 5% of the share capital, or a duly authorized association of shareholders holding their ordinary shares in registered form for at least two years and jointly owning a certain percentage of voting rights (computed on the basis of a formula related to capitalization which on the basis of the Company’s outstanding share capital as at December 31, 2020, would represent approximately 1% of voting rights) or by any interested party, including the Works’ Council in urgent situations.
At least 15 days before the date set for any Shareholders’ Meeting on first call, and at least 10 days before any second call, notice of the meeting must be sent by mail to holders of ordinary shares who have held said ordinary shares in registered form for at least one month prior to the notice date.
Such notice can be given by e-mail to holders of ordinary shares in registered form who have accepted in writing this method of convocation.
One or several shareholder(s), together holding a certain percentage of SCOR’s voting rights (computed on the basis of a formula related to capitalization which, on the basis of outstanding share capital as at December 31, 2020, would represent approximately 0.5% of voting rights), the Works’ Council or a duly authorized association of shareholders holding ordinary shares in registered form for at least two years and holding together a certain percentage of the voting rights (calculated on the basis of a formula relating to capitalization which on the basis of the outstanding share capital as at December 31, 2020, would represent approximately 1% of SCOR SE’s voting rights) may, within 10 days of such publication, propose resolutions to be submitted for approval by the shareholders at the Shareholders’ Meeting.
Attendance and exercise of voting rights at Ordinary Shareholders’ Meetings and Extraordinary Shareholders’ Meetings are subject to certain conditions. In accordance with French law and Company bylaws, the right to participate in Shareholders’ Meetings is subject to registration of shares in the shareholder’s name or in the name of the approved intermediary acting on his or her behalf, by T-0 (Paris time) on the second trading day prior to the Shareholders’ Meeting, either in the nominative share registers held on the Company's behalf by the Company’s agent or in the bearer share accounts held by an authorized intermediary.
The rights of a shareholder of a particular class of the Company’s capital stock, including ordinary shares, can be amended only after a Special Meeting of all shareholders of said class has taken place and the proposal to amend such rights has been approved by a two-thirds majority of shares of voters present (including those voting by correspondence) or represented by proxy. The ordinary shares constitute the only class of capital stock.
Subject to the terms and conditions set forth by the legal and regulatory provisions in force, shareholders may send their proxy voting forms or remote voting forms concerning any Shareholders’ Meeting either in paper format or, if approved by the Board of Directors, by an electronic means of communication. For instructions issued by shareholders via electronic means including proxy instructions or for electronic remote voting forms, the capture and electronic signature of the shareholder may be carried out directly, if applicable, on the dedicated website set up by the
5.3.2.6. PROVISIONS THAT COULD DELAY, DEFER OR PREVENT A CHANGE IN CONTROL OR IN THE SHAREHOLDER STRUCTURE
Pursuant to Articles L. 322-4 and R. 322-11-1 of the French Insurance Code, any transaction allowing a person acting alone or in concert with other persons, as defined by Article L. 233-10 of the French Commercial Code, to acquire, increase, decrease or cease holding, directly or indirectly, an equity stake in an insurance or reinsurance company, shall be notified by such person(s) to the ACPR prior to its completion when any one of the three following conditions is met: • the portion of voting rights or capital shares held by said person(s) exceeds or falls below the tenth, fifth, third or half thresholds; • the Company becomes or ceases to be a subsidiary of said person(s); • the transaction enables this or these persons to exercise a significant influence on the management of this company.
Commercial Court at the request of the Chairman, any of the shareholders or the AMF. In addition, every shareholder who, directly or indirectly, acting alone or in concert with others, acquires ownership of shares greater than or equal to 10%, 15%, 20% or 25% of the share capital must notify the Company and the AMF of its intentions for the six months following such an acquisition. Failure to comply with this requirement will result in the suspension of the voting rights attached to the shares exceeding the applicable threshold held by the shareholder for a period of two years from the date on which notice is served and, upon a decision of the Commercial Court, part or all the shares of said shareholder may be suspended for up to five years.
5.3.4. PUBLISHED INFORMATION The bylaws of the Company are described in this Universal Registration Document and can be found on the Company’s website. The other legal documents relating to the Company can be consulted at the Company’s registered offices pursuant to the applicable rules and regulations.
This consolidated non-financial performance statement was prepared in accordance with the provisions of Article L. 225-102-1 and Article L. 22-10-36 of the French Commercial Code enacting Directive 2014/95/EU as regards the disclosure of non-financial and diversity information by certain large undertakings and groups.
Unless stated otherwise, this consolidated statement covers SCOR SE and all its fully consolidated subsidiaries, hereinafter “SCOR” or “the Group”, other than the exceptions stipulated in the note on methodology in the appendix to this statement.
The Group is structured around three regional management platforms, or “Hubs”: the EMEA Hub, the Americas Hub and the Asia-Pacific Hub.
The reverse nature of the reinsurance production cycle is another specific feature of its business model: the selling price of reinsurance products and services is set before their actual cost is precisely known.
(e.g. Property, Casualty, Credit and Surety, Decennial Insurance, Transport, Construction, Agriculture risks and Natural Catastrophes), Specialty insurance (e.g. Business Solutions, Managing General Agencies, SCOR Channel), and P&C Partners (alternative solutions and new products); • SCOR Global Life covers Life and Health insurance risks through three product lines – Protection, Longevity and Financial Solutions – with a strong focus on biometric risks.
6.1.1.2. INVESTMENTS AND ASSET MANAGEMENT The Group also conducts investment activities via SCOR Global Investments, its third business unit, which is tasked with managing the investment portfolio of the Group’s legal entities. Within this business unit, SCOR Investment Partners also manages funds on behalf of third-party clients.
(1) SCOR operates also in Specialty Insurance in property and in casualty.
