01 SCOR GROUP 3 1.1. Key figures and strategic plan 5 1.2. Information about the SCOR Group 9 1.3. Market and financial review 21
RISK FACTORS AND RISK MANAGEMENT MECHANISMS 121 3.1. Main risks 122 3.2. Management of main risks 140 3.3. Internal control and risk management procedures 151
SCOR SHARES, SHARE CAPITAL AND GENERAL INFORMATION 253 5.1. SCOR shares 254 5.2. Share capital & shareholders 255 5.3. General information 268
A APPENDICES 311 Appendice A Person responsible for the annual report 312
Appendice D Additional information relating to the management report of the company and the Group – Correspondence table 355
The Universal Registration Document was filed on March 2, 2021 with the French financial markets authority (Autorité des marchés financiers – AMF), as competent authority under Regulation (EU) 2017/1129 without prior approval pursuant to Article 9 of the said regulation.
Pursuant to Article 19 of Regulation (UE) 2017/1129 of June 14, 2017 of the European Parliament and Council, the following information is included by reference in this Universal Registration Document (the “Universal Registration Document”): • SCOR SE’s corporate and consolidated financial statements for the financial year ended December 31, 2019 and the report of the Statutory Auditors regarding said financial statements as presented in SCOR SE’s Universal Registration Document filed with the AMF on March 13, 2020 under number D.20-0127; • SCOR SE’s corporate and consolidated financial statements for the financial year ended December 31, 2018 and the report of the Statutory Auditors regarding said financial statements as presented in SCOR SE’s registration document filed with the AMF on March 4, 2019 under number D.19-0092.
Parts of these documents which are not expressly included herein are of no concern to the investor.
This is a translation into English of the Universal Registration Document of the Company issued in French and it is available on the website of the Issuer.
The annual financial report included in this Universal Registration Document is a translation into English of the annual financial report included in SCOR’s Universal Registration Document issued in French.
1.1. KEY FIGURES AND STRATEGIC PLAN 5 1.1.1. Group key figures 5 1.1.3. Dividend distribution policy 7 1.1.4. Current strategic plan 8 1.2. INFORMATION ABOUT THE SCOR GROUP 9 1.2.2. History and development of SCOR 9 1.2.3. Organizational structure of SCOR 9 1.2.4. Ratings information 11 1.2.5. Business overview 11 1.2.6. Research and development, patents and licenses 18 1.3. MARKET AND FINANCIAL REVIEW 21 1.3.1. Reinsurance market developments 21 1.3.2. Financial market developments 21 1.3.3. Significant events of the year 22 1.3.4. Information on SCOR’s competitive position 23 1.3.5. Revenues & earnings summary 23 1.3.6. Financial position, liquidity and capital resources 34 1.3.8. Cash flows 36 1.3.9. Calculation of financial ratios 37 1.3.10. Events subsequent 1.3.11. Documents on display 39
WHAT IS REINSURANCE Reinsurance is at the heart of risk management: it enables insurers to cover their risks by ceding part of them, in order to mutualize them worldwide. SCOR covers major Non-Life risks including large catastrophe risks (both natural and man-made catastrophes: hurricanes, floods, volcanic eruptions, explosions, fires, plane crashes, etc.), and Life biometric risks (mortality, longevity and lines, both long term and short term). The challenge for reinsurance professionals consists of identifying, selecting, assessing and pricing risks, in order to be able to absorb them.
employees of 64 nationalities accross 29 countries, equally distributed (47% women / 53% men)
+ 4,400 clients throughout the world 4th largest reinsurer in the world billion euros of premium income in 2020
01SCOR GROUP Key figures and strategic plan 1.1. KEY FIGURES AND STRATEGIC PLAN
In the face of the Covid-19 pandemic (2), SCOR has once again demonstrated the strength and resilience of its business model as well as its ability to absorb major shocks. The Group consistently continues to execute its strategic plan “Quantum Leap” combining growth, profitability and solvency, with no change in risk appetite, capital shield policy or capital management policy.
(1) Refer to the 2018 Registration Documentation Section 1.3.3 – Significant event of the year 2018 on the US tax reform (Tax Cuts and Jobs Act, the “TCJA”).
(2) See Section 1.3.5.5 – Net investment income and investment income on invested assets. (3) See Section 1.3.9 – Calculation of financial ratios, for detailed calculation.
(4) Earnings per share are calculated as net income divided by the number of ordinary shares, which includes the average number of shares over the reporting period, shares issued during the period and time-weighted treasury shares. See Section 4.6.22 – Earnings per share for detailed calculation. (5) Closing stock price on December 31, 2020 (December 31, 2019 and December 31, 2018).
(1) By net reinsurance premiums written, source: “AM Best Special Report Global Reinsurance 2020”. (2) Refer to Section 1.3.3 – Significant events of the year.
* Return on equity is based on the Group’s share of net income divided by average shareholders’ equity (calculated as shareholders’ equity at the beginning of the period adjusted for the effect of all movements during the period using a prorata temporis method).
Shareholders’ equity, debt and leverage ratio * (in %) In EUR millions * The leverage ratio is calculated by dividing the subordinated debt by the sum of shareholders’ equity and subordinated debt. The calculation excludes accrued interest and includes the impact of swaps related to subordinated debt issuances. This ratio is expressed as a percentage. It is used to determine how much lenders are financing the Group's activities over shareholders.
** In March 2018, SCOR placed a perpetual note in the amount of USD 625 million. In June and November 2018, SCOR redeemed the CHF 315 million and CHF 250 million undated subordinated notes line, using the proceeds of the new instrument.
*** In December 2019, SCOR issued a perpetual note in the amount of USD 125 million. These new notes are assimilated and form a single series with the existing USD 625 million perpetual deepy surbordinated notes issued on March 2018. The new notes issue bear the same terms and conditions as the original notes.
* The net combined ratio is calculated by taking the sum of Non-Life claims (including natural catastrophes), commissions and management expenses net of retrocession, divided by earned premiums net of retrocession.
The net combined ratio calculation has been refined in 2017 to exclude some immaterial non-technical items that were previously included. Considering their potential growth, these items have been excluded to ensure they do not distort the net combined ratio in the future. The impact on the previously reported ratio is +0.26%pt as at
In the context of Covid-19, the Annual Shareholders’ Meeting, postponed to June 16, 2020, approved the subsequent proposal of the Board of Directors of SCOR SE, which had met on May 25, 2020, that no dividend will be distributed for the 2019 fiscal year, in accordance with the Autorité de Contrôle Prudentiel et de Résolution’s (ACPR) position. The entire net income for 2019 was allocated to distributable earnings. For further information, refer to Section 1.3.3 – Significant events of the year.
The statute of limitations for dividends is five years. Unclaimed dividends will be paid over to the French Treasury. See also Section 4.6 – Notes to the consolidated financial statements, Note 22 – Earnings per share.
UNIVERSAL REGISTRATION DOCUMENT SCOR 2020 7 01SCOR GROUP Key figures and strategic plan
01 SCOR GROUP Key figures and strategic plan 1.1.4. CURRENT STRATEGIC PLAN In September 2019, SCOR launched its strategic plan, “Quantum Leap”. This plan covers the period from mid-2019 to the end of 2021. It respects SCOR’s four strategic cornerstones, which are: • a strong franchise, achieved by deepening its presence in the local Non-Life and Life reinsurance markets in which SCOR operates with recognized expertise and strengthening proactive client relationships through best-in-class services and product innovation; • a high degree of diversification of Non-Life and Life business and geographical presence, providing more stable results and robust capital diversification benefits with the use of financial market instruments; • a controlled risk appetite on both sides of the balance sheet; and • a robust capital shield policy (see Section 3.3.3 – Retrocession and other risk mitigation techniques).
With “Quantum Leap”, SCOR sets equally weighted profitability and solvency targets that are ambitious in the current financial and economic environment: • a return on equity above 800 basis points above the five-year rolling average of five-year risk-free rates over the cycle; and • an optimal solvency ratio in the 185-220% range (percentage of
(VNB) annual growth rate of ~6% to 9%, cost ratio of ~5.0% and tax rate between ~20% to 24%; • SCOR Global P&C: Gross written premiums annual growth rate of ~4% to 8%, net combined ratio of ~95% to 96% and Value of New Business (2) (VNB) annual growth rate of ~6% to 9%; • SCOR Global Life: Gross written premiums annual growth rate of ~3% to 6%, net technical margin of ~7.2% to 7.4% and Value of New Business (2) (VNB) annual growth rate of ~6% to 9%; • SCOR Global Investments: Average annualized return on invested assets in the range of ~2.4% to 2.9% (3).
1.2.1. INTRODUCTION Listing As at the date of this Universal Registration Document, SCOR SE’s shares are listed on the Eurolist of Euronext Paris SA and on the SIX Swiss Exchange (formerly SWX Swiss Exchange) in Zurich, where they were admitted for trading on August 8, 2007.
At the beginning of the 1980s, the French government’s stake in the Company’s share capital, held through the Caisse Centrale de Réassurance, was progressively reduced in favor of insurance companies that were active on the French market.
Revios Rückversicherung AG, enabling it to become a leading worldwide Life reinsurer. Based in Cologne (Germany), Revios was the former Life reinsurance unit of Gerling Global Re Group and had developed on a stand-alone basis from 2002 onward to become one of the leading European reinsurers specializing in Life reinsurance, with operations in 17 countries.
1.2.3. ORGANIZATIONAL STRUCTURE OF SCOR The main operational entities of the Group are presented in the chart below: Subsidiaries of Life business unit
01 SCOR GROUP Information about the SCOR Group 1.2.3.1. BRIEF DESCRIPTION OF THE GROUP AND OF THE POSITION OF THE ISSUER
Group operating companies SCOR SE is the Group parent company and is listed on the Euronext Paris regulated market.
The Group is a three-engine group driven by SCOR Global Life, SCOR Global P&C and SCOR Global Investments. The Group’s organizational choices were guided by the principles of mobilization of skills and expertise, operating efficiency, structural simplicity, clear reporting lines and balance between teams from the Group’s different entities.
SCOR Global P&C, the Group’s Non-Life business unit , operates worldwide through the reinsurance subsidiaries and branches of SCOR SE in the EMEA region, including Spain, Italy, Switzerland, the UK, Germany, South Africa, Russia, the Americas region and the Asia-Pacific region, including Australia, China, India, South Korea, Hong Kong and Singapore.
SCOR Global Life, the Group’s Life business unit , operates worldwide through the insurance and reinsurance subsidiaries and branches of SCOR SE in the EMEA region including Germany, the UK, Ireland, Italy, Spain, Switzerland, the Netherlands, Sweden, Belgium, South Africa, in the Americas region including Canada, the US, Latin America, and the Asia-Pacific region including Australia, New Zealand, China, Hong Kong, Japan, Singapore, Malaysia, South Korea and India.
The Group’s subsidiaries, branches and offices are connected through a central network of applications and data exchange platforms, which allow local access to centralized risk analysis, underwriting or pricing databases and also gives access to information on local market conditions, to be shared among the Group’s subsidiaries, branches and offices. In addition, by regularly rotating personnel between the various locations of the Group, SCOR encourages its underwriters, actuaries, modelers, claims experts and risk controllers to share and exchange experience across its various geographic markets and business lines.
In the context of Solvency II, the SE reinsurance legal entities (SCOR Global Life SE and SCOR Global P&C SE) merged into SCOR SE on March 31, 2019. This reorganization enables SCOR to optimize its operational and legal structure and level of regulatory capital, thereby creating additional value for its shareholders, customers and partners.
Each Hub has local, regional (1) and Group responsibilities, with the heads of each Hub reporting to the Group Chief Operating Officer. Each Hub typically includes the following functions: Legal and Compliance, Information technology support, Finance, Human Resources and General Services. This organization enables: • SCOR’s operational structures and support functions to be optimized by creating service platforms in charge of managing pooled resources, including information technology, human resources, legal/compliance and others in the Group’s main locations; • several Group functions to be carried out and managed in geographical locations other than Paris in order to benefit fully from the competencies within different Hubs; and
The Hubs are not responsible for generating revenues or for underwriting or claims management. The local underwriting and claims management teams have direct reporting lines within the respective P&C and Life business unit. Hub-shared service costs are then allocated to the business unit.
Management reviews the operating results of the Non-Life and Life operating segments individually to assess the operational performance of the business and to allocate resources. For more information on SCOR’s operating segments, see Section 4.6 Note 5 – Segment information.
On September 25, 2020, AM Best affirmed SCOR’s Financial Strength Rating at “A+ (Superior)” and its Long-Term Issuer Credit Ratings of "aa-".
For more information on risks arising from credit ratings, please see Section 3.1.1.5 – Downgrade risk.
1.2.5. BUSINESS OVERVIEW Since 2002, SCOR has defined its strategy and principle orientations through the creation of seven successive plans: “Back on Track” (2002-2004), “Moving Forward” (2004-2007), “Dynamic Lift” (2007-2010), “Strong Momentum” (2010-2013), “Optimal Dynamics” (2013-2016), “Vision in Action” (2016-2019), and “Quantum Leap” (2019-2021). The success of its various plans, along with the Group’s acquisitions of Revios (in 2006),
Risk appetite defines the quantity of risk that SCOR is willing to accept to achieve a desired level of profitability. This determines where the Group wishes to position itself on the assumed riskexpected return spectrum, between extremely risk averse (low risklow return) and extreme risk taker (high risk-high return). SCOR uses a target solvency ratio as well as a target expected profitability. These two components provide a comprehensive definition of its risk appetite. The Group actual solvency ratio and profitability profile are regularly reported to the Board of Directors via the Risk Committee.
Functions Reinsurance has four essential functions: • it offers the direct insurer greater security for its capital and solvency, as well as protection against the potentially high volatility of results when abnormally high frequency or severity of losses or events occur, by covering the direct insurer above certain contractually set amounts per event or in the aggregate; • it allows insurers to increase the maximum amount they can insure for a given loss or series of losses by enabling them to underwrite a greater number of risks, or larger risks, without excessively raising their need to cover their solvency margin and, therefore, to increase their capital base; • it gives insurers access to substantial available liquidity in the event of major loss events; and
• enabling ceding companies to build up their business, particularly when launching new products requiring significant upfront investment or financing or when investing in new markets by starting their own operations or acquiring portfolios or companies.
Breakdown of the Group’s business The Group is organized into three business units (SCOR Global P&C, SCOR Global Life and SCOR Global Investments), of which there are two reportable operating segments, and one corporate cost center referred to as “Group Functions”. The reportable operating segments are: the SCOR Global P&C business, which has responsibility for property and casualty insurance and reinsurance (also referred to in this Universal Registration Document as “NonLife ”); and the SCOR Global Life business, with responsibility for Life reinsurance (also referred to in this Universal Registration Document as “Life”). These two businesses represent SCOR's two “operating segments” for the purposes of IFRS 8 – Operating segments, and are presented as such in its consolidated financial statements, included in Section 4 – Consolidated financial statements. Each operating segment underwrites different types of risks and offers different products and services, which are marketed via separate channels; responsibilities and reporting within the Group are established on the basis of this structure. SCOR Global Investments is the asset management business unit of the Group. Its role is complementary to the two operating segments as it manages SCOR Global P&C’s and SCOR Global Life’s investment assets associated with the contract liabilities. SCOR Global Investments also manages assets on behalf of third parties although these activities are currently not considered material. Therefore, SCOR Global Investments is not considered as a separate reportable operating segment for purposes of IFRS 8 – Operating segments.
SCOR’s cost center is referred to in this Universal Registration Document as “Group Functions”. Group Functions is not an operating segment and does not generate revenues. The costs in Group Functions are Group-related and are not directly attributable to either the P&C or Life segment, but those costs that are indirectly attributable are allocated to the operating segments based on suitable allocation keys. Group Functions includes the cost of departments fulfilling duties for the benefit of the whole Group, such as Group Internal Audit, Group Finance departments (Tax, Accounting, Consolidation and Reporting, Financial Communication, Treasury and Capital Management, Financial Planning and Analysis), Group Chief Operating Officer departments (Legal and Compliance, Communication, Human Resources, Information Technology, Cost Controlling and Budgeting) and Group Chief Risk Officer departments (Group Actuarial, Risk Coverage, Risk Governance, Prudential and Regulatory Affairs, Risk Modeling).
• Casualty treaties: covering general liability, product liability and professional indemnity.
The teams underwrite on the basis of sophisticated risk evaluation, seeking flexibility and innovative approaches for their clients, working closely with the following global business line experts.
• Political Risks: Confiscation Expropriation Nationalization Deprivation (CEND), embargo and no currency transfer.
SCOR provides customized products and solutions tailored to local situations: • basic cover of construction damage caused by inherent defects in structural works; • tailored cover, including material damage caused by inherent defects in waterproofing works and/or in other specific parts of construction; and
SCOR provides reinsurance and insurance solutions in all sectors of the Aviation market: airlines, aerospace and general aviation.
SCOR’s broad range of lines provides significant and stable capacity to cover standalone, specialized Marine risks and risks forming part of broader composite covers.
With a consistent underwriting approach and substantial capacity, SCOR’s engineering team offers a broad range of reinsurance and insurance cover: Construction All Risks (CAR) and Erection All Risks (EAR) insurance, as well as advance loss of profits or delay in startup following a CAR or EAR loss, contractors’ plant and machinery, electronic equipment, machinery, machinery loss of profits and combined machinery/electronic equipment and property.
SCOR’s Property Cat team has provides reinsurance solutions to cover natural catastrophes events and property risks.
It is SCOR’s large corporate risk insurance and facultative reinsurance unit. Taking a consistent and long-term approach, SBS combines risk management expertise and advanced technology with creativity and flexibility to support the strategies and needs of its clients, particularly in Energy, Construction, Property, Liability and Financial lines.
SCOR Channel is SCOR’s Lloyd’s syndicate, offering a full suite of insurance products, from core lines of business to specialist lines such as Political and Credit risks, Cyber and Environmental Impairment Liability.
SCOR is the sole capital provider of the SCOR Channel syndicate.
Its dedicated decision-making committees provide rapid responses and promote consistency of the P&C underwriting approach: • Alternative Solutions focuses on the development of customized, non-traditional, and new products/solutions; • Cyber Solutions helps corporate and insurance clients to develop
Mortality protection represents 58% of the SCOR Global Life portfolio based on gross written premiums for the year ended December 31, 2020. SCOR Global Life actively underwrites mortality risk in all the geographical markets in which it operates.
Financial Solutions Financial Solutions combine traditional Life reinsurance with financial components providing liquidity, balance sheet, solvency and/or income improvements to the client. This type of reinsurance treaty is typically used by cedents to fund growth, stabilize earnings or optimize their solvency position (capital relief).
1.2.5.4. UNDERWRITING, DISTRIBUTION, CATASTROPHE RISK, CLAIMS AND RESERVES For information on underwriting, catastrophe risk, claims and reserves, see Section 3.3.2.1 – Management of underwriting risks related to the P&C business and Section 3.3.2.2 – Management of underwriting risks related to the Life reinsurance business.
The proportion of brokered and direct business written by the Group’s subsidiaries varies according to market and cedent practices. For the year ended December 31, 2020, the Non-Life business unit wrote approximately 69% of gross written premiums through brokers and 31% through direct business, while the Life business unit wrote approximately 6% through brokers and approximately 94% through direct business.
For the year ended December 31, 2020, SCOR’s largest brokers for the Non-Life business unit were MMC with approximately 23% of the Group’s Non-Life gross written premiums, Aon Group with approximately 21% and Willis Group with approximately 14%. SCOR’s largest brokers for the Life business unit were Aon Group with approximately 1% of the Group’s Life gross written premiums and Willis Group with less than 1%.
The direct reinsurance market remains an important distribution channel for reinsurance business written by the Group. Direct placement of reinsurance enables SCOR to access clients who prefer to place their reinsurance partly or in totality directly with reinsurers based upon the reinsurer’s in-depth understanding of the ceding company’s needs.
The Capital Shield has the following objectives: • ensuring protection of the Group’s capital and solvency in line with SCOR’s Risk Appetite Framework; and • balancing the portfolio and improving its diversification, hence using available capital more efficiently. It also contributes to avoiding undesired earnings volatility and providing liquidity in times of stress.
For more information on the capital, refer to Section 1.3.6.1 – Capital. For more information on the Capital Shield Strategy, refer to Section 3.2.3 – Retrocession and other risk mitigation techniques. For information on the Group’s solvency scale, refer to Section 1.3.7 – Solvency and Section 4.6 – Notes to the consolidated financial statements, Note 13 – Information on share capital, capital management, regulatory framework and consolidated reserves. For information on structured entities used in the Capital Shield Strategy, refer to Section 4.6 – Notes to the consolidated financial statements, Note 3 – Scope of consolidation.
The investment portfolio is positioned dynamically in order to optimize the financial contribution from the investment portfolio to the Group’s results and capital allocation. SCOR follows a capitaldriven investment process, ensuring through a very strict ALM process that the tactical asset allocation is aligned with the Group’s risk appetite. Meanwhile, the Group has set very stringent risk limits (value at risk “VaR”, investment guidelines) that enable permanent monitoring of limits to protect the Group from extreme market events and severe loss scenarios.
SCOR has set up a rigorous governance process and an ERMfocused organizational structure: • the Board of Directors approves risk appetite, risk limits and as a consequence, the capital allocated to insurance business investments on the basis of the Risk Committee’s recommendations; • the Executive Committee approves the overall investment strategy and the macro-positioning of the investment portfolio on the basis of the Group Investment Committee’s recommendation.
Group Investment Committee The Group Investment Committee is chaired by the Group’s Chairman and Chief Executive Officer and is composed of the Group Chief Financial Officer, the Group Chief Risk Officer, the Chief Economist, the Chief Executive Officer of SCOR Global P&C, the Chief Executive Officer of SCOR Global Life, the Chief Executive Officer of SCOR Investment Partners and other representatives of
SCOR Global Investments. The Group Investment Committee meets at least each quarter and defines the strategic and tactical asset allocation as well as the risk appetite of the Group.
SCOR Investment Partners SCOR Investment Partners centralizes the management of all investment assets of the Group entities, however in some jurisdictions, such management is delegated to external asset managers. The SCOR Investment Partners investment team is organized around six asset management desks: • aggregate, focusing on rates, covered bonds and investment grade credit; • credit, focusing on high yield debt and on leveraged loans; • equities and convertible bonds; • infrastructure loans; • Insurance-Linked Securities (ILS); and • direct real estate investments and real estate loans.
01 SCOR GROUP Information about the SCOR Group 1.2.5.7. DEPENDENCY OF THE ISSUER WITH RESPECT TO PATENTS OR LICENSES, INDUSTRIAL, COMMERCIAL OR FINANCIAL CONTRACTS AND NEW MANUFACTURING PROCESSES
See Sections 3 – Risk factors and risk management mechanisms and 1.2.6 – Research and development, patents and licenses.
SCOR has entered into many scientific partnerships over the years, the active ones being with the ADERA (Association pour le développement de l’enseignement et des recherches auprès des universités, des centres de recherche et des entreprises d’Aquitaine – INSERM) on LTC (EUR 100,000 annually) and the Pierre et Marie Curie University at the Pitié-Salpêtrière Hospital on HIV and Immunotherapy developments (EUR 50,000 annually). SCOR has also funded the Department of Demography at the University of California, Berkeley on the Human Mortality Database project (USD 20,000 per year), which serves the academic and actuarial community, to build predictive models of life expectancy for many countries.
Since 2015, SCOR has also been organizing, with the partnership of the French Institute of Actuaries, an actuarial symposium in Paris. In November 2015, the theme was centered around “Actuarial and Data Science”, followed by “Scientific laws and mathematical models: from physics to actuarial science” in December 2016, “Will Artificial Intelligence revolutionize actuarial science?” in December 2017, “Macroeconomic and Financial instabilities” in December 2018, “Actuarial Science and Game Theory” in December 2019 and most recently “Scenarios and Prospective” in December 2020.
In addition to the above, scientific risk management techniques are promoted, and knowledge shared, via the involvement in collective studies through the Geneva Association and the teaching of insurance and scientific risk management techniques in schools and universities (e.g. the graduations, the masters and the Executive MBA supplied by the École nationale d’assurance (ENASS) of the Paris Conservatoire national des arts et métiers (CNAM).
In accounting, consolidation and financial reporting area and through all entities of the Group, SCOR runs a global solution, SAP-based, embedding a unique chart of accounts, standard processes, and real-time analytical capabilities. This platform is regularly enriched through the development of new modules, such as, Trace, a global treasury solution deployed in 2019, or Cost Vision, managing expenses at a much granular level, deployed early 2021. In this financial area, the introduction of RPA has also provided opportunities to optimize several manual processes, this approach being now extended to other areas of the information system.
The Life business unit has developed an IT roadmap which aims at preparing SCOR Global Life for the future by increasing its competitiveness, providing high level of service to clients, complying with all regulatory requirements (ie. IFRS 17, GDPR) and increasing the understanding of Life business. Other front-office solutions have been developed for SCOR Global Life to harmonize and further enhance the underwriting of substandard risks and develop tele-underwriting in different countries. The introduction of Artificial Intelligence completes these solutions. Underwriting solutions like Velogica are proposed to SCOR's Life clients, notably in the US market. The integration of Life Individual policy management systems is now completed in the US through an inhouse system, Everest and is now being progressively extended to the rest of the world by the development of a new platform, named hElios, which will provide an even more accurate knowledge of the risks. These individual data are the basis for enhanced actuarial modeling, in which SCOR Global Life is also investing, through the development of a pricing and reserving technical platform and through the roll-out of a new experience analysis solution.
In all areas, the modeling and analysis methods are getting gradually richer in Machine Learning & Artificial intelligence innovative technologies that actuaries can test through a Data Science platform called DASP. This new cloud-based platform has been deployed in 2020 to data scientists and actuaries working on innovative algorithms offering enhanced technological capabilities to cope with the increasing volume of data. This infrastructure reinforces the capacity to develop and industrialize the new services, shortening the innovation cycle.
In the asset management area, SCOR Investment Partners is now equipped with a global front-office solution, Bloomberg AIM, reinforcing the real-time monitoring of all investments. The record keeping of the portfolio managed by SCOR Global Investment and the investment accounting are managed through an integrated platform. All this asset management information is now available in real time through global analytical platforms. The asset management landscape is currently evolving to comply with the new accounting standard, IFRS 9, starting Jan 1st, 2022.
The SCOR technical environment is based on a secured international network, a private cloud-based global data center with a fully replicated dual site, providing a strong disaster recovery capability. During 2020, since the very beginning of the Covid-19 crisis, it has been fully available to all SCOR employees and external partners who could all work and access all technical resources without disruption or security risks. This homogeneous technical environment is also a solid ground to prepare for a global move to the public cloud, which has started in 2020 and aims at providing even more flexibility and scalability to SCOR IT operations. SCOR is also investing continuously in cybersecurity and data protection, reinforcing the physical and logical access controls, the network security through introduction of artificial intelligence monitoring, the data leakage prevention and the employee awareness through cybersecurity training programs.
1.2.7. INVESTMENTS Principal investments made over the past three financial years See Section 3.3.4 – Management of market risks, for a description of risk management connected with SCOR investments in debt instruments and equity securities as well as with investments it owns.
See Section 1.2.2 – History and development of SCOR, and Section 4.6 Note 4 – Acquisitions and disposals.
1.3.1. REINSURANCE MARKET DEVELOPMENTS The global reinsurance industry comprises Life and Non-Life reinsurance.
Non-Life reinsurance is a cyclical market estimated by various analysts at USD 190 to 230 billion of premium globally, covering property, casualty, financial, and specialty lines. The sector is exposed to volatility in the form of development of past reserves and large natural and man-made losses.
On the life side, Covid-19 has had a limited impact on traditional business premiums volumes, some large transactions executions have been delayed due to Covid-19. The impact of Covid-19 claims is overall manageable for the reinsurance market, the insured individuals being less affected than the general populations. The pandemic has also accelerated industry-wide trends such as a greater digitalization in the distribution processes, a rising health consciousness of the population which better values Life insurance, and the need to reinvent medical underwriting which has been disrupted during the Covid-19 outbreak.
The support to economies and financial markets has driven positive performance of financial assets, disconnected from the underlying economic situation.