In order to keep abreast of biometric trends and scientific developments, the Life business unit relies on five communities of expertise called chapters (see Section 1.2.6 - Research and development, patents and licences), which are used to assess the key factors inherent to mortality, longevity, morbidity and policyholder behavior risks. Biometric risks such as mortality, longevity, disability and long-term care are at the heart of underwriting in Life reinsurance. The chapters enter into many scientific partnerships, such as with ADERA (Association pour le développement de l’enseignement et des recherches auprès des universités, des centres de recherche et des entreprises d’Aquitaine – INSERM) in Long-Term Care risk, and the Pierre et Marie Curie University at the Pitié-Salpêtrière Hospital in HIV developments.
In addition, the Group has established the SCOR Corporate Foundation for Science to promote scientific research. Founded in 2011 with a EUR 0.3 million endowment, the Foundation had been funded by the SCOR Group with a total of EUR 12.5 million in support until the end of 2020. Between 2011 and the end of 2020, the Foundation has devoted EUR 10.8 million to promoting scientific research.
Additional information about the R&D activities, the SCOR Corporate Foundation for Science, and other research activities is presented in Section 1.2.6 of the Group’s Universal Registration Document.
An integrated governance system has been established to consider social and environmental issues arising from business activities, including the principal environmental, social and governance (ESG) risks related to them, as well as broader corporate social responsibility (CSR) initiatives. This system is structured around five core pillars: • a general reference framework consisting of the Group’s mission statement and adherence to global initiatives supported by UN programs, supplemented where appropriate by subject-specific reference frameworks and transposed into standards (e.g. the Code of Conduct) and relevant Group activities; • a structured governance framework, which the Board of Directors is responsible for overseeing, assisted, as provided for in its Internal Charter, by the preparatory work of its specialized committees, in particular the Corporate Social and Societal
Responsibility and Environmental Sustainability Committee, the Risk Committee and the Audit Committee; • integrated initiatives, translated into operational measures in annual action plans, the implementation of which is periodically reported to the supervisory and management bodies; • a risk management system shaped by the formal procedures in place and applied to the most relevant functional processes, building on the risk analyses performed in connection with this performance statement and the monitoring of megatrends and associated emerging and operational risks; • a framework of performance conditions indexed to CSR criteria, applied in a manner appropriate to the responsibilities exercised within the Company.
These pillars are presented in greater detail in the following subsections 6.1.3.1. GENERAL GOVERNANCE FRAMEWORK AND TRANSPOSITION INTO NORMS AND STANDARDS
(1) These concepts are defined in Section 1.2.5 of the Group’s Universal Registration Document.
This general reference framework is supplemented, where appropriate, by subject-specific local (e.g. on disability-related topics) and global (e.g. the Geneva Association’s Climate Risk Statement) charters.
The principles contained in these initiatives are translated into norms and standards in the Group’s main reference texts, including: (i) its Code of Conduct, an entire section of which is dedicated to the Group’s mission, the United Nations Global Compact and the Principles for Sustainable Insurance, (ii) its climate policy, which sets out the three main orientations pursued by the Group in this area, and (iii) its sustainable investment policy.
6.1.3.2. ROLE OF THE SUPERVISORY AND MANAGEMENT BODIES SCOR’s Board of Directors has various advisory committees responsible for preparing its discussions, assisting it in its supervisory role, and making recommendations to it in specific areas, including on environmental, social and governance matters.
Environmental Sustainability Committee ensures that the Group’s CSR approach is consistent with its long-term development, and that the direct and indirect effects of its activities on the environment and society are incorporated into its strategy. As such, this Committee oversees the execution of the CSR action plan, which puts the Group’s approach in this area into practice on an annual basis. This plan covers a range of relevant topics, such as relations with Group stakeholders, integrating ESG into (re)insurance and investment activities, the Group’s environmental performance with regard to its operations, and the areas covered by the #WorkingWellTogether program described in Section 6.2.1.2. of this statement. In addition, this committee is also responsible for making proposals to the Board of Directors on how to take social and environmental issues into account in the Group’s orientations; • the Risk Committee examines, on the basis of risk and solvency assessments, the major risks facing the Group on both the assets and liabilities side of its balance sheet and ensures that the means to monitor and control these risks have been implemented insofar as possible. It examines strategic risks as well as the Group’s main technical and financial commitments, which consist of underwriting, reserving, market, concentration, counterparty, asset-liability management, liquidity and operating risks, as well as risks arising from changes in prudential regulations. In this regard, the Risk Committee is kept regularly informed of the major social and environmental issues that may influence the Group’s activities, including megatrends (e.g. climate change and environmental degradation, changing demographics and lifestyles, digitalization of the economy) and the associated emerging risks closely linked to these issues; • in addition to its accounting and financial remit, the Audit Committee has ethics-related, internal audit and compliance responsibilities. Accordingly, the Committee reviews the annual compliance plan and is kept informed about the Company’s activities in this area. The compliance plan addresses the main risks identified in Section 6.3 of this statement. It sets out the activities of the compliance function, its annual priorities – defined on the basis of a prior risk analysis – and the procedures for detecting, preventing and responding to the most significant risks facing the Group; • the Compensation and Nomination Committee is charged primarily with drawing up the rules used to calculate the variable compensation of executive corporate officers and ensuring that these rules are in line with the annual assessment of the performance of executive corporate officers, taking the Group’s strategy into account. The Committee is also responsible for examining the terms, amount and allocation of stock option programs for all the Group’s employees. The Group’s environmental and social performance is one of the performance conditions associated with these compensation instruments, as specified in Section 6.1.3.5 of this statement. It also makes sure that executive corporate officers implement a policy of nondiscrimination and diversity, in particular with regard to the balanced representation of men and women on the executive bodies. In this regard, the Committee is kept regularly informed of the trends observed.
At the level of the management bodies, SCOR set up a Group CSR Committee at Executive Committee level in 2018. In addition to this committee, the Executive Committee is also guided by the work of a Group Risk Committee and a Group Investment Committee when considering the social and environmental risks arising from the Group’s activities and operations and implementing the Group’s CSR approach.