Following asset purchase programs, interest rates continued to decrease. In the United States, the 10-year rates decreased from 1.9% on December 31, 2019 to 0.9% on December 31, 2020. Due to rates being already in negative territory the magnitude of the move was less important in Europe where the 10-year German Bund reached -0.6% on December 31, 2020 versus -0.2% a year before. The Bank of England, whose key rate is at 0.1% on December 31, 2020, has disclosed openly that negative rate policy was to be considered as a potential tool of its monetary policy. In contrast, the US Federal Reserve has reiterated its skepticism due to the negative collateral damage it could imply on the banking system.
Equity performance has been even more surprising with a strong overperformances of tech stocks. Hence, US equity indices have beaten record after record with the Nasdaq posting a 45% total return for the year. Indices with higher exposure to cyclical sectors or financials have suffered, with for example the CAC 40 ending in negative territory with a negative total return of 4% in 2020.
Refer to Section 6 – Non-financial performance statement for further information on non-financial impacts.
Since March 27, 2020, the European Insurance and Occupational Pensions Authority (“EIOPA”) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR) have issued statements, on April 2, 2020, and on April 3 and 21, 2020, respectively, regarding dividend distributions in respect of the 2019 fiscal year. In its press release of April 3, the ACPR says that “insurance companies must […] refrain from proposing the distribution of dividends”.
The ACPR’s position calling for no dividend distribution covers the period from April until January 1, 2021.
AgroBrasil Acquisition On February 13, 2020, SCOR acquired control of AgroBrasil Administração e Participações Ltda (“AgroBrasil”), Brazil’s familyowned leading Managing General Agent distributing fruit and grain loss of crop quality and yield insurance protection to Brazilian farmers.
SCOR has been a longstanding re/insurance player in the Brazilian agriculture market, which is one of the world’s most advanced and sophisticated markets. AgroBrasil is a recognized expert with an unrivalled access to growers, backed by a unique network of expert agronomists and a proprietary digital platform.
Successful placement of the EUR 300 million subordinated notes On September 10, 2020, SCOR has successfully issued dated subordinated Tier 2 notes in the amount of EUR 300 million. SCOR intends to use the proceeds of the issuance for general corporate purposes. The coupon has been set to 1.375% until September 17, 2031, and resets every 10 years at the prevailing 10-year EUR midswap rate +2.6%. The “31 Non-Call 11” notes mature on
The proceeds from the notes are eligible for inclusion in Tier 2 regulatory capital, in accordance with applicable rules and regulatory standards, and as equity credit in the rating agency capital models.
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.
Ruling against Thierry Derez and Covéa by the Commercial Court for misconduct during the preparation and execution of Covéa’s unsolicited takeover bid for SCOR In a judgment rendered on November 10, 2020, the Paris Commercial Court ruled that Thierry Derez committed a serious breach of his legal and fiduciary duties and obligations as a director of SCOR in his personal capacity (regarding loyalty, conflicts of interest, and confidentiality), by disclosing confidential SCOR information and documents to Covéa and its advisors with the aim of wrongfully favoring the preparation and execution of an unsolicited takeover bid for SCOR by Covéa. Thierry Derez was ordered to pay the amount of EUR 479,376, plus interest, in compensation for the damage caused to SCOR.
Thierry Derez, Covéa SGAM and Covéa Coopérations were ordered in solidum to pay the sum of EUR 19,603,191, plus interest, in compensation for the damage caused to SCOR.
Thierry Derez, Covéa SGAM and Covéa Coopérations have appealed against the judgment of November 10, 2020.
On the Committee’s recommendation, the Board of Directors has decided to separate the roles of Chairman and Chief Executive Officer, in conditions conducive to a successful transition. The separation will come into full effect following the General Meeting in the spring of 2022.
SCOR SE and its consolidated subsidiaries formed the world’s fourth largest reinsurer (1) serving more than 4,400 clients.
1.3.5. REVENUES & EARNINGS SUMMARY The Group's financial data is presented in Section 1.1 – Key figures and strategic plan and in Section 4 – Consolidated financial statements. The commentary below is based on the financial data presented in the aforementioned sections.
See also Section 4.6 – Notes to the consolidated financial statements, Note 1 – Accounting principles and methods, Note 2 – Significant events of the year and Covid-19, Note 16 – Net contract liabilities and Note 25 – Insurance and financial risks.
1.3.5.1. COVID-19 SCOR is successfully managing and absorbing the impact of the Covid-19 pandemic both operationally and financially.
SCOR has applied its modeling expertise to conduct a thorough assessment of all its exposures to the health, economic and financial crisis from the Covid-19 pandemic. Based on data currently available, information received from cedents to date and the results of the models used, SCOR has recorded a total cost of the Covid-19 pandemic in 2020 for Life, P&C and Investments at EUR 640 million, net of retrocession and before tax.
The Covid-19 pandemic impact comprises the following: • On the Life side, SCOR estimates the impact of the Covid-19 pandemic on its Protection book to be manageable, with an impact booked in 2020 at EUR 314 million (net of retrocession and before tax). Within this amount, the actual Covid‑19 related claims received stand at EUR 187 million.
— The Covid-19 pandemic is estimated to have a manageable impact on SCOR Global Life’s portfolio over the next 12 months, even though uncertainty remains. The ultimate outcome is still subject to significant variation, partly due to the development of the virus with new strains, combined with the level of respect of containment measures and rollout of vaccination particularly in the U.S. The outcome on SCOR Global Life’s portfolio will also be affected by any divergence in the impact of the virus on lives reinsured with SCOR Global Life, including the infection fatality rate, compared to the impact on the general population, particularly in the US. SCOR is continually monitoring the situation using a detailed proprietary epidemiological model.
1.3.5.2. OPERATING RESULT SCOR is characterized by its strategic positioning aimed at diversifying its exposures. To this end, the Group seeks to preserve: • the diversification of its business by maintaining a broadly balanced split between its Life and Non-Life reinsurance activities. The business volume split for the year ended December 31, 2020 was approximately 56% for Life reinsurance and 44% for Non-Life reinsurance based on gross written premiums; • the geographic diversification of the Group’s business by: — operating in a large number of countries, both mature and emerging, — maintaining its policy of being positioned on strong-growth markets such as Asia-Pacific and Latin America, — operating as a mixed Non-Life and Life reinsurer in China using the license received in 2011, enabling SCOR to add Life reinsurance services to the existing Non-Life activities; and
See Section 4.6 – Notes to the consolidated financial statements, Note 5 – Segment information, for further details on the results of the reportable segments.
In 2020, SCOR generated approximately 33% of its gross written premiums in Europe, Middle East and Africa (EMEA) (2019: 38%), with significant market positions in France, Germany, Spain and Italy, 49% of its gross written premiums in the Americas (2019: 46%) and 18% in Asia (2019: 16%).
(1) In 2019, the market responsibility for one portfolio was reallocated from the Americas to EMEA in SCOR Global Life. The gross written premiums for SCOR Global Life previously reported in the 2018 Registration Document for Americas was EUR 4,375 million for the year ended December 31, 2018. Gross written premiums previously reported for EMEA was EUR 2,980 million for the year ended December 31, 2018.
Net earned premiums Net earned premiums for the year ended December 31, 2020 amounted to EUR 14,517 million as compared to EUR 14,058 million and EUR 13,611 million for the years ended December 31, 2019 and 2018, respectively. The overall increase in net earned premiums amounted to EUR 459 million from 2019 to 2020 and EUR 447 million from 2018 to 2019.
Gross benefits and claims paid Gross benefits and claims paid were EUR 12,494 million, EUR 11,792 million and EUR 11,168 million in 2020, 2019 and 2018, respectively. The level of gross benefits and claims paid in 2020 has notably been impacted by the Covid-19 pandemic outbreak. For SCOR Global P&C, the level of gross benefits and claims paid increased to EUR 4,774 million during 2020 from EUR 4,576 million in 2019 (2018: EUR 3,942 million). For SCOR Global Life the level of gross benefits and claims paid increased to EUR 7,720 million in 2020 from EUR 7,216 million in 2019 (2018: EUR 7,226 million).
Net retrocession result The net result of the Group’s retrocession program was a net cost of EUR 318 million in 2020 as compared to a net cost of EUR 327 million and EUR 264 million in 2019 and 2018, respectively.
Other operating income and expenses include a recovery of USD 9 million (EUR 8 million) on Atlas IX 2015-1 related to 2017 hurricane Harvey, Irma and Maria (HIMM) events (in 2019: USD 13 million (EUR 12 million).
Operating income Operating result before impact of acquisitions for the year ended December 31, 2020 amounted to EUR 479 million as compared to EUR 713 million in 2019 and EUR 632 million in 2018. The decrease between 2019 and 2020 is mainly due to the Covid-19 pandemic that has impacted SCOR Global P&C and SCOR Global Life’s business units. For the year ended December 31, 2020, the operating segment SCOR Global Life contributed EUR 333 million (EUR 437 million and EUR 371 million in 2019 and 2018, respectively) and SCOR Global P&C EUR 276 million (EUR 407 million and EUR 393 million in 2019 and 2018, respectively) to the operating result. In 2020, 2019 and 2018, EUR (130) million, EUR (131) million and EUR (132) million respectively, related to Group functions.
Consolidated net income – Group share SCOR generated a consolidated net income of EUR 234 million in 2020, compared to EUR 422 million and EUR 322 million for the years ended December 31, 2019 and 2018, respectively.
In a year marked by the Covid-19 pandemic and a series of natural catastrophes, SCOR continues to demonstrate its ability to absorb shocks, delivering robust results in 2020. It has been backed a positive underlying performance of SCOR Global P&C and SCOR Global Life and a prudent asset management policy which safeguarded shareholders’ interests whilst delivering solid returns, albeit in a very low interest rate environment.
In 2020, the effective tax rate was 31.4% compared to 25.7% in 2019 which was mainly impacted by the US tax reform, tax rate differentials and non deductible expenses, and 34.7% in 2018. See Section 4, Note 18 – Income taxes, for further explanations on the effective tax rate.
Return on equity was 3.8%, 7.0% and 5.5% for the years ended December 31, 2020, 2019 and 2018 respectively. Basic earnings per share were EUR 1.26, EUR 2.27 and EUR 1.72 for the years ended December 31, 2020, 2019 and 2018, respectively.
Despite the Covid-19 pandemic SCOR Global P&C continued on a growth trend over 2020 and its underlying fundamentals remain strong in line with the strategic plan “Quantum Leap” assumptions, on a normalized basis. SCOR Global P&C confirmed its position as a leading reinsurer, demonstrating its resilience to the shock of the Covid-19 pandemic, in particular thanks to a reactive and efficient portfolio management policy.
SCOR Global P&C had continued on a strong growth trend in 2019 benefitting from a robust underwriting performance following successive treaty renewals and facultatives’ portfolio underwritings throughout the year. Despite a second half year marked by natural catastrophes, SCOR Global P&C confirmed the objectives of its new strategic plan “Quantum Leap”, in particular thanks to an efficient portfolio management policy.
Net combined ratio In 2020, the net combined ratio reflects the impact of the Covid-19 pandemic, named a pandemic since March 2020. The natural catastrophe ratio remains within the budget assumptions and stands at 6.8% compared to 11.6% in 2019 and 12.6% in 2018.
In 2019, the net combined ratio reflected large and extended natural catastrophes that occurred during the year, impacting mainly Japan and the Bahamas, partially absorbed by 1.9 percentage points of reserve releases (EUR 110 million). The natural catastrophe ratio stands at 11.6% compared to 12.6% in 2018 and 14.9% in 2017.
The following table highlights losses due to natural catastrophes for the years 2020, 2019 and 2018: As at December 31
Number of catastrophes occurred during the financial year 32 (3) 24 (5) 24 (7)
Losses and loss adjustment expenses due to catastrophes, gross 450 779 901
Losses due to catastrophes, net of retrocession (2) 423 665 656
(1) The net loss ratio is calculated by dividing Non-Life claims (including claims arising from natural catastrophes) by Non-Life premiums earned. This ratio is net of retrocession (See Section 1.3.9.5 – Net combined ratio).
Other natural catastrophes (less than EUR 10 million) 68 58 56 28 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
In 2020, SCOR Global Life continued to grow profitably in a competitive life reinsurance market, while achieving solid operating profitability and absorbing the financial impacts of the Covid-19 pandemic. The positive result from SCOR Global Life 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 claims 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 claims experience and in-force management actions may vary over time. The net technical result includes EUR 314 million claims caused by the Covid-19 pandemic, of which EUR 283 million relates to the life reinsurance business in the U.S. and EUR 31 million relate to all other markets.
• Mortality protection: 58% of SCOR Global Life’s portfolio is traditional mortality reinsurance business, based on 2020 gross written premiums. SCOR Global Life developed a strong position in Mortality in the US, as well as in the major European markets.
• Long-Term Care (LTC): SCOR Global Life has been pioneering LTC reinsurance solutions in the French market for twenty years and has acquired a sound practical experience in the underwriting and the management of LTC risks.
• Critical Illness: SCOR Global Life is a market leader in the UK. It also leverages its experience and expertise from the UK to expand into selected Asian markets and South Africa.
In the Financial Solutions product line, accounting for 8% of 2020 gross written premiums, SCOR Global Life has built a recognized position in providing capital and solvency solutions. Since 2013, SCOR Global Life has signed landmark transactions in Europe, the US, Asia and Latin America. In 2020 SCOR Global Life confirmed its position in the Asia-Pacific region and in the US market.
(1) Based on 2019 gross written premiums. Source: NMG report. (2) At December 31, 2020 exchange rates. (3) Source: 2019 SOA/Munich Re survey of US life reinsurance, published in 2020.
The return on invested assets in 2020 was 2.8% as compared to 3.0% in 2019 and 2.8% in 2018. The evolution of investment income in 2020 is driven by strong investment revenues, albeit impacted by the low yield environment and supported by the active portfolio management strategy implemented by SCOR Global
Investments, which translated into substantial realized capital gains of EUR 197 million, mostly achieved on the fixed income and real estate portfolios. The impairment and amortization charge stands at EUR 54 million and increases in 2020 compared to 2019 and 2018, driven by equity impairments resulting from the volatility on equity markets, which followed the Covid-19 pandemic outbreak.
The following table presents a reconciliation of these figures with the IFRS figures as presented in Section 4.6 – Notes to the consolidated financial statements, Note 19 – Investment income.
Fair value through income on invested assets (6) 16 20 (24)
Net interest income on funds withheld and contract deposits 163 158 151
IFRS INVESTMENT INCOME NET OF INVESTMENT MANAGEMENT EXPENSES 654 679 619
Return on invested assets (ROIA as a %) 2.8% 3.0% 2.8%
(2) Realized gains/(losses) on invested assets are presented net of EUR 3 million realized gain related to investments not held for investment purposes, included in realized capital gains/losses on investments under IFRS.
(3) Realized gains/(losses) on invested assets are presented net of EUR (3) million realized losses on derivatives shown under fair value through income on invested assets.
(4) Impairment/depreciation of real estate is presented net of EUR (5) million impairment/depreciation attributable to third parties. (5) Impairment/depreciation on invested assets are present net of EUR (1) million impairment/depreciation related to investments not held for investment purposes.
(6) Fair value through income on invested assets includes EUR (1) million investment income from other consolidated entities. (7) Real estate financing expenses relate to real estate investments (buildings held for investment purposes) only, net of financing expenses attributable to third parties.
• keeping SCOR Investment Partners’ strong momentum in thirdparty asset gathering through a comprehensive product offering and best-in-class returns.
The fixed income portfolio represents a significant portion of SCOR’s invested assets with 79% invested within this asset class (81% at year-end 2019). The exposure to corporate bonds is stable at 43% at the end of 2019 and 2020. The exposure to government bonds and assimilated decreased slightly from 27% to 26%, the exposure to covered bonds and Agency MBS decreased from 9% to 7% and the exposure to structured and securitized products is stable at 2%, over the same period. The fixed income portfolio remains of very high quality with an average rating at “A+” at the end of 2020, stable compared to the average rating at the end of 2019. The duration of the fixed income portfolio stands at 3.3 years at the end of 2020 compared to 3.4 years at the end of 2019.
SCOR’s exposure to equity securities remained stable at 2% of invested assets as at December 31, 2020 (as at December 31, 2019: 2% of invested assets). This exposure is essentially composed of convertible bonds and to a lower extent listed equities.
The real estate portfolio remained stable at 3% of invested assets as at December 31, 2020 (as at December 31, 2019: 3% of invested assets).
Other investments, comprising mainly ILS, private equity and infrastructure funds and non-listed equities remained stable at 3% of invested assets as at December 31, 2020 (as at December 31, 2019: 3% of invested assets).
Investments at fair value through income - - - 252 - 1,099 1,351 - 1,351 - - 1,351
Shareholders’ equity Shareholders’ equity stood at EUR 6,177 million at December 31, 2020 compared to EUR 6,374 million at December 31, 2019 and EUR 5,828 million at December 31, 2018. See Section 4.5 – Consolidated statement of changes in shareholders’ equity for a description of this change.
Book value per share (1) stood at EUR 33.01 at December 31, 2020 compared to EUR 34.06 and EUR 31.53 at December 31, 2019 and 2018, respectively.
However, SCOR makes every effort to limit collateral requirements related to financial covenants or to the Group’s financial strength rating in its financial agreements.
For information on collateral requirements, see Section 3.1.5 – Liquidity risks and Section 4.6 – Notes to the consolidated financial statements, Note 24 – Commitments received and given.
1.3.6.2. BORROWING CONDITIONS AND FINANCING STRUCTURE Debt is a key component of the Group’s financing strategy. It is essentially composed of subordinated debt used to optimize its cost of capital. Subordinated debt provides long-term financial resources as well as financial flexibility.
Subordinated debt and leverage ratio The total amount of subordinated debt increased to EUR 2,538 million from EUR 2,409 million in 2019 (2018: EUR 2,277 million).
On December 11, 2019, SCOR placed a perpetual deeply subordinated restricted Tier 1 Regulation S notes issue in the amount of USD 125 million. These New Notes were assimilated (assimilées) and form a single series with the existing USD 625,000,000 perpetual deeply subordinated Restricted Tier 1 Notes issued on March 2018.
The Group has a leverage ratio of 28.5% at December 31, 2020, as compared to 26.4% at December 31, 2019 and 27.5% at December 31, 2018. This ratio is calculated as the percentage of subordinated debt compared to total shareholders’ equity plus subordinated debt. The calculation of the leverage ratio excludes accrued interest from debt.
Real estate debt and other financial liabilities SCOR uses real estate debt and other financial liabilities mainly to finance real estate investments and for general corporate purposes. Real estate debts are non-recourse, the debtors’ claims are limited to assets underlying the financing, and there is an asset and liability matching with little to no risk that the assets will be insufficient to service and settle the liabilities. They meet the conditions for operational leverage and can be classified as operational debts, and therefore excluded by the rating agencies from financial leverage calculations. As at December 31, 2020, real estate financing and other financial liabilities amounted to EUR 487 million and EUR 185 million, respectively (December 31, 2019: EUR 517 million and EUR 101 million, respectively). This includes the real estate debt of MRM for the amount of EUR 77 million (EUR 78 million as at December 31, 2019).
Total investments, including cash and cash equivalents, amounted to EUR 31.9 billion at December 31, 2020 compared to EUR 31.7 billion and EUR 29.8 billion at December 31, 2019 and 2018, respectively.
(1) See Section 1.3.5.5 – Net investment income and investment income on invested assets.
SCOR’s internal model Since January 1, 2016, the regulatory solvency position of the Group has been assessed using SCOR’s internal model, which was approved in November 2015 by the relevant supervisory authorities.
SCOR’s internal model is used extensively in the preparation of management decisions which involve risk management or solvency considerations. The solvency position of the Group is monitored using SCOR’s dynamic solvency scale which defines SCOR’s strategic solvency target for “Quantum Leap” – the “Optimal Range” between 185% and 220% – as well as the various management actions to be taken depending on the solvency position, as shown below.
Cash flow used in financing activities amounted to EUR (41) million in 2020, EUR (373) million in 2019 and EUR (638) million in 2018. This figure mainly includes the absence of the FY 2019 dividend payment, the issuance of the subordinated Tier 2 notes of EUR 300 million in September 2020 and the redemption of the CHF 125 million undated subordinated notes, issued on October 20, 2014, and callable in October 2020.
Net investing cash flow amounted to EUR (464) million in 2020, EUR (219) million in 2019 and EUR (101) million in 2018. In 2020, cash flows used in investing activities were mainly composed of acquisitions of loans and receivables, while in 2019 they were mainly composed of acquisitions and disposals of other business investments.
The Group’s total liquidity, defined as cash and cash equivalents (including cash and cash equivalents from third parties) (2), shortterm government bonds with maturities above three months and below twelve months and bank overdrafts, which is well diversified across a limited number of banks, stands at EUR 2.0 billion at the end of 2020 (2019: EUR 1.5 billion and 2018: EUR 1.2 billion), supported by a very strong operating cash flow generation.
(1) Solvency ratio based on Solvency II requirements. The Group solvency final results are to be filed to supervisory authorities by May 2021, and may differ from the estimates expressed or implied in this Universal Registration Document.
01SCOR GROUP Market and financial review 1.3.9. CALCULATION OF FINANCIAL RATIOS
BASIC BOOK VALUE PER SHARE 33.01 34.06 31.53 1.3.9.2. RETURN ON INVESTMENTS AND RETURN ON INVESTED ASSETS The return on investments (ROI) is used to assess the profitability of the Group’s investments, including funds withheld by cedents and other deposits less cash deposits. This percentage return is calculated by dividing the total net investment income by the average investments (calculated as the quarterly averages of the total investments).
(1) Average investments are the quarterly averages of the total investments as per the “Invested assets” reconciliation table included in Section 1.3.5.5 – Net investment income and investment income on invested assets, adjusted for ceded funds withheld.
(2) Unallocated loss adjustment expenses are part of gross benefits and claims paid.
Effect of changes in foreign exchange rates (4) (261) 63 47
Weighted average shareholders' equity – before U.S. tax reform impact (1) 6,249 6,020 5,945
ROE – BEFORE U.S. TAX REFORM IMPACT (1) 3.8% 7.0% 6.6%
The technical ratio is a Non-Life indicator and is calculated as the sum of the loss ratio and commission ratio. This ratio is net of retrocession and is used to assess the net performance of reinsurance transactions excluding P&C management expenses.
1.3.10. EVENTS SUBSEQUENT TO DECEMBER 31, 2020 No material change has occurred in the Group’s financial or commercial situation or in the Groups’ financial performance since the end of the 2020 financial year.
The information published by SCOR within the last 12 months from March 13, 2020 to March 2, 2021 is available for downloading from the following sites: • Autorité des marchés financiers (AMF): • Bulletin des annonces légales obligatoires (BALO): • SCOR: • L’info financière: UNIVERSAL REGISTRATION DOCUMENT SCOR 2020 39
2.1. CORPORATE GOVERNANCE PRINCIPLES, SHAREHOLDERS’ MEETINGS, BOARD OF DIRECTORS, EXECUTIVE COMMITTEE, EMPLOYEES, AND INFORMATION REQUIRED BY ARTICLE L. 2210 -11 OF THE FRENCH COMMERCIAL CODE 42 2.1.1. Corporate governance principles 42 2.1.2. Shareholders’ Meetings 43 2.1.3. Board of Directors 43 2.1.4. Board of Directors’ Committees 72 2.1.5. Corporate officers and their powers 78 2.1.6. Executive Committee 78 2.1.7. Number of employees 80 2.2. BOARD OF DIRECTORS AND EXECUTIVE COMMITTEE MEMBER COMPENSATION, AND SHARE OWNERSHIP 81 2.2.1. Compensation of the Executive Corporate Officer and the Directors 81 2.2.2. Compensation of the Executive Committee members other than the Chairman and Chief Executive Officer 100 2.2.3. Stock options and performance shares 102 2.2.4. Summary of transactions in securities by persons discharging managerial responsibilities and closely associated persons as defined in Article L. 621-18-2 of the French Monetary and Financial Code (Code monétaire et financier) 117 2.3. RELATED PARTY TRANSACTIONS 118 2.3.1. Related party transactions and agreements 118 2.3.2. Statutory Auditors’ special report on regulated agreements 119 2.4. ADDITIONAL INFORMATION 120 2.5. AUDIT REPORT ON THE CORPORATE GOVERNANCE REPORT 120
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1. CORPORATE GOVERNANCE PRINCIPLES, SHAREHOLDERS’ MEETINGS, BOARD OF DIRECTORS, EXECUTIVE COMMITTEE, EMPLOYEES, AND INFORMATION REQUIRED BY ARTICLE L. 22-10-11 OF THE FRENCH COMMERCIAL CODE
In application of Article L. 22-10-10 of the French Commercial Code, SCOR SE refers to the AFEP-MEDEF corporate governance code in preparing the report to be issued in accordance with Article L. 225-37 of the French Commercial Code (Code de commerce).
2.1.1.2. CHANGE IN SCOR’S GOVERNANCE STRUCTURE At its meeting on December 16, 2020, SCOR SE’s Board of Directors reached a decision regarding the succession of Denis Kessler, Chairman and Chief Executive Officer.
In accordance with best corporate governance practices, the Compensation and Nomination Committee conducted an in-depth process over several years in preparation for the succession of Denis Kessler as SCOR SE’s Chief Executive Officer, making every effort to identify the mode of governance and the people best able to ensure SCOR’s development over the coming years, while creating value for all its stakeholders.
Executive Officer. The new governance structure will come into full effect following the Shareholders’ Meeting in the spring of 2022.
Following a rigorous internal and external selection process and acting on the recommendation of the Compensation and Nomination Committee, the Board of Directors unanimously agreed that Benoît Ribadeau-Dumas has all the necessary qualities to be the Chief Executive Officer of SCOR SE and to pursue and deepen the Group’s value-creating development model over the coming years. To ensure the best possible executive management transition to Benoît Ribadeau-Dumas, the Board of Directors recommended that he be appointed to the role following the Shareholders’ Meeting in the spring of 2022, with Denis Kessler remaining Chief Executive Officer until that date. Since January 1, 2021, Benoît Ribadeau-Dumas has been Deputy Chief Executive Officer of SCOR SE, and, as such, has joined the Group’s Executive Committee. As stated in the press release of December 16, 2020, the Board of Directors will also propose that he be made a director at the 2021 Shareholders’ Meeting.
Moreover, on the recommendation of the Compensation and Nomination Committee, the Board of Directors unanimously decided that it would be beneficial, when the separation comes into effect in the spring of 2022, for Denis Kessler to remain nonexecutive Chairman of the Group to ensure a successful transition and to perpetuate the Group’s values. A resolution to that effect will be submitted to the 2021 Shareholders’ Meeting.
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.2. SHAREHOLDERS’ MEETINGS The conditions for the participation of the shareholders at Shareholders’ Meetings and, more specifically, the operating procedures, the main powers of the Shareholders’ Meetings, the description of the shareholders’ rights as well as the methods of exercising these rights are set forth by Article 19 of the Company’s bylaws, an electronic version of which is available on the SCOR website (www.scor.com).
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.3.2. INFORMATION CONCERNING THE MEMBERS OF THE BOARD OF DIRECTORS
DENIS KESSLER Chairman and Chief Executive Officer Chairman of the Strategic Committee Member of the Crisis Management Committee
First appointed: Term of office expires: 2021 French – Age: 68 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: No Board meeting attendance rate: 100%
OTHER POSITIONS • Director of BNP Paribas SA (France) (1), (2)
Denis Kessler, a French citizen, is a graduate of HEC business school (École des hautes études commerciales), holds a PhD in economics and advanced degrees in economics and social sciences, and is a Fellow of the French Institute of Actuaries. He was Chairman of the French Insurance Federation (FFA), Senior Executive Vice‐President and member of the Executive Committee of the AXA group and Executive Vice‐President of MEDEF (Mouvement des entreprises de France). He joined SCOR as Chairman and Chief Executive Officer on November 4, 2002. In January 2016, he was elected to join the Academy of Moral and Political Sciences of the Institut de France.