6.1.3.3. INTEGRATION OF SOCIAL AND ENVIRONMENTAL ISSUES IN THE GROUP’S STRATEGY SCOR is at the heart of the key social, economic and environmental issues facing society, as its activities help to build the resilience of societies via its risk identification, analysis, transfer and pooling techniques. These issues are regularly analyzed by the Group’s teams, both from a risk standpoint and from the perspective of development opportunities, particularly in the context of its system for identifying and analyzing megatrends and the associated emerging risks, as well as in the analysis of non-financial risks covered by this statement.
In accordance with the requirements of the European NonFinancial Reporting Directive and its most recent non-binding guidelines, SCOR has conducted an internal assessment of the main non-financial issues and risks relating to its business activities.
6.1.3.5. PERFORMANCE CONDITIONS AND SOCIAL AND ENVIRONMENTAL ISSUES SCOR has incorporated social and environmental criteria into the compensation of its teams, based on arrangements appropriate for the relevant compensation mechanisms and the responsibilities held within the organization: • a portion of the short-term variable compensation paid to the
6.2.1. HUMAN CAPITAL AS A KEY SUCCESS FACTOR FOR THE GROUP The Group considers diversity and inclusion to be a strong asset, and has therefore implemented a global harmonized human capital management strategy, based on respect and dignity, where individual differences are valued and skills and knowledge are developed throughout employees’ career.
6.2.1.1. ALIGNING STAKEHOLDERS’ INTERESTS AND RETAINING TALENT THROUGH A MERIT-BASED COMPENSATION POLICY
In terms of risk and regulations, SCOR is committed to maintaining a compensation policy that is fully in line with SCOR’s controlled risk appetite and discourages taking excessive risks, aligning management objectives with shareholder expectations, motivating and retaining its pool of talent, and being compliant with the regulations and guidelines defined by the regulators regarding compensation policies.
Key components of the Group’s compensation policy Compensation comprises several components: a fixed and a variable portion, an immediate and a deferred portion, and an individual and a collective portion. The components include a base cash salary, an annual cash bonus, shares and options where applicable, pension schemes and any other benefits.
(1) SCOR Channel is currently not included in the Group’s compensation policy but applies the main principles including those described below. Exceptions will be duly mentioned.
The Partnership level determines the bonus components of the Partners. Calculated from the basic gross annual salary, the SCOR bonus system is linked directly to the individual performance appraisal (corresponding to predefined ranges linked to individual performance) and also to the ROE that SCOR achieved in the previous financial year.
The Group’s compensation policy reflects the desire to implement compensation schemes in accordance with best market practices and to involve key employees in the Group’s medium- and longterm development. The Group’s commitment to adopt compensation systems that are in line with the best market practices enables it to involve key employees in the Group’s longterm development.
In 2020, SCOR Channel’s average employee compensation was EUR 137,013, composed of average fixed compensation of EUR 106,103 and of an average bonus of EUR 30,910, which includes the specific long-term incentive plan.
6.2.1.2. PROMOTING INCLUSION THROUGH DIVERSITY AND EQUAL TREATMENT Promoting diversity, inclusion and equal treatment is an essential objective of the Group's human capital management policy. It is part of its social commitments for combating discrimination, and contributes to its economic and financial performance and the recognition of the Group’s employer brand, which in turn helps to attract and retain skills.
SCOR’s Diversity and Inclusion policy, as well as the Code of Conduct, describe the Group’s commitment to achieve the principle of equal opportunities in all aspects related to the employment conditions of its employees, in terms of recruitment, evaluation, compensation and talent management. To that end, this policy defines a global harmonized framework while defining roles and responsibilities of the various stakeholders regarding its enforcement and the eventual means of redress in the event of non-compliance with the aforementioned principles.
Ensuring a balanced representation of men and women in governing bodies
In this context, the Board of Directors decided to set a target of 20% of women at the Group Executive Committee in 2021 (and 30% by the end of 2025), from 10% today. In order to build a strong pipeline of senior female talent, and in line with SCOR’s policy implemented in the last few years aiming at ensuring an equitable balance in the number of men and women joining its Partnership program, the Board of Directors has also decided to set an additional target of 27% women amongst Global Partners (GP), Senior Global Partners (SGP) and Executive Global Partners (EG0) by the end of 2025, from 19% today. GP, SGP and EGP partners represented 10.7% of employees as of
As part of its Diversity and Inclusion policy and the associated roadmap, SCOR has continued to deploy proactive measures, alongside an orchestrated internal communication approach under the #WorkingWellTogether brand: • Recruitment: SCOR is committed to raising awareness among those involved in the recruitment process on diversity and inclusion, ensuring that the process is free from discriminatory behavior through recruitment-specific training promoting diversity and inclusion. In addition, SCOR strives to ensure that the selection process is as objective as possible, thanks to the use of a skills-based evaluation system. Specific checks are also carried out on candidate evaluations via the Group's recruitment platform to ensure that equal treatment is respected. Finally, SCOR is currently working on the creation of a Graduate Program aimed at promoting diversity and inclusion through the integration of new talent, particularly women, in key functions in the reinsurance sector.
• Training: the content of leadership training programs leading to high-responsibility positions has been reviewed and optimized in 2020, notably thanks to the new online training platform "My Learning Platform". Particular attention is paid to ensuring balanced representation within the Group's three flagship programs, Global Leadership Program, SUL (Stepping Up to Leadership) and its regional ASPIRE program, launched for the
(1) Excluding SCOR Channel [calculated on the basis of the Group’s headcount at the end of the year].