(1) Company whose shares are listed on a regulated or organized market. (2) Since Denis Kessler did not wish his term of office as a director of BNP Paribas SA to be renewed, this term of office will expire at the 2021 Shareholders’
First appointed: Term of office expires: 2023 French – Age: 59 Aéroports de Paris 1, rue de France 95931 Roissy-Charles-de-Gaulle, FranceIndependent: Yes Board meeting attendance rate: 100%
OTHER POSITIONS • Chairman and Director of Média Aéroports de Paris (France) • Member of the Board of Directors of Société de distribution aéroportuaire (SDA) (France) • Member of the Executive Committee of Relay@ADP (France) • Chairman of the Fondation d’entreprise Groupe ADP (France) • Director of Régie autonome des transports parisiens (RATP) (France) • Member of the Supervisory Board of Le Cercle des économistes SAS (France) • Chairman of the Board of Directors of the association Paris Europlace (France) • Chairman of the Board of Directors of Établissement public du domaine national de Chambord (France) • Director of FONDACT (France) • Director of the Institut pour l’innovation économique et sociale (France) • Member of the Board of Directors of Atout France (France) • Director of the Fondation de l’islam de France (France) • Member of the Board of Directors of Airports Council International (ACI) Europe (Belgium)
• Chief Executive Officer of FB Consulting SAS (France) • Director of KK Wind Solutions (Denmark)
First appointed: Term of office expires: 2022 American – Age: 34 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: No Board meeting attendance rate: 100%
Lauren Burns Carraud, an American citizen, is a graduate of Saint Joseph’s University and holds an MBA from NYU Stern School of Business. She began her career at Marsh, specializing in D&O liability for financial institutions. Prior to joining SCOR, Lauren spent eight years at Citigroup and J.P. Morgan in a variety of strategy, banking, communications and public relations roles. She joined SCOR in 2018 as Deputy Chief Communications Officer.
First appointed: Term of office expires: 2022 French – Age: 31 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: No Board meeting attendance rate: 100%
MAIN POSITION • SCOR Group Chief Information Officer’s Personal Assistant (France)
Fiona Camara, a French citizen, graduated with a bachelor’s degree in applied foreign languages from Paris-Sorbonne University where she was also awarded a Master of Science degree in Management of international tourism. Fiona Camara began her career in 2013 as a Personal Assistant for a tour operator manager in San José (Costa Rica). She later worked as personal assistant to a record label manager in Atlanta (United States), as well as for a French concierge service for high-profile clients. Fiona Camara joined SCOR in 2015 as personal assistant to the SCOR Group Chief Information Officer.
OTHER POSITIONS • Chairman of the Board of Directors of Ofi Asset Management (France) • Vice-Chairman of the Board of Directors of Ofi Holding (France) • Non-voting director of Ofivalmo Partenaires (France) • Vice-Chairman of the association des assureurs mutualistes (AAM) (France) • Member of the Management Board of Domplus (France) • Member of the Executive Committee of the French Insurance Federation • Member of the Advisory Board of Macifimo (France)
First appointed: Term of office expires: 2023 Belgian – Age: 49 Loyens & Loeff Avenue de Tervueren 2 1040 Brussels, BelgiumIndependent: Yes Board meeting attendance rate: 100%
OTHER POSITIONS • Director of Erasme Hospital (Belgium) • Teacher at the université libre de Bruxelles (Belgium)
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Member of the Board of Directors of Simont Braun SRL (Belgium) • Managing partner of Simont Braun SRL (Belgium)
BRUNO PFISTER Director Chairman of the Risk Committee Member of the Strategic Committee, Audit Committee, Compensation and Nomination Committee, Crisis Management Committee and Corporate and Social Responsibility and Environmental Sustainability Committee
First appointed: Term of office expires: 2021 Swiss – Age: 61 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: Yes Board meeting attendance rate: 88%
OTHER POSITIONS • Chief Executive Officer of Holding Malakoff Humanis (France) • Permanent representative of Malakoff Humanis Prévoyance at the Board of Directors of OPPCI Vivaldi (France) • Chief Executive Officer of SGAM Malakoff Humanis (France) • Chief Executive Officer of Malakoff Humanis Prévoyance (France) • Chief Executive Officer of Malakoff Humanis Agirc-Arrco (France) • Chief Executive Officer of Malakoff Humanis International Agirc-Arrco (France) • Chief Executive Officer of association sommitale Malakoff Humanis (France) • Chief Executive Officer of association de Moyens Assurance de Personnes (France) • Chief Executive Officer of association de Moyens Retraite Complémentaire (France) • Operational Manager of Mutuelle Malakoff Humanis (France) • Operational Manager of MHN, Malakoff Humanis Nationale (France) • Director of Fondation Malakoff Humanis Handicap (France)
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Operational Manager of Énergie Mutuelle (France) • Chief Executive Officer of UGM Agilis (France) • Chief Executive Officer of Malakoff Humanis Groupement Assurantiel de Protection Sociale (France) • Chief Executive Officer of Malakoff Humanis Innovation Santé (France) • Chief Executive Officer of la Caisse mutuelle d'assurances sur la Vie (CMAV) (France) • Chief Executive Officer of l'institution Nationale de prévoyance des représentants (INPR) (France) • Chief Executive Officer of Capreval (France) • Director of Quatrem (France) • Director of Auxia (France) • Director of Auxia Assistance (France) • Chairman of the Board of Directors of Quatrem SA (France) • Chairman of the Board of Directors of Viamedis SA (France) • Chairman of the Board of Directors of Auxia SA (France) • Chairman of the Board of Directors of Auxia Assistance SA (France) • Director of Viamedis (France) • Director of GIE Karéo Services (France) • Member of the Executive Committee of Cofifo SAS (France) • Chairman of SAS Totem MM 1, now SA MM Retraite Supplémentaire (France) • Chairman of SAS Totem MM 2, now MM INNOV’ (France) • Permanent representative of Malakoff Médéric Assurances on the Board of Directors of La Banque Postale Asset Management (France) • Chief Executive Officer of association sommitale du Groupe Humanis (France) • Chairman and Chief Executive Officer of Association Totem 1 (France) • Chairman and Chief Executive Officer of Association Totem 2 (France) • Chairman and Chief Executive Officer of Association Totem 3 (France) • Chairman of SAS Totem MM3 (France) • Chairman of SAS Totem MM4 (France) • Sole Director of GIE SI2M (France) • Chief Executive Officer of SGAM Malakoff Médéric (France) • Chief Executive Officer of AS2M (France) • Chief Executive Officer of association de Moyens Assurances (France) • Chief Executive Officer of association de Moyens Retraite (France) • Chief Executive Officer of SGAPS Humanis Développement Solidaire (France)
Thomas Saunier, a French citizen, is a graduate of École polytechnique, ENSAE and the French Institute of Actuaries. Head of the Actuarial Department and Director of Steering and Management Control at CNP Assurances from 2000 to 2003, he spent more than 10 years at Generali France, initially as Deputy Chief Executive Officer responsible for products, operations and information and finance systems. In 2005, he was promoted to Chief Executive Officer responsible for the retail market, IT and customer service, before taking charge of the corporate, professional and retail markets in 2011. Appointed Chief Executive Officer of Malakoff Médéric Group in an environment characterized, for all stakeholders in the social protection sector, by unprecedented challenges in the management of supplementary pensions and in the development of life and health insurance business, he took up his position within the group on June 1, 2016. Following the merger of the Humanis and Malakoff Médéric groups, on January 1, 2019 Thomas Saunier became Chief Executive Officer of the Malakoff Médéric Humanis group, now known as Malakoff Humanis group.
KORY SORENSON Director Chair of the Audit Committee Member of the Strategic Committee, Risk Committee and Crisis Management Committee
• Director of SCOR Global Life Americas Reinsurance Company (US) (2)
• Director of SCOR Global Life USA Reinsurance Company (US) (2)
• Director of l'institut Pasteur (France) • Director of Aviva Insurance Limited (UK) • Director of Uniqa Insurance Group AG (Austria) (1)
First appointed: Term of office expires: 2021 French – Age: 75 Generali France 2, rue Pillet-Will 75009 Paris, FranceIndependent: No Board meeting attendance rate: 100%
• Member of the Supervisory Board of Generali Investments SpA (Italy) • Chairman of the Board of Directors of Europ Assistance Italie (Italy) • Permanent Representative of Europ Assistance Holding on the Board of Directors of Europ Assistance (Spain)
First appointed: Term of office expires: 2022 French – Age: 45 SCOR SE 5, avenue Kléber 75116 Paris, FranceIndependent: Yes Board meeting attendance rate: 75%
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Director of ACCOR (France) (1)
Natacha Valla, a French citizen, is an economist, currently Dean of the School of Management and Innovation at Sciences Po Paris. She began her career at the European Central Bank (2001-2005) and then worked at the Banque de France (2005-2008) before joining Goldman Sachs as Executive Director (2008-2013). She was then Deputy Director of CEPII (2014-2016), a think tank in international economics before joining the European Investment Bank (2016-2018) in charge of Economic policy and Economic strategy. From 2018 to May 2020, she was Deputy CEO for Monetary Policy at the European Central Bank. She has been a member of the Economic Commission of the Nation, of the Scientific Committee of the ACPR and of the Council of Economic Analysis (conseil d’analyse économique, CAE). She received her PhD from the European University Institute in Florence and is the author of numerous books and articles in monetary and international economics.
OTHER POSITIONS • Director of Bank of China Insurance Company (China) • Director of Trust Mutual Life Insurance Company (China) • Director of PICC Re (China)
FIELDS WICKER-MIURIN Director Chair of the Corporate and Social Responsibility and Environmental Sustainability Committee Member of the Strategic Committee, Audit Committee, Risk Committee, Compensation and Nomination Committee and Crisis Management Committee
First appointed: Term of office expires: 2023 American and British – Age: 62 Leaders’ Quest Ltd 11/13 Worple Way, Richmond upon Thames, Surrey – TW 10 6DG United Kingdom
POSITIONS THAT EXPIRED DURING THE LAST FIVE YEARS • Director of SCOR UK (UK) (2)
• Non-executive member of the Board of the Department of Digital, Culture, Media and Sport of the UK Government (UK) • Director of Control Risks International Ltd (UK) • Member of the Board of HMG Ministry of Justice (UK) • Director of Ballarpur Industries (India) • Director of BILT Paper (India)
(1) Company whose shares are listed on a regulated or organized market. (2) Company of the SCOR Group.
59 Male French 694 1 Yes April 26, 2022 1 year • Member of the Strategic Committee
49 Female Belgian 1,897 0 Yes April 30, 2023 5 years • Member of the Strategic Committee
54 Male French 5,484,767 0 Yes April 27, 2023 3 years • Member of the Strategic Committee 60 UNIVERSAL REGISTRATION DOCUMENT SCOR 2020
75 Male French 5,954 1 No May 15, 2021 17 years • Member of the Strategic Committee
• Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee
Chinese 940 0 Yes April 26, 2023 2 years • Member of the Strategic Committee
62 Female American and British 2023 7 years • Chair of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee
34 Female American 2,286 0 No June 16, 2022 <1 year • Member of the Compensation and Nomination Committee
31 Female French 225 0 No April 26, 2022 1 year • Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee
Composition principles and diversity policy The Board of Directors’ composition is guided by the following principles: • application of best-in-class corporate governance practices; • appropriate number of Board members in order to allow meaningful individual participation; • majority of independent directors; • diversity of expertise; • professional experience; • diversity of nationalities; • high proportion of female Board members.
As of December 31, 2020, the composition of the Board of Directors is as follows: OF DIRECTORS ARE INDEPENDENT (excluding the directors representing employees) (unchanged from December 31, 2019).
The other directors work in the industry, banking, financial and digital sectors, legal advisory services and other services.
OF DIRECTORS ARE WOMEN (excluding the directors representing employees) (unchanged from December 31, 2019).
Accordingly, SCOR has been compliant with legal requirements and the recommendations of the AFEP-MEDEF corporate governance code in terms of diversity for several years. In terms of its composition, the Board of Directors of SCOR strives to maintain a balanced representation between men and women by respecting at all times at least the minimum number of members of each gender provided for by law, as well as a balance between the age and length of service of its members. It also ensures, on the basis of a skills matrix, that directors have varied and complementary experience and skills. This ensures open discussion and the highest degree of quality in the decision-making process at Board level. Given the global dimension of the Group, a wide variety of nationalities is also sought.
Changes in the composition of the Board of Directors during the year The following table presents the changes in the composition of the Board of Directors that took place during the year: Name First appointed Renewal Departure Gender Nationality Reason of the change
Marguerite Bérard April 30, 2015 April 27, 2017 June 16, 2020 F French End of term of office
Lauren Burns Carraud June 16, 2020 F American Beginning of term of office
Fiona Camara April 26, 2019 June 16, 2020 F French Renewal
Adrien Couret November 6, 2020 M French Beginning of term of office
Vanessa Marquette April 30, 2015 June 16, 2020 F Belgian Renewal
Natacha Valla June 16, 2020 F French Beginning of term of office
Directors may, under certain conditions, be filled by the Board of Directors, pending the next Shareholders’ Meeting. The appointment is then submitted for approval by shareholders at the next Shareholders’ Meeting.
The Board meets at least four times a year. In accordance with the law, it approves the financial statements, proposes dividends and makes investment and financial policy decisions. The Board examines and takes decisions on major operations, possibly after review by an ad hoc committee.
The Board’s duties and responsibilities beyond those set forth by the applicable laws and regulations are set out in SCOR SE’s bylaws.
Independence criteria as per the Internal Charter of the Board of Directors of SCOR
The Board of Directors noted that Denis Kessler, Fiona Camara and Lauren Burns Carraud could not be deemed independent.
Kory Sorenson and Fields Wicker-Miurin resigned from their positions on the boards of subsidiaries of the SCOR Group with effect from April 1, 2020 and therefore remain independent.
In this respect, the Board of Directors noted that Denis Kessler, Fiona Camara and Lauren Burns Carraud have received compensation greater than EUR 100,000 within the last five years, in respect of their duties as executive and employees of the Group.
4 Shall not be a significant customer, supplier, investment or commercial banker, consultant (or to be linked directly or indirectly to these persons) of SCOR or its Group, nor shall SCOR or its Group account for a significant portion of such person’s business activities. For the quantitative assessment, a business relationship is deemed significant if it amounts to an annual sum of more than 5% of SCOR’s consolidated revenues, or more than 5% of the turnover, consolidated as necessary, of the director or the company with which he or she is affiliated. For the qualitative assessment, the criteria to qualify that a business relationship is deemed significant will be, among others, duration and continuity, economic dependence and exclusivity. Whether or not the relationship with SCOR or its Group is significant must be debated by the Board in consideration of the Compensation and Nomination Committee’s report.
The Board of Directors noted that the following directors had direct or indirect links with companies having business relationships with the SCOR Group, as a result of the management functions exercised by these directors in the latter: • Adrien Couret, Chief Executive Officer of Aéma group; • Thomas Saunier, Chief Executive Officer of Malakoff Humanis group; • Augustin de Romanet, Chairman and Chief Executive Officer of
In addition, the Board of Directors examined the business relationships with companies in which its directors hold other directorships.
The Board of Directors confirmed that the direct or indirect business relationships between the Directors and SCOR SE do not call into question their independence, either quantitatively or qualitatively.
The Board of Directors confirmed that no director has been an auditor of SCOR SE in the last five years.
IARD, Generali group; • Fields Wicker-Miurin, Director of BNP Paribas SA and Prudential plc.
9 Shall not be a non-executive corporate officer receiving variable compensation in cash or in the form of shares or any compensation linked to the performance of the Company or the Group.
The Board of Directors of SCOR SE does not include any nonexecutive corporate officer.
The table below presents the results of the detailed review, criterion by criterion, of the independence of each director carried out by the Board of Directors in February 2021, on the proposal of the Compensation and Nomination Committee, with regard to the criteria mentioned above: Denis Kessler, Chairman of the Board No No Yes Yes Yes Yes No Yes Yes No
Fabrice Brégier Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Vanessa Marquette Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Jean-Marc Raby ** Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Augustin de Romanet Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Thomas Saunier *** Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Claude Tendil Yes Yes Yes Yes Yes Yes No Yes Yes No
Natacha Valla Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Zhen Wang Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Fields Wicker-Miurin Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes * SCOR SE director since November 6, 2020. ** SCOR SE director until November 5, 2020. *** Representing Holding Malakoff Humanis, director.
He is also in charge of assisting the Board concerning the smooth operation of the Company's governance bodies and advising the Board on the operations that require a Board decision. He may include any subject he deems necessary on the agenda of the Board of Director’s meetings.
He convenes the non-executive directors as often as needed and chairs any meetings held.
In 2020, the Lead Independent Director chaired the session of the non-executive directors on several occasions, during which the succession plan of the Chairman and Chief Executive Officer was discussed as well as the most appropriate governance structure for the Group as part of this succession process.
Multiple directorships In accordance with the recommendations of the AFEP-MEDEF corporate governance code, the executive corporate officer should not hold more than two other directorships in listed companies, including foreign companies, not affiliated with the SCOR Group. Moreover, he or she shall also seek the opinion of the Board before accepting a new directorship in a listed company.
Directors undertake to hold no more than four other directorships in listed companies, including in foreign companies, outside of the Group. He or she is required to consult the Lead Independent Director and the Chairman of the Compensation and Nomination Committee prior to his or her prospective appointment as director, Chairman and Chief Executive Officer, Chairman of the Board of Directors, Chief Executive Officer, member of a Supervisory Board or Chairman or member of a Management Board of other companies, whether the registered office of such companies is located in France or abroad. This allows the Board of Directors, assisted by the Compensation and Nomination Committee, to verify that the directors are in compliance with applicable limits imposed on multiple offices and that any potential conflict of interest is prevented.
Limitations and restrictions on trading in SCOR securities The Internal Charter of the Board of Directors sets out the main recommendations of the market authorities with regard to directors trading in the securities of the Company.
The Internal Charter then requires directors to register all SCOR shares that they themselves or their dependent, minor children hold at the time they take up office and those acquired subsequently. In addition, the Internal Charter lays down certain restrictions on trading in SCOR’s securities: UNIVERSAL REGISTRATION DOCUMENT SCOR 2020 67
The Board of Directors of SCOR SE decided, in order to protect the Company’s interests, to implement a set of internal control mechanisms to prevent risks of conflict of interest, with: • a review by the Audit Committee of related party transactions; • an annual review of each director’s situation, in order to analyze his or her independent status and the existence of any potential conflicts of interest; • its Internal Charter, according to which any director involved in a risk of conflict of interest agrees to resign from his or her position if the conflict is not resolved; • the adoption of a Code of Conduct communicated to all Company employees. This Code establishes reinforced requirements as regards the prevention of situations of risks of conflict of interest. It is supplemented by a policy defining the whistleblowing procedures available to employees, which provides for incidents to be reported to the Audit Committee; • the systematic addition of an item to the agenda of each meeting of the Board of Directors on the potential conflict of interest of a director related to a topic on the agenda.
Directors may, in the event a conflict of interest is likely to continue beyond the abovementioned one-month period, ask to be heard by the Compensation and Nomination Committee.
• Review and approval of the quarterly, half-year and annual financial statements
• Review of the impact of Covid-19 on the Group’s results • Review and approval of the half-year interim report • Review of the 2020 budget and operating plan • Review and approval of the 2019 Universal Registration
Document • Annual review and approval of the Group policies, in particular those required by the Solvency II Directive • Review and approval of the SCOR SE and Group Corporate
• Quarterly review of the risk dashboard, with a particular focus on the impact of the Covid-19 crisis on the Group’s risk profile
• Review of the Group Internal Model results • Review and approval of the Regular Supervisory : report and the Solvency and Financial Condition Report • Quarterly review of the Solvency II update • Quarterly review of prudential affairs • Review and approval of the 2020 ORSA report • Review of the actuarial function report
• Determination of the Chairman and Chief Executive Officer compensation for 2020
• Review and approval of the non-financial performance statement • Review and approval of the annual deliberation on professional gender equality and equal pay policy • Review and approval of the annual statement of the Company regarding the UK Modern Slavery Act • Review of the fossil fuels divestment strategy • Information on CSR issues and expectations of investors and
• Review of the 2020 investment strategy • Annual review of the related party agreements • Examination of results of the review of ordinary agreements entered into at arm’s length conditions • Review and approval of the modifications made to the Internal
Charter of the Board of Directors • Review and approval of various financial authorizations • Review of an internal restructuring project
The average attendance rate of the members of the Board as of December 31, 2020 was 96%. The following table presents the attendance of the members of the Board of Directors during 2020: Board members Attendance rate (%)
During the 2020 financial year, the Chairman of the Board of Directors participated in numerous national and international events at which he represented the company. He spoke on the economic and financial consequences of the Covid-19 pandemic at a round table organized by the SCOR-Paris School of Economics Chair in June, which brought together several renowned economists. In September, at SCOR's annual conference attended by more than 250 of the Group's clients, he expressed his views on how the measures taken by the public authorities, broadly speaking, to contain the spread of the coronavirus have profoundly changed the nature of the pandemic risk for the (re)insurance sector. He also spoke on this matter at the Singapore International Reinsurance Conference (SIRC) held in October. In September, he participated in a conference organized by a major investment bank, during which he affirmed the ambitions and specified the approaches and resources used by SCOR to pursue its valuecreating development in the coming years, in particular by capitalizing on the improvement in pricing terms and conditions on the property and casualty (re)insurance market. The Chairman of the Board of Directors also spoke several times in national and international media. In addition, he had discussions with many of the Group's clients, investors and shareholders.
Vanessa Marquette, member of the Compensation and Nomination Committee and independent director, agreed to lead this assessment by means of a detailed questionnaire sent to the directors and in-depth interviews with them. The questionnaire focused in particular on the organization, operation and fields of activity of the Board, as well as on the operation and work of the Committees and on the compensation of Committee and Board members.
The majority of directors consider that the Board functions better than other Boards of which they are a member. They also consider that Board meetings are effective and well organized, that Committees function efficiently and that management is open to suggestions from directors. They also praised the independence of spirit present throughout the Board, as well as the arrival of two directors, who will provide the Board with their solid expertise. The directors stated that they are very satisfied with the level of attendance of the directors at Board meetings.
To SCOR’s knowledge, there are no conflicts of interest between the duties of the directors and Executive Committee members to SCOR and their own private interests.
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.4. BOARD OF DIRECTORS’ COMMITTEES SCOR’s Board of Directors has established six advisory committees responsible for examining specific topics, preparing the Board’s discussions and making recommendations.
The Strategic Committee is composed of Denis Kessler (Chairman), Fabrice Brégier, Adrien Couret, Vanessa Marquette, Bruno Pfister, Augustin de Romanet, Thomas Saunier (as representative of Holding Malakoff Humanis), Kory Sorenson, Claude Tendil, Natacha Valla, Zhen Wang and Fields Wicker-Miurin.
The Committee’s mission is to examine the Group’s development strategy, including investments in organic growth and major internal restructuring operations, plus any significant operation falling outside of the strategy announced by the Group and to examine any acquisition, merger, asset contribution or disposal of an amount in excess of EUR 100 million.
The Strategic Committee met on three occasions in 2020, each meeting lasting approximately two hours, including one strategic seminar.
Fields Wicker-Miurin 100 * Member of the Strategic Committee until June 16, 2020. ** Member of the Strategic Committee since November 6, 2020. *** Member of the Strategic Committee until November 5, 2020. **** Representing Holding Malakoff Humanis, director. *****Member of the Strategic Committee since June 16, 2020.
02REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.4.2. THE AUDIT COMMITTEE
The Audit Committee is composed of Kory Sorenson (Chair), Vanessa Marquette, Bruno Pfister, Natacha Valla and Fields WickerMiurin. Each of its members is independent.
The Audit Committee has two main missions: • accounting, financial and non-financial responsibilities, including the analysis of periodic financial statements, the review of the relevance of choices and correct application of accounting standards, the review of the accounting treatment of any material transaction, the review of the scope of consolidation, the review of significant off-balance sheet commitments, the control of the selection of Statutory Auditors, the review of any accounting and financial reporting documents before they are made public. The audit fees for services rendered by Statutory Auditors during the year are subject to a quarterly review and approval by the Audit Committee, with a specific review for the non-audit services. The Audit Committee approves the non-audit fees to ensure that the auditors’ independence is not jeopardized; • ethical, internal control and compliance responsibilities: the Audit Committee is responsible for ensuring that internal procedures relating to the collection and auditing of data guarantee the quality and reliability of SCOR’s financial statements. The Audit
Committee is also in charge of reviewing agreements with related parties (conventions réglementées), analyzing and responding to questions from employees with regard to internal controls, the preparation of financial statements and the treatment of internal accounting books and records. It gives its opinion on the organization of Internal Audit, examines its annual work program, receives internal audit reports and stays informed regarding the implementation of recommendations. Finally, it examines the annual compliance plan and stays informed regarding the Company’s compliance activities.
If applicable, the Audit Committee ensures the implementation of a mechanism to prevent and detect corruption and influence peddling. It receives all of the information needed for this purpose and reports, if applicable, to the Board of Directors.
The Committee may consult the Chief Financial Officer, the Head of Internal Audit, the Heads of the actuarial and compliance functions and the Statutory Auditors on these issues, including in the absence of the Chairman and Chief Executive Officer. It may also call upon outside experts. During the 2020 financial year, and for each meeting, it met with the Statutory Auditors and the Group Chief Financial Officer (during the review of the financial statements), in the absence of the Chairman and Chief Executive Officer. The review of the financial statements was accompanied by a presentation made by the Statutory Auditors highlighting the main results of their work and the accounting methods used, as well as by a presentation made by the Group Chief Financial Officer describing risk exposure and material off-balance sheet liabilities. The review of the financial statements was accompanied by a management presentation describing SCOR’s exposure to social and environmental risks.
Accounting, financial and non-financial responsibilities Ethics, internal control and compliance responsibilities
• Review of the half-year interim report • Review of the 2020 budget and operating plan • Review of the Statutory Auditors’ reports • Review of the 2019 Universal Registration Document • Review of the financial resolutions for the Annual General
Meeting and the proposed dividend on the 2019 results • Review of some financial authorizations prior to their submission to the Board of Directors
During the joint sessions of the Audit and Risk Committee: • Review of the impact of the Covid-19 crisis on the Group, for each business unit
• Review of the quarterly internal audit reports and of the 2020 internal audit plan
• Annual review of the Group policies, notably those required by the Solvency II Directive and under the Audit Committee's remit
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code
The average attendance rate of the Committee members as of December 31, 2020 was 100%. The following table presents the attendance rate of the Audit Committee’s members in 2020: Board members Attendance rate (%)
The Risk Committee is composed of Bruno Pfister (Chairman), Fabrice Brégier, Vanessa Marquette, Kory Sorenson, Claude Tendil, Zhen Wang and Fields Wicker-Miurin. Each of its members is independent except Claude Tendil.
The Committee is responsible for examining, particularly based on the Own Risk and Solvency Assessment (ORSA), the major risks to which the Group is exposed, both on the assets and liabilities side, and for ensuring that tools for monitoring and controlling these risks are in place. It examines the Group’s main risks and its Enterprise Risk Management (ERM) policy. It also examines the Group's strategic risks (including emerging risks) as well as the Group’s main technical and financial commitments (underwriting, reserving, market, concentration, counterparty, asset-liability management, liquidity and operating risks as well as the risks relating to changes in prudential regulations).
• Quarterly review of the Group’s main exposures, with a particular focus on the impact of the Covid-19 crisis on the Group’s risk profile • Review of the Group risk appetite • Review of Solvency II matters • Review of Group policies required by the Solvency II Directive • Review of the US mortality portfolio • Review of the Group’s internal model results • Review of the 2020 ORSA report • Monitoring of prudential regulations • Review of the 2019 climate report
During the joint sessions of the Audit and Risk Committee: • Review of the impact of the Covid-19 crisis on the Group, for each business unit • Review of the actuarial function report • Review of the internal control system • Review of the regulatory reports (Solvency and Financial Condition Report and Regular Supervisory Report)
The Committee ensures that the executive corporate officers implement a policy of non-discrimination and diversity, in particular regarding the balanced representation of women and men within the governing bodies and reports to the Board of Directors.
• Work on the renewal of the composition of SCOR SE's Board of Directors and its Committees
• Annual assessment of the Board of Directors • Review of the Corporate Governance Manual of SCOR SE and the
Group • Review of the amendments made to the Internal Charter of the
Board of Directors • Annual review of Group policies, in particular those required by the Solvency II Directive
Fields Wicker-Miurin 100 * Member of the Compensation and Nomination Committee since June 16, 2020. ** Member of the Compensation and Nomination Committee until June 16, 2020.