The Diversity and Inclusion Month organized in June 2020, is an annual flagship event that takes place across the Group's offices. The event provides an opportunity, through a variety of activities (workshops, quizzes, videos, resources, training modules), to raise employee awareness and emphasize the Group's commitment to these issues. Given the social context, the initiatives were focused on mental health and support for the 2020 #BlackLivesMatter movement following the tragic events that affected the entire world. As an example, this support was reaffirmed through communications sent to all employees in the Americas, in tribute to George Floyd but also as part of "Juneteenth", an annual holiday celebrating the end of slavery in the United States. Sessions were held throughout the year, as evidenced by the initiatives launched in London around Black History Month, facilitating discussions and contributing to collective and individual awareness on the themes of cultural and ethnic diversity, the fight against racial prejudice and the promotion of an increased inclusive culture.
In addition, the Group also implements non-discriminatory measures for older employees; they may take the form of collective agreements in some countries, such as in France which upholds its commitments on non-discrimination, equal treatment, recruitment, retention, and the management of the skills of senior citizens.
Various initiatives were undertaken in 2020 to integrate people with disabilities and raise employee awareness, especially as part of European Disability Employment Week, when the Group ran initiatives to integrate people with disabilities during “DuoDay”, conferences (Handicafé Digital), and internal and external communication campaigns. These measures aim to raise employee awareness of the different forms of disability and the recognition of the Worker with a Disability status.
Second #WorkingWellTogether pillar: quality of life and well-being at work The Group aims to retain talented employees by facilitating an improved work-life balance through the development of an innovative and flexible working environment and dedicated events raising awareness on health and well-being at work.
• The Group responded to the global pandemic with specific measures in order to protect its employees' physical and mental health and ensure business continuity. Incident Management Teams (IMT) were created in each SCOR site reporting to one of the three regional IMTs, which in turn reported to the Global IMT crisis unit.
• From the start of the pandemic, and very often in anticipation of instructions from local authorities, general remote working measures were put in place for employees, prioritizing their health and that of their families, and to avoid to the spread of the virus.
• SCOR's Business Continuity Plan (BCP) provided the IT infrastructure and resources necessary for employees to continue the activities from home with as little disruption as possible.
• These measures have been subject to regular discussions among employee representatives of relevant countries and in accordance with agreed protocols (see also Section 6.2.14 – Fostering social dialogue for additional information). In addition, specific discussions on the flexibility and evolution of working solutions were launched in the third quarter of 2020.
• Medical and health services for employees have also been further developed in 2020 (medical appointments, examinations, sports activities, workstation assessment and ergonomic solutions, and specific solutions for stress management). A psychological assistance program was deployed at each Group site in order to support employees throughout the health crisis.
Third #WorkingWellTogether pillar: community engagement The commitment to supporting communities is #WorkingWellTogether’s third pillar. Expanding on the CSR action plan led by the Group’s Board of Directors through its specialized committee, this area seeks to facilitate the social, societal and environmental commitment of SCOR employees within communities. This approach is the result of a broad consultation that SCOR has launched with its employees on a number of CSR topics and how these topics could be better integrated into the organization. SCOR is carrying out sponsorship initiatives across the world that lead its entities and teams to get involved in community life.
For example, in the Americas, the teams give back to communities by supporting a number of charity events as volunteers under the “Give4Others” program. The SEAC (SCOR Employee Activities Committee), a SCOR employee association, joined forces with nonprofits Concrete Safaris and Volunteers of America for the organization holiday experiences for underprivileged teenagers, community cooking initiatives, coat collections and a virtual night event in support of the homeless. The United Way fundraising campaign, launched in fall 2020 in the United States and Canada with an interoffice competition, was a real success, raising more than EUR 93,000 to support initiatives in education, health and the fight against insecurity.
In 2020, employees in the Asia-Pacific region worked with charities protecting the environment (raising awareness on the impact of waste on the environment and collection of plastics in tanks), fighting poverty (packing food for the most needy families and organizing clothing collections) and providing teaching assistance (helping migrant workers to improve their English).
In Europe, SCOR employees were also involved in community outreach initiatives at their respective sites. In France, for example, more than 150 SCOR employees took part in a sports challenge in 2020 and reached 15 million steps, using the Good Life mobile application to keep track, in support of cardiovascular disease research and prevention. In Switzerland and Germany, numerous initiatives have also been launched, such as fabric donations for refugees, a bicycle donation scheme for Africa, toy collections at Christmas, a Run4Kids fun run and language courses aimed at social and professional integration. In Spain, employees were also invited to take part in a virtual fun run to raise funds for “Menudos Corazones”, an association that helps and supports families with children suffering from congenital heart diseases. Italy has also shown its support for an association aimed at supporting terminally ill cancer patients. In the United Kingdom, the R.A.I.S.E (Responsibilities, Awareness/Actions, Initiatives, Social/Staff Engagement) committee has been structured to give the employees of SCOR London, SCOR Channel and ReMark the opportunity to help address social, environmental, charitable and community issues impacting their daily lives. For example, staff members offered a £10,000 springboard grant to associations promoting social inclusion. In addition, the Coriali project, which was chosen in a vote, gives people with mental disabilities the chance to develop professionally through the arts, particularly dance. Another success for the R.A.I.S.E. committee was the winter charity program, which raised £11,300 to support four associations fighting against poverty and insecurity, as well as SCOR UK’s partner association, the Tom Bowdidge Foundation, which supports child and teenage cancer patients.
In addition to these local initiatives, fun challenges were organized with this new platform as part of the Sustainable Development Weeks, in partnership with Green SCOR, to involve employees in concrete actions related to saving water and reducing plastic use. More than 150 employees took part.
In October 2020 and as part of the SCOR for Good project, the Group, with the strong support of the Board of Directors and the Executive Committee, began offering each employee the possibility of dedicating one day of their working time per year to an activity contributing to community engagement.
2 – Considering career prospects Beyond analyzing the employee’s performance over the past year and setting new objectives, the annual appraisal facilitates the professional development of each employee. With their managers, employees examine the career prospects available within the Group, based on their personal aspirations and the needs of the Company. Together, they also identify any training that could help them to achieve new objectives. Leadership and Organizational Reviews also provide the possibility to implement individual action plans (training, professional development, etc.) for some Group employees.