Its mission is to: • examine the main corporate social, societal responsibility and environmental sustainability challenges faced by the Company; • examine the corporate social and societal responsibility and environmental sustainability strategy and action plans, including commitments made by the Company in this regard, monitor their implementation, and propose any actions in this respect; • submit to the Board of Directors any proposals designed to take the corporate social and societal responsibility and environmental sustainability issues faced by the Company into consideration when determining its business guidelines; • examine the corporate social and societal responsibility and environmental sustainability reports submitted to the Board of Directors in accordance with the applicable laws and regulations, particularly the non-financial performance statement referred to in Article L. 22-10-36 of the French Commercial Code; • study the non-financial ratings obtained by the Company and define, if necessary, objectives in this area; The Corporate Social and Societal Responsibility and Environmental Sustainability Committee may call upon outside experts.
• Approval of the approach to integrate biodiversity into investment policy
• Annual review of the UK Modern Slavery Act annual statement • Approval of the diversity and inclusion action plan • Review of the annual declaration on the professional gender equality and equal pay policy • Review of the “SCOR for Good” project aiming to encourage the involvement of Group employees in the communities and territories where the Group operates, by granting, during their working time, a day of volunteer work to various local communities and providing a global digital platform
Its role is to assist and advise the Board of Directors and propose to the Board any necessary measures and decisions in the event of a crisis affecting the Company, the Group or one of its members, as well as following up on such measures and decisions.
Depending on the agenda, the Lead Independent Director, who chairs this Committee, may exclude the Chairman and Chief Executive Officer from the discussions of the Crisis Management Committee. Moreover, any member of the committee must recuse himself or herself from all meetings of said committee linked, directly or indirectly, to a subject that personally concerns him or her.
• Follow-up of the criminal and civil actions brought by SCOR against Thierry Derez and Covéa following Covéa’s unsolicited takeover bid for SCOR in 2018
The average attendance rate of the Committee members as of December 31, 2020 was 100%. The following table presents the attendance rate of the members of the Crisis Management Committee in 2020: Board members Attendance rate (%)
Management, failure to uphold the corporate governance code, a corporate officer’s inability to carry out his or her duties as a result of an accident or death, or a proven breach of the code of ethics by the Chairman.
These sessions were held on five occasions in 2020, and were chaired by the Lead Independent Director.
• Discussions on the results of the votes at the Shareholders’ Meeting as well as on the opinions expressed by shareholders as part of active shareholder dialogue
• Provision of information to non-executive directors on the work carried out by the Compensation and Nomination Committee on the succession plan for the Chairman and Chief Executive Officer, and, in particular, on the most appropriate governance structure for the Group in the context of this succession
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.5. CORPORATE OFFICERS AND THEIR POWERS
The Board of Directors has the power to appoint and remove, at any time and with or without cause, the Chairman and Chief Executive Officer, and to appoint separate persons to hold the positions of Chairman of the Board of Directors and Chief Executive Officer. On the proposal of the Chairman and Chief Executive Officer, the Board of Directors may also appoint a Deputy Chief Executive Officer to assist the Chief Executive Officer in managing the business. In addition, the Board of Directors appoints the persons effectively running SCOR SE, in compliance with the French Insurance Code.
2.1.5.2. POWERS OF THE CORPORATE OFFICERS The Board of Directors of the Company also limited the powers of the Chairman and Chief Executive Officer by stipulating in the Internal Charter the need for prior Board approval for the following operations: • organic growth investments and major internal structuring operations; • any significant operation falling outside of the strategy announced by the Group; • any project regarding a sale or acquisition, merger or cash and asset contribution higher than one hundred million euros. In addition, any project regarding a sale, in one or more transactions, concerning at least half of the Company’s assets over the last two years must be submitted to the Shareholders’ Meeting.
The Group also has a number of other measures in place to ensure an appropriate balance of powers within its governance structure.
Accordingly, in 2020, all of the directors were independent, except the Chairman and Chief Executive Officer, the directors representing employees and Claude Tendil, who has been a director for over 12 years.
The Board of Directors of SCOR also has a Lead Independent Director who may include any matter he deems necessary on the agenda of the Board of Directors’ meetings and convene a nonexecutive directors’ session.
Lastly, pursuant to the French Insurance Code and to requirements of the Solvency II Directive, four key function holders (compliance, risk management, actuarial, internal audit) have been appointed for SCOR SE and the Group. They are heard at least annually by the Board or one of its Committees and may raise any issues or concerns directly to the Board.
2.1.6. EXECUTIVE COMMITTEE The Executive Committee is composed of executives of the Company and of its subsidiaries. It is responsible for implementing the strategy defined by the Board of Directors, under the Chairman and Chief Executive Officer’s authority.
Denis Kessler See Section 2.1.3.2 – Information concerning the members of the Board of Directors.
Jean-Paul Conoscente Jean-Paul Conoscente, an American and French citizen, is a graduate of the University of California Berkeley (Master of Science in Structural Engineering) and the École des travaux publics, Paris (Engineering Diploma in Civil Engineering). He started his career in earthquake engineering in California and then in cat modeling as the European head of the modeling firm EQECAT. He subsequently held several senior positions with AON Benfield as a reinsurance broker in London and Paris and then with AXA Re in Paris as the Global Head of Property. In 2008, he joined SCOR in New York as Chief Underwriting Officer for the Americas for SCOR Global P&C and helped transform SCOR’s team and portfolio in the Americas, before taking on the role of Chief Executive Officer of SCOR’s P&C U.S. Operations in 2016. Following SCOR Global P&C’s restructuring in September 2018, he became its Chief Executive Officer of Reinsurance globally. In April 2019, he was appointed Chief Executive Officer of SCOR Global P&C, and a member of the Executive Committee and a person effectively running SCOR SE.
Paolo De Martin Paolo De Martin, an Italian citizen, graduated from Ca’ Foscari University, Italy, with a degree in Business Economics. He subsequently spent two years in the optical business as founder and managing partner of an eyewear manufacturer. He joined General Electric Company (GE) in 1995 as a finance trainee in London. In 1997, he joined GE’s internal auditing & consulting group, charged with assignments in multiple GE businesses in the Americas, Europe and the Asia-Pacific region. In 2001, Paolo De Martin was promoted to Executive Manager for GE Capital Europe, before joining GE Insurance Solutions as Financial Planning and Analysis Manager for Global Property and Casualty Reinsurance. In 2003, he was appointed Chief Financial Officer of GE Frankona group before becoming Chief Financial Officer of Converium Holding AG in July 2006. In September 2007, Paolo De Martin was appointed Group Chief Financial Officer of SCOR. In January 2014, Paolo De Martin was appointed Chief Executive Officer of SCOR Global Life.
Ian Kelly Ian Kelly, a British citizen, is a Fellow of the Association of Chartered Certified Accountants. Having begun his career with Prudential, he subsequently joined the London-based Life reinsurance department of the Gerling group, which later became Revios UK, as Chief Accountant. Following the acquisition of Revios by SCOR, he was appointed Chief Financial Officer of the UK operations in 2007. In 2009, Ian Kelly was appointed Director of General Accounting and Group Reporting, with responsibility for the consolidation of financial reporting of the SCOR Group. Ian Kelly strengthened his strategy, regulatory and financial experience within SCOR with his appointment as Head of Group Financial Planning and Analysis in 2011. As well as being responsible for the financial planning of the Group, Ian Kelly was appointed Head of Investor Relations in 2016. In October 2020, he became Group Chief Finance Officer.
Benoît Ribadeau-Dumas Benoît Ribadeau-Dumas, a French citizen, is a graduate of the École Polytechnique. Having graduated top of his class from the École nationale d’administration (ENA), he began his career at the French Council of State, before becoming advisor to the Prime Minister from 2002 to 2004. In 2004, he joined Thales, an electrical systems group specializing in aerospace, defense and security. In 2010, he started working at CGG, a company specializing in underground exploration, as Executive Vice President in charge of the Marine division. He was promoted to manager of the Acquisitions division in 2014. The following year, he joined the Executive Committee of Zodiac Aerospace, where he ran the Aerosystems branch and became a member of the Management Board. In 2017, he became Chief of Staff to the Prime Minister. He joined SCOR in January 2021 as Deputy Chief Executive Officer of SCOR and will be appointed Chief Executive Officer following the 2022 Annual General Meeting.
Laurent Rousseau Laurent Rousseau, a French citizen, is a graduate of HEC (École des hautes études commerciales). He started his career in 2001 as an equity analyst at Credit Suisse First Boston in London, covering European insurers and reinsurers. In 2005, he joined JP Morgan in the insurance Investment Banking team, executing M&A, capital raising and restructuring transactions for European insurers and reinsurers. He joined SCOR in 2010 as Advisor to the Chairman and Chief Executive Officer and became Head of SCOR Global P&C’s Strategy, Business Development and Marketing in 2012. In July 2015, he became Chief Underwriting Officer of SCOR Global P&C’s treaty business in Europe, Middle East & Africa. In April 2018, he was appointed Deputy Chief Executive Officer of SCOR Global P&C, a member of the Group’s Executive Committee and, since September 2018, Chief Executive Officer for Specialty Insurance (SCOR Business Solutions, the Channel Managing Agency and MGAs in the Americas).
02 REPORT ON CORPORATE GOVERNANCE Corporate Governance principles, Shareholders’ Meetings, Board of Directors, Executive Committee, employees, and information required by Article L. 22-10-11 of the French Commercial Code 2.1.7. NUMBER OF EMPLOYEES The total number of Group employees increased from 3,028 (including 125 SCOR Channel employees) as at December 31, 2019 to 3,123 (including 132 SCOR Channel employees) as at December 31, 2020. The distribution of personnel covers the various geographical areas to meet the Group’s strategic needs of the Group.
The following table presents the distribution of employees during the periods indicated: Distribution by Hub (1)
(1) Each Hub covers a region and may have employees in several countries. (2) The EMEA Hub covers employees in France, Spain, Italy, Belgium, the Netherlands, Russia, South Africa, Kenya, the United Kingdom, Ireland, Sweden,
Switzerland, Israel and Germany. (3) The Americas Hub covers employees in the United States, Mexico, Brazil, Canada, Chile, Colombia and Argentina. (4) The Asia-Pacific Hub covers employees in China, Hong Kong, India, Japan, South Korea, Malaysia, Singapore, Taiwan and Australia.
(1) The “Group Functions and Support” unit includes the departments reporting to the Group CFO, CRO and COO as well as the departments directly managed by the Chairman and Chief Executive Officer. ReMark (149 employees, fully consolidated entity), MRM (5 employees, fully consolidated entity), Château Mondot SAS (21 employees, fully consolidated entity), Les Belles Perdrix de Troplong Mondot EURL (11 employees, fully consolidated entity), Telemed (45 employees), Essor (84 employees), AgroBrasil (34 employees) and Coriolis (7 employees) are all wholly-owned subsidiaries of SCOR SE except MRM of which SCOR SE owns 59.9% of the capital. Due to their specific activities, their business models and their organizations, their human resources are managed independently from the Group and employee numbers are therefore not included in the Group figures.
For details on the principles and rules set for the determination of the compensation and benefits of Denis Kessler as Chairman and Chief Executive Officer for 2020, please see the brochure for the 2020 Ordinary and Extraordinary Shareholders’ Meeting.
2.2.1.2. APPROVAL OF THE COMPONENTS OF COMPENSATION DUE OR AWARDED TO DENIS KESSLER AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2020
(1) The variable compensation for 2020 has been determined by the Board of Directors based on a percentage of achievement for the objectives of 62.25%. It will be paid in one instalment, pending the approval of the Shareholders’ Meeting.
The benchmark study conducted by Mercer in 2020 for the Compensation and Nomination Committee concluded that the compensation package of the Chairman and Chief Executive Officer (all compensation components included) is aligned with market practice. More specifically, the Chairman and Chief Executive Officer’s total compensation for 2019 was equal to 91% of the median (among a list of peers including the main global reinsurers selected by premium income and for which information on the pay of top management is available, i.e. Alleghany, Arch Capital Group, Axis Capital Holdings Limited, Everest Re, Great West Lifeco, Hannover Re, Munich Re, Reinsurance Group of America and Swiss Re).
In accordance with Article L. 22-10-34 of the French Commercial Code, the payment of the variable and exceptional components must be approved by the Shareholders’ Meeting.
In accordance with the compensation policy applicable to all Partners within the Group, a multiplier may be applied to the financial objective (capped at a maximum of 130% of the target) and the personal objectives (capped at a maximum of 150% of the target) attached to the annual variable compensation of the Chairman and Chief Executive Officer in the event of outperformance, increasing the ceiling on the variable annual compensation of the Chairman and Chief Executive Officer to 140% of his target variable annual compensation.
The variable compensation for any given year is paid in the following year, after the financial statements of the Company for such given year are approved by the Board of Directors and is subject, in 2021 for the variable compensation for 2020, to the approval of the Shareholders’ Meeting.
For 2020, the variable compensation of the Chairman and Chief Executive Officer has been determined according to the following objectives: • 50% based on the achievement of a financial objective: return on equity (ROE) level achieved by SCOR, with a target of 800 basis points above the five-year risk-free-rate (“Quantum Leap” target); • 50% based on the achievement of personal objectives: maintaining a solvency ratio equal or higher than the lower limit of the optimal range defined in the strategic plan, achievement of the “Quantum Leap”strategic plan, assessment of the global warming-related risks for SCOR (outside-in analysis) and publication of the results in a climate report aligned with the recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD), and strengthening of the Group's talent pool, in particular through training and active careers and skills management and the preparation of succession plans for key positions in the Group.
If the observed average solvency ratio is lower or higher than the Target Solvency Ratio*, the options will be exercisable according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio
Lower than or equal to -35 percentage points 0% * If the strategic plan sets a target or "optimal" range, the lower end of this range is considered for calculation purposes as being the Target Solvency Ratio.
In addition to the deferred amount, an amount of EUR 126,453 was paid by the Company in 2020 with regard to social security schemes and individual health coverage
As the Company representative, the Chairman and Chief Executive Officer is granted a company car with a shared driver. The insurance, maintenance, fuel and all costs related to the driver are paid by the Company. The Chairman and Chief Executive Officer also benefits from a health insurance policy under the terms of a contract dated September 16, 1988.