From an operational point of view, these meetings enable the Group to meet key business needs: having the right talent in the right place, developing skills and preparing for future needs.
SCOR University, supported by a global team of training and development specialists, has focused its development in 2020 on the following six themes, in line with the business needs of each of the Group's Business Units, emphasizing on two priorities in particular: Digital Transformation and IFRS 17.
Promoting a self-driven, skills-based learning culture, 2020 was a year marked by developing and digitalizing SCOR’s training programs. 2020 also saw a shift in employees’ learning behavior, moving more and more to real-time learning with a preference for shorter learning formats.
• Development of the new "My Learning Platform", ensuring access to all learning programs, content and resources for all Group employees worldwide. This new multi-media platform simplifies access to training, offering blended learning solutions that combine a variety of learning formats, such as face-to-face, virtual and digital content. “My Learning Platform" is accessible to all SCOR employees in real time, and was also made available to external employees such as service providers and SCOR Channel employees in 2020.
• Support for the digital transformation: launch of a data science curriculum with an introductory module focusing on machine learning.
• Re-structuring of management programs: a new management program for new managers was designed at the end of 2020 to better support their development. This 12-week program has a strong focus on the transition from employee to manager, the development of a feedback culture, performance coaching, and the creation of a relationship of trust and authenticity in an everchanging environment.
• Insourcing of e-learning content production and upskilling of SCOR University to create an interactive e-learning content.
In 2020, on average, each employee received approximately 15 hours of training. Training represented a cost of EUR 843,500 in 2020 (2).
(1) SCOR Channel and ReMark employees are not covered by these reviews. (2) Data includes global e-learning training. For technical reasons, the expense is calculated net of tax for France.
• The CECC met six times in 2020: on February 12, May 11 and 20, June 5, July 8 and September 30.
• 17 collective agreements were signed within the Group in 2020 (5 for France, 8 in Germany and 4 in Brazil). These agreements are intended to improve the economic performance of SCOR and the working conditions of employees, in particular by linking them more closely to the Company's performance and improving employee benefits.
These entities, all wholly owned subsidiaries of SCOR SE except MRM of which SCOR SE holds 59.9% of the capital, are all managed independently from the Group in terms of human resources (HR policies, processes, rules and frameworks, etc.).
6.2.2.1. SOCIAL INDICATORS The social indicators published below include SCOR Channel for 2019 et 2020, unlike in previous years.
(1) Headcount is calculated on the basis of employees registered as at December 31. Each Hub covers a region and may have employees in several countries. For example, the EMEA Hub covers France, the United Kingdom, Spain, Italy, Belgium, the Netherlands, Russia, Ireland, Switzerland, Germany, Israel, Sweden, Kenya and South Africa. As temporary workers and external service providers are managed according to specific rules in each site, this data is not mentioned in the headcount. For a breakdown of countries by Hub, see Section 2.1.7.
(1) Definition of Partner: see Section 6.2.1.1 – “Partners” program. The executive corporate officer is included in this group. This figure includes the decisions taken during the 2021 Partners promotions and nominations campaign which took place at the end of 2020.
(1) For France, this data includes the meetings of the Social and Economic Committee and the employee representatives. (2) Excluding SCOR Channel as the “Partners” program is not implemented.
(1) All trainees paid under a tripartite relationship between the company, the school and the student. SCOR had 203 trainees as at December 31, 2020 (71 in France, 12 in Switzerland, 30 in Germany, 8 in the United States, 19 in the United Kingdom, 3 in Russia, 6 in Hong Kong, 4 in China, 10 in Singapore, 2 in South Korea, 1 in Taiwan, 32 in Ireland, 2 in Colombia, 2 in Brazil and 1 in Canada). The trainees’ employment contracts differ depending on the country and training objectives. All trainee programs aim to introduce the students to the work environment, whether through work-study programs or vocational training courses for specific professions.
End of fixed-term contract 6 6 12 8 5 13 3 4 7
6.2.2.2. NOTE ON METHODOLOGY The report covers the 12-month period from January 1, to December 31, of the year under review.
Employees on fixed-term contracts are considered as definitively leaving SCOR when their contracts expire. Employees who signed a permanent contract in 2020 at the end of their fixed-term contract are not included in the fixed term contract endings.
For employees who signed several similar employment contracts during the year, only the initial hiring and the final departure are considered.
2020 Group staff turnover is calculated as follows: number of departures in 2020 (excluding dismissals, deaths, company transfers and trainees)/headcount as at December 31, 2019.
The collective agreements are concluded for a positive impact, in particular for the working conditions of employees and for the economic performance of the company.
The programs implemented in these areas and the associated performance indicators (training) are described in the following sections.
6.3.1. CODE OF CONDUCT AND COMPLIANCE POLICY The Group Code of Conduct establishes the key areas of compliance with legal and ethical obligations and the best practices in these areas. The Code addresses important compliance and business ethics issues, such as the rules applicable to business confidentiality, inside information and the acceptance of gifts and invitations. Additionally, it underlines the importance of knowing stakeholders (“Know Your Customer – KYC”) to comply with antimoney laundering regulations and economic sanction programs.
All employees are responsible for ensuring compliance with applicable laws, regulations and policies in their daily duties as well as for escalating any actual or suspected compliance breach, in line with the Group’s guidelines on reporting concerns, which up until early 2019 provided two channels to securely raise concerns. In order to make it easier for SCOR employees and third parties to raise any relevant concerns, SCOR added in 2019 a third channel of communication, for raising alerts through the internet.
Through this new channel, the Group’s internal and external stakeholders can raise an alert by simply clicking on a link on the SCOR Intranet portal or on the Group’s website. This enables secure and confidential reporting of concerns at any time and from any location with Internet access. The reporting channel allows users to include attachments to the report and also allows for anonymous reporting. All reports filed through this process are confidentially routed to the appropriate Hub General Counsel and Hub Compliance Officer and to the Group Chief Compliance Officer, so that they are fully reviewed and investigated.
06NON-FINANCIAL PERFORMANCE STATEMENT Business conduct and compliance 6.3.2. DATA PRIVACY AND PROTECTION The United Nations Global Compact, of which SCOR is a member, invites the Group to promote and respect the protection of international human rights law and to ensure that it is not a party to any human rights violations.
As well as the processing of personal data relating to its employees, SCOR’s activities may involve the processing of other personal data, which requires it to comply with personal data protection and privacy regulations. The Code of Conduct defines the most important principles related to the respect of personal data and privacy that are mandatory for all employees.
In addition, the General Data Protection Regulation (GDPR) (EU 2016/679) has been in force since May 25, 2018 and constitutes the overarching regulation on data protection in Europe with the objective of making companies accountable for their processing of personal data. While the GDPR is general in nature and does not specifically relate to reinsurance, it nonetheless has a significant impact on SCOR’s data processing activities.
In 2018, the Group completed a project designed to ensure compliance with the GDPR’s requirements, which led to the implementation of several organizational and technical measures.
SCOR adheres to several guidelines and policies that relate to or impact some aspects of data privacy and/or protection: • the Group Data Protection Guidelines, which establish a common minimum standard to be applied by SCOR for processing personal data; • the Group Data Breach Response Guidelines, which establish a response process to help staff identify and escalate a potential data breach, to ensure an appropriate and timely Company response; • the Group Information Security Policy, which establishes SCOR’s commitment to IT security and defines IT security governance.
6.3.3. ETHICS AND ARTIFICIAL INTELLIGENCE SCOR’s Code of conduct serves as a reference to enable employees to understand their legal and ethical obligations toward SCOR’s different stakeholders. This reference is also used for artificial intelligence as SCOR is committed to formally integrating these principles into its operations, based on the "ethical guidelines for trustworthy AI" published in April 2019, by the European Commission High-Level Expert Group on Artificial Intelligence.
6.3.4. ANTI-CORRUPTION As mentioned in the Code of Conduct, SCOR has a zero-tolerance approach to corruption, including active and passive bribery and influence peddling. The Group Policy on Anti-Bribery clearly defines corrupt practices and provides guidance for employees in recognizing and preventing corrupt practices.
In addition to the above, sanctions and embargoes, are mandatory topics in the legal and compliance training conducted every year. These in-person training sessions are supplemented by a periodic training via an e-learning module for employees who may be exposed to economic sanction and embargo issues in the course and scope of their work.
6.3.6. ANTI-MONEY LAUNDERING, FINANCING OF TERRORISM AND KYC As a reinsurer, SCOR does not typically have any contractual relationship with the underlying insureds of its cedents, and most global anti-money laundering and counter-terrorism financing laws and regulations do not apply to reinsurance. However, as an international financial group, SCOR still has a proportionate process to assess and analyze the Group’s exposure to money laundering and terrorism financing risks.
SCOR has put in place a risk-based approach, set out in the Group’s Guidelines on Anti-Money Laundering, Combating the Financing of Terrorism and Know-Your-Customer. The procedures include the identification of business risk indicators by the compliance teams, which are subsequently applied in business risk assessments by each Hub.
6.3.7. INSIDER TRADING Transparency, accountability and credibility in the eyes of our investors are key values for SCOR as a listed company. In this respect, the Group Guidelines on Managing Inside Information clearly prohibit trading in SCOR’s securities while in possession of information which, if made public, would be likely to have a significant influence on the share price.
As a result of its diversified and global business model, SCOR (re)insures and invests in the global economy, including industries with multiple ESG profiles and diverse stakeholders, and industries operating in countries that have cultural and normative environments of varying degrees of maturity in social and environmental fields. As such, the Group's reputation may be influenced by the perception of external stakeholders who expect companies to consider society’s challenges, including the development of products and services to address such issues.
In this context, the Group continues to develop several initiatives in the field of ESG risk management, as well as opportunities arising from social and environmental issues. These initiatives focus on: • institutional commitment, support for scientific research and cooperation with several of the Group's stakeholders, particularly with regard to the modeling of natural events and a framework for the development of sustainable finance; • the development of guidelines to provide a framework for the Group's activities in business sectors where ESG stakes are high, particularly in carbon-intensive industries such as those involving the mining and use of thermal coal. In addition to these guidelines, the Group is developing tools to monitor the ESG quality of its investment and underwriting activities in the field of specialty insurance; • the design of insurance, reinsurance and investment products that address the issues identified as most relevant to the Group’s activities, such as issues relating to climate change mitigation and adaptation, health and, to ensure inclusion, access to insurance.
As part of its Quantum Leap strategic plan, SCOR has further committed to ESG criteria integration by updating its sustainable investment policy in September 2020 alongside new commitments in relation to climate issues. In May 2020, the Group joined the NetZero Asset Owner Alliance to implement its decarbonation strategy.
Based on structured governance, as introduced in Section 6.1.3.2 of this statement, the Group's sustainable investment policy is built on five pillars: • building a resilient investment portfolio with an integrated risk management approach; • facilitating sustainable investment decisions through negative and positive screening; • fostering sustainable behavior through engagement; • financing a sustainable world through themed and/or impact investments; • supporting climate awareness through public debate and collective initiatives.
The governance of the responsible investment policy and its pillars are described below.
6.4.1.1. PHILOSOPHY AND GOVERNANCE OF THE INVESTMENT POLICY As emphasized in its sustainable investment report (2), SCOR’s investment philosophy is driven by capital allocation in a regulated Solvency II environment, underpinned by the Group’s internal model. The investment activity is developed to optimize the recurring financial contribution to the Group’s profitability, while protecting the value of assets and creating long-term sustainable value. Accordingly, SCOR is prudent in the management of its investment portfolio, focusing on fairly liquid, high-quality fixedincome assets in order to ensure Group solvency in the event of major losses impacting its liabilities. Asset and liability management is a critical factor when selecting assets backing SCOR’s technical liabilities. The Group focuses on asset allocation and asset concentration and applies a strict congruency principle.
Given its strong concerns about environmental factors, SCOR also encourages its investment managers to overweight issuers with good ESG ratings and decisive strategies, in order to align with the Paris Agreement. SCOR closely monitors the implementation of all its preferences and regularly reviews its positions.
6.4.1.2. BUILDING A RESILIENT PORTFOLIO FROM AN INTEGRATED RISK MANAGEMENT PERSPECTIVE
Negative screening: exclusions Certain activities may not be aligned with SCOR sustainable investing policy, raise sensitive issues or entail a reputational risk for the Group. As such, the Group excludes certain activities or issuers from its investment universe. These exclusions apply to all asset classes falling within the definition of invested assets. The list of exclusions is communicated to all investment managers with immediate effect. New investments are prohibited, and the remaining positions are actively managed in order to accelerate their liquidation.
The Group applies exclusions to: • companies involved in the production of cluster munitions, and countries that do not adhere to anti-money laundering and counter-terrorism financing rules, as defined by the Financial Action Task Force (FATF) on money laundering; • a number of carbon-intensive sectors, in line with its commitment to make its asset portfolio carbon neutral by 2050, while favoring a balanced approach between CO2 reduction and economic development. In this respect, the Group excludes issuers for which thermal coal (mining and power generation) accounts for more than 10% of their turnover or more than 10% of the electricity generated, as well as coal plant developers on the Urgewald list. These exclusions also apply to companies involved in oil sands and oil development in the Arctic region, above a threshold expressed as a percentage of oil reserves that is set at 30%. Upstream oil & gas companies are also excluded from the investment universe, except for those taking commitments to materially reduce the carbon footprint of their activities; • the tobacco industry, since the Group’s signature of the TobaccoFree Finance Pledge in May 2018.
6.4.1.4. FOSTERING SUSTAINABLE BEHAVIOR THROUGH ENGAGEMENT Drawing on the voting recommendations of a proxy, SCOR exercises the voting rights on the shares held directly in its portfolio in accordance with the commitments undertaken under its action plan for investments. In 2020, as a result of the Covid-19 pandemic and its operational impact, SCOR could not exercise its voting rights for 9 issuers out of the 12 directly held in its portfolio. For those 9 issuers, all the proxy voting recommendations of the proxy were followed.
6.4.1.5. FINANCING A SUSTAINABLE WORLD THROUGH THEMATIC AND/ OR IMPACT INVESTMENTS
In addition to its adherence to the Principles for Responsible Investment, the Group is involved in numerous professional associations that are leading discussions on climate issues and investments, such as the French Insurance Federation, the French Association of Institutional Investors. As an asset owner, the Group participated in around fifteen public conferences and roundtables on sustainability and climate change in 2020.
6.4.2.1. CONTRIBUTING TO THE UNDERSTANDING OF CLIMATE RISKS Climate risk management research, notably in terms of climate risk modeling techniques and climate risk transfer mechanisms, contributes to a better understanding of climate change challenges and adaptation to them. In this respect, SCOR provides institutional and financial support to targeted institutions in the aforementioned areas, while enhancing its own tools and expertise.
This institutional commitment to climate change adaptation is backed at the highest level of the Group. SCOR’s Chairman and Chief Executive Officer has co-chaired the Geneva Association’s Extreme Events and Climate Risks working group since May 2015 and also is a member of the Steering Committee of the Insurance Development Forum, an institution that brings the United Nations, the World Bank and several other international bodies together with the reinsurance industry. SCOR is also a member of the InsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions, an initiative more specifically designed to provide insurance solutions to the most economically vulnerable populations.
Furthermore, SCOR is one of the earliest supporters of OASIS, a not for profit company funded by private stakeholders developing an open source risk modeling platform designed to provide a better understanding of the impact of climate change on extreme events. The Group has also partnered with Climate-KIC, one of the largest public-private partnerships founded to combat climate change. The
In addition, the natural catastrophe modeling teams within the Group’s P&C business unit are trying to factor the latest usable scientific knowledge into the models they use. The natural catastrophe modeling tools used by the P&C business unit to assess insurance risks take account of climate risk both implicitly (e.g. claims activity being used as the basis for calibrating models) and explicitly (e.g. using current estimates of rising sea levels to assess the risk of coastal flooding rather than long-term averages). In this way, current changes in the frequency and severity of the natural risks that SCOR underwrites, whether or not they are related to climate change, are taken into account in the pricing of contracts.
The Group's ability to integrate the latest scientific knowledge into its models is illustrated, for example, by the implementation of an internal OASIS model for forest fires in California and the development of a new modeling mechanism for floods in China. The P&C business unit has notably conducted an extensive scenario-based study to quantify the impact of climate change on SCOR’s risk profiles and those of its clients, whose results were shared internally with SCOR's Board of Directors.
6.4.2.2. INTEGRATING ESG INTO INSURANCE ACTIVITIES Over the past few years, SCOR has undertaken several initiatives aimed at further integrating ESG issues into the insurance activities developed by SCOR Business Solutions (SBS).
The Group’s ESG scoring grid for coal extraction therefore comprises thresholds expressed as a percentage of company turnover and as an absolute value in terms of thermal coal produced each year. Other criteria such as coal quality, trends in coalmining, observance of industry standards and CSR rating are also taken into account. Within the electricity generation sector, the Group’s ESG scoring grid includes a threshold expressed as a percentage of GWh generated from the use of thermal coal. Other criteria are also used, such as the technology used, type of coal, CSR rating and the purpose and location of the plant in question.
06NON-FINANCIAL PERFORMANCE STATEMENT Considerations of environmental and social issues in the Group’s business activities
These exclusions were consolidated into an ESG underwriting guide in 2019. This guide also includes instructions to integrate ESG issues specific to certain activities that may present ethical issues in health (e.g. manufacture and distribution of opioids, animal testing), the environment (e.g. palm oil production, dam construction) and human rights (e.g. textiles and forced labor). For the sectors identified, the underwriting teams are invited to integrate these issues into the "Know Your Customer" procedure. When in doubt about the ESG quality of the proposed case, teams are invited to forward the file to their managers and to the SBS underwriting manager for arbitration.
Finally, drawing on the methods developed in connection with its investments, the Group is testing various techniques designed to assess the overall ESG quality of the business portfolio underwritten as part of the business developed by SBS.
P&C reinsurance activities In the field of P&C reinsurance, the Group's strategic plan focuses on issues relating to climate change mitigation through support for the energy transition and adaptation to climate risks. These orientations capitalize on the Group's expertise accumulated in its analysis, modeling and risk transfer activities: • supporting the energy transition: SCOR has strengthened its underwriting team in the field of renewable energy and has identified strategic markets in which it plans to develop as part of the plan. In addition, the P&C business unit has developed a strategic partnership with Energetic, a start-up that has developed credit insurance to protect developers of renewable energy projects against payment default; • development of solutions contributing to climate risk adaptation: long involved in multiple government insurance pools covering climate catastrophes, the Group is developing partnerships with development finance institutions that have climate change adaptation objectives. In this respect, SCOR, alongside several other (re)insurers associated with the Insurance Development Forum, has committed to supporting the resilience of developing countries in partnership with the United Nations Development Program, and with the German and British governments. Collaborations with institutions including the World Bank, to provide parametric insurance against climate-related natural disasters in the Philippines, and the World Food Program in the development of livestock insurance for Ethiopian herders, are other recent examples of the Group's commitment to development finance institutions to provide solutions that contribute to resilience. Through these programs, the Group is helping to increase insurance penetration and to improve the adaptability of insurance beneficiaries. In developing countries, there may be a significant protection gap (1) and insufficient data to develop compensatory insurance schemes. Parametric insurance schemes, developed in partnership with development finance institutions, offer a solution in terms of providing financial protection for post-event reconstruction.
• The development of solutions to expand insurability: an innovative family solution was developed in Spain, offering coverage for newborns with congenital conditions such as Down’s syndrome, which was developed in close collaboration with a Spanish insurer and required specific research on congenital diseases.
The Life business unit is also helping people live longer and healthier lives through: • A focus on the promotion of healthy lifestyles with, as an example, the Biological Age Model (BAM), which encourages people to stay active, thereby reducing some risks related to contemporary lifestyles. The app was launched for SCOR’s employees in the US and Canada over the summer 2020 and in Paris at the end of September 2020. The algorithm is now being deployed in Asia with four clients, following the signature of the agreement with Manulife China in November 2020; • The development of diagnosis and patient monitoring solutions. For example, SCOR has invested in BioSerenity, a French medical solutions company that aims to optimize the pathways of patients with certain chronic diseases; • The prevention of mental illness: through the “FEEL” initiative in Germany, SCOR developed a solution offering intervention/ prevention for mental disorders in disability portfolios with its German partner Sentio. In November 2020, SCOR received the “Digital Lighthouse” innovation award for this solution.
SCOR Global Life is also sharing its knowledge with society: • Contribution to research is key to SCOR’s CSR strategy: with its knowledge team, the Life business unit is contributing to various research papers and publications in collaboration with universities and scientific research institutes. SCOR also holds regular conferences to share knowledge with society, in particular on progress in breast cancer research.
The focus is placed on greenhouse gas emissions, for which the indicative reduction target in terms of intensity has been raised to 30% (1) by the end of the Quantum Leap strategic plan. After expanding it in 2018 from the previous year, the Group has decided to extend its CO2 emission offsetting program to all the residual emissions measured in this subsection.
In addition, the Group has initiated a program to stop using singleuse plastics in several of its offices, particularly the largest ones in terms of staff and size, such as Paris, London, Cologne, Zurich and Singapore.
6.4.3.1. ENVIRONMENTAL QUALITY AND CERTIFICATION OF OFFICES SCOR conducts its operations from office buildings of varying size that it either owns or rents in around thirty countries.
The Group focuses on the management of its energy consumption sources and encourages the purchase of energy produced from renewable sources.
6.4.3.3. GREENHOUSE GAS EMISSIONS AND VOLUNTARY OFFSETTING As part of its Quantum Leap strategic plan, SCOR has raised its reduction objective in terms of carbon intensity per employee under the first two scopes of the GHG protocol to 30% by the end of the plan (compared to the previous objective of 15% by 2020). At the end of 2020, the Group’s carbon intensity reduction was 35%. In addition, the Group, which is committed to offsetting all its emissions measured under this subsection, submitted three portfolios of offset projects to a staff vote in 2019. The Group’s employees voted to support two projects for conserving forest in Brazil and Ethiopia. The Group will have offset all its 2019 and 2020 emissions upon delivery of the carbon credits generated by these two projects. These carbon credits are not deducted from the greenhouse gas emissions reported below.
(1) The coverage rates are calculated on the basis of the Hubs’ response rates. The number of employees working in the locations surveyed divided by the number of employees working in the entities fully consolidated in the financial statements. Additional information on the scope of reporting can be found in Section 6.6.3 of this statement.
6.5.2. CYBER SECURITY, A PRIORITY IN THE DIGITAL AGE Aware of the expectations of its clients and other partners in terms of protection against cyber risks and their consequences, SCOR has developed an IT security policy, supplemented by guidelines and procedures which are implemented across various levels of its organization. This security program against cyber incidents was developed by the IT security team, under the responsibility of the Group's Chief Information Security Officer, with the assistance of the rest of the IT Department.
principles; • the development of a proactive cyber approach to enhance preventive security means.
The Group security framework defines the Group’s IT system security governance and the related security services and solutions implemented by SCOR.