The above individual insurance policy has been taken out by the Company and supplements the “all causes” death or permanent disability insurance policy for senior executives, dated June 30, 1993 and renewed or renegotiated annually. The latest version is compliant with the mandatory collective supplementary welfare plan specific to SCOR, which is applicable to an objective category of employees whose annual gross base compensation is equal to or more than three times the social security ceiling. The individual and collective “all causes” death insurance policies are renewed or renegotiated on an annual basis so that the Chairman and Chief Executive Officer will benefit from any policies that may replace the existing ones.
Severance pay* No amount is payable in respect of the financial year ended
As the plan has been closed to new entrants since June 30, 2008, only senior executives based in France and employed by the Group before this date benefit from this supplementary pension plan. As he joined SCOR in 2002, the Chairman and Chief Executive Officer is entitled to a guaranteed pension of 50% of his reference compensation, less any pension benefits acquired under other mandatory collective pension plans. Moreover, the amount paid under the SCOR plan may under no circumstances exceed 45% of the reference compensation, pursuant to the AFEP-MEDEF corporate governance code. It should be noted that, given his seniority within the Company, the Chairman and Chief Executive Officer has reached the ceiling of 45% set by the plan. Accordingly, he has not acquired any additional rights since 2011. Consequently, the legal provision which limits the annual increase in potential rights to 3% of the compensation of the beneficiary has no practical implications in his case. Since 2014, he has had the option of exercising his rights under this plan in the event of retirement.
In order to benefit from the supplementary pension plan, the Chairman and Chief Executive Officer must still be a corporate officer or employee of the Company when he retires.
As at December 31, 2020, the commitments made by SCOR to the Chairman and Chief Executive Officer in respect of the defined benefit supplementary pension plan represent an estimated annual gross pension amount of EUR 996,697. This amount represents 41.0% of his reference compensation, which corresponds to the average of his annual gross compensation over the five last years, including the fixed and variable portions. This represents a decrease compared to the estimated annual gross pension as at December 31, 2019, which was EUR 1,066,769.
The achieved ROE for 2020 is 3.8%. The target ROE for 2020 is 800 basis points above the 5-year risk-free rate, or 8.48%. Thus, the achieved ROE/target ROE ratio is 44.2%. Although SCOR was profitable in 2020, no variable compensation will be paid in respect of this objective as a result of the application of the minimum threshold of 50% of the target ROE introduced by the Board of Directors in 2020 as part of changes to the Chairman and Chief Executive Officer's compensation policy to take into account the opinions expressed by the shareholders through their votes at the Shareholders’ Meetings and as part of the active shareholder dialogue with them.
The Board of Directors highlighted SCOR's remarkable performance in maintaining its solvency at a very high level despite the impact of Covid19 on its business.
In this new environment, SCOR delivered the following performances: • ROE of 3.8% (normalized ROE (1) of 10.6%), compared to a target of 8.48%; • Solvency ratio estimated at 220% at end-2020, compared to an optimal range of 185% - 220%; • Non-life: annual growth in premiums of 2.4% at constant exchange rates (normalized annual growth (2) at constant exchange rates of 5.6%), compared to an assumption of 4% - 8%, and net combined ratio of 100.2% (normalized net combined ratio (3) of 95.7%), compared to an assumption of 95% - 96%; • Life: annual growth in premiums of 1.4% at constant exchange rates, compared to an assumption of 3% - 6%, and net technical margin of 5.8% (3.7% negative impact due to Covid-19), compared to an assumption of 7.2%-7.4%; • Investments: 2.8% return on assets, compared to an assumption of
• Cost ratio of 4.5%, compared to an assumption of 5%.
First, the Board of Directors noted that the achievement of the ROE and solvency ratio objectives was covered by the Chairman and Chief Executive Officer's first two objectives. In a context marked by the impact of Covid-19, it noted that SCOR's growth remained positive both in life and in non-life, with this impact being reason for the difference versus the plan. In terms of technical profitability, it noted that the SCOR's wellmanaged underwriting policy, and in particular the low exposure to the risk of event cancellations, had helped to limit the amount of claims. Similarly, it noted the resilience of the Group's asset portfolio, including in the spring of 2020. Lastly, in the current context, it welcomed the Group's cost control efforts, which kept costs significantly lower than the Quantum Leap assumption.
(1) Normalized for the expense due to natural disasters (taking into account a natural disaster budget of 7%) and the cost of the Covid-19 pandemic (excluding impairment of the equity portfolio)
(2) Normalized due to the effects of the Covid-19 pandemic. (3) Normalized for the expense due to natural disasters (taking into account a natural disaster budget of 7%) and the cost of the Covid-19 pandemic.
Strengthening of the Group's talent pool, in particular through training and active management of careers and skills and the preparation of systematic succession plans for key positions in the Group
In terms of training, amid the widespread use of remote working for most of the year in the Group's various locations around the world, the strategic focus in previous years on developing a digital training offering proved particularly relevant. The online “My Learning Platform” provided unlimited access to 15,000 online courses and video tutorials taught by experts covering technical subjects, business expertise and professional efficiency. In 2020, SCOR employees completed 1,800 courses and watched 47,000 video tutorials. Thanks to the implementation of a fully digitalized onboarding process, new employees were able to receive training in reinsurance and in other essential subjects like compliance, without having to be physically present in the offices. As a result, the number of training courses attended by employees increased by 51% in 2020.
In terms of active careers and skills management, the active careers management approach facilitated more than 140 internal mobilities in 2020, despite Covid-19. In addition, 70% of employees were covered by Leadership & Organization Reviews, where the focus was on succession planning for all employees up to three levels below the Chairman and Chief Executive Officer as well as for those identified as occupying a key position. During the very unusual period of the unprecedented crisis, SCOR put its employees and the preservation of its talent pool at the center of its priorities, by anticipating government decisions to best protect their health, providing them with computer equipment (screens, etc.) to ensure they have a comfortable working environment at home, setting up a psychological support system, regularly asking for their feedback via pulse surveys and setting up local support actions. In the survey carried out between April and July 2020, the support proposed by the Group in the face of the health crisis was judged very positively, gaining a score of 81/100.
Stock options and performance shares In accordance with the AFEP-MEDEF corporate governance code, the following tables present for the executive corporate officer the stock options allocated and exercised during the financial year as well as the performance shares allocated and that became available during the financial year.
Stock options exercised by the executive corporate officer during the year
Number of options exercised during the period Plan date Exercise price
Performance shares allocated to the executive corporate officer during the year by the issuer or by another company of the Group
Denis Kessler 93,750 February 21, 2017 Presence condition until February 21, 2020 and performance conditions
Achievement of performance conditions In 2020, the Compensation and Nomination Committee acknowledged the partial achievement of the performance conditions attached to the February 21, 2017 performance share plan, bringing the vesting rate to 75%. In addition to the performance conditions described below, the presence of the beneficiary in the Group until February 21, 2020 and compliance with the Group’s ethical principles as described in the Code of Conduct of the SCOR Group was required.
Ratio between the observed average ROE over 2017-2019 and the average target ROE 65.0% 50%
Median compensation (3) paid or awarded on a full-time equivalent basis to Group employees other than the executive corporate officer (3) 100,267 98,616 103,390 102,583 101,549
Median compensation (3) paid or awarded on a full-time equivalent basis to employees of SCOR SE and its branches (1) other than the executive corporate officer (5) 77,491 80,084 85,150 82,109 85,378
Consolidated net income – Group share (in million EUR) 603 286 322 422 234
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.1.3. COMPENSATION AND NUMBER OF SHARES HELD BY DIRECTORS The Shareholders’ Meeting of June 16, 2020 decided to maintain the annual maximum aggregate amount of directors’ compensation at EUR 1,550,000. On the proposal of the Compensation and Nomination Committee and within the limit of the amount agreed by the Shareholders’ Meeting, the Board of Directors at its meetings held on February 21, 2017, October 23, 2018 and May 25, 2020 set the terms and conditions for the allocation of the compensation so as to encourage the attendance of the directors and to be compliant with the AFEP-MEDEF corporate governance code which stipulates that directors’ compensation should consist primarily of a variable portion.
The Board of Directors decided to allocate the compensation as follows: • a fixed portion in an annual amount of EUR 28,000, payable at the end of each quarter. For non-French resident directors, an additional EUR 10,000 per year is allocated; • a variable portion based on the effective presence of the directors at meetings of the Board of Directors and its Committees, in an amount equal to EUR 3,000 per Board or Committee meeting they attend, except for the Chairs of the Audit Committee, Risk Committee, Compensation and Nomination Committee, Corporate Social and Societal Responsibility and Environmental Sustainability Committee, Crisis Management Committee and Non-Executive Directors’ Sessions, who receive an amount equal to EUR 6,000 for each meeting they chair.
Except for the Chairman and Chief Executive Officer and the directors representing employees, the members of the Board are not entitled to Company stock option plans or free share allocation plans, nor to any variable compensation other than the compensation related to their attendance at meetings.
No pension contributions (or commitments) have been made on behalf of the directors, except for the Chairman and Chief Executive Officer, in the exercise of their duties.
Holding Malakoff Humanis, represented by Mr. Thomas Saunier 58,000 55,000 58,000 58,000
(1) Pursuant to the decision made by the Board of Directors held on March 21, 2006, the Chairman and Chief Executive Officer receives compensation along with the other members of the Board of Directors of the Company, based on the same terms and conditions.
(3) Director whose term of office began on November 6, 2020. (4) Director whose term of office ended at the close of Shareholders’ Meeting of June 16, 2020. (5) Director whose term of office ended on November 5, 2020.
Mrs. Burns Carraud and Mrs. Camara, who are directors representing employees, also have an employment contract and are compensated accordingly. However, the amount is not disclosed for reasons of confidentiality.
The compensation policy takes into account the corporate interest of the Company and its subsidiaries and contributes to the business strategy as well as to the sustainability of the Company by allocating a variable portion to the directors subject to effective attendance at meetings of the Board of Directors or of its Committees, and variable to the Chairman and Chief Executive Officer subject to the achievement of performance objectives. The compensation policy encourages the active contribution of corporate officers to the Group's business, by rewarding either their effective participation in meetings of the Board of Directors and its Committees, or their direct contribution to the Group's performance.
The compensation policy is established in compliance with the legal and regulatory provisions and following the recommendations of the AFEP-MEDEF corporate governance code.
Pursuant to the Act of July 3, 2008 implementing European Union Directive 2006/46/EC of June 14, 2006, SCOR refers to the AFEP-MEDEF corporate governance code in preparing the report to be issued in accordance with Article L. 225-37 of the French Commercial Code.
The compensation conditions of the corporate officers are made public annually, through the documents disclosed for the Shareholders’ Meeting.
The changes in relation to the compensation policy for the Chairman and Chief Executive Officer presented in 2020 – are specifically identified in the relevant sections.
The Shareholders’ Meeting of the Company of June 16, 2020 decided to maintain the annual maximum aggregate amount of directors’ compensation at EUR 1,550,000.
On the proposal of the Compensation and Nomination Committee and within the limit of the amount agreed by the Shareholders’ Meeting, the Board of Directors at its meetings held on
Moreover, the non-executive members of the Board of Directors, who are individuals, except for the directors representing employees, receive an amount of EUR 10,000 each year to invest in SCOR shares.
This compensation policy shall be applicable for the current fiscal year, i.e. fiscal year 2021, and shall remain in force until the next Shareholders’ Meeting called to approve the financial statements for the year ended December 31, 2021.
In accordance with the law, the payment of the Chairman and Chief Executive Officer’s variable and exceptional compensation is subject to approval by the Ordinary Shareholders’ Meeting, under the conditions set out in Article L. 22-10-34 II of the French Commercial Code.
In compliance with the recommendations of the AFEP and MEDEF, corporate governance code, Denis Kessler does not have an employment contract with the Company.
At these meetings, the Compensation and Nomination Committee noted that several recent changes to the compensation of the executive corporate officer effectively met the views expressed by some shareholders. In particular: • the replacement in 2020 of the linear scale for calculating the portion of variable annual compensation relating to the target ROE by a tiered scale that is systematically less advantageous, particularly in the event that the achieved ROE is below the target ROE (minimum threshold raised from 30% to 50% of the target), which has introduced a high level of requirement. As an illustration, when the new scale is applied to the annual variable compensation to be paid in 2021 for 2020, no payment is made under this criterion; • the addition of a performance condition based on SCOR's Total Shareholder Return (TSR) compared to a panel of peers in the resolutions on performance shares and stock options submitted to the Shareholders’ Meeting, which allows for a better alignment of interests with the shareholders.
The above changes form an integral part of the compensation policy proposed for the executive compensation policy for 2021.
This compensation policy is based on the principles described below, which are consistent with the principles set out in the SCOR Group’s overall compensation policy and rigorously applied by the Compensation and Nomination Committee as part of its work, both in creating and updating the compensation policy submitted to the Board for the Chairman and Chief Executive Officer and in making proposals about the compensation to be granted.
During their deliberations on his personal situation, in which the Chairman and Chief Executive Officer does not take part, the Compensation and Nomination Committee and the Board of Directors ensure that the compensation policy for the Chairman and Chief Executive Officer is in line with the corporate interest and business strategy of the Company and contributes to its sustainability.
The Group's compensation policy favors performance shares and stock options over cash compensation, which distinguishes SCOR from most of its peers. This policy allows maximum alignment with the interests of shareholders, during the performance measurement period (three or six years) and beyond, through the holding of SCOR shares over time. In particular, it encourages longterm performance. It also allows costs to be kept under control, since taxation and employer charges on performance shares are, in France, lower than those on cash compensation.
The performance conditions, both for the collective portion of the variable annual compensation and for the performance shares and stock options, are perfectly aligned with SCOR's strategic objectives: profitability and solvency.
Structure of the Chairman and Chief Executive Officer’s compensation The structure of the Chairman and Chief Executive Officer’s compensation is in line with market practice and is mainly composed of cash compensation, including a fixed portion and a variable annual portion, as well as variable long-term compensation and a supplementary pension plan.
The fixed compensation of the Chairman and Chief Executive Officer, payable in 12 monthly installments, is determined on the basis of: • the level and complexity of his responsibilities; • his career path, professional experience and expertise; • market analyses with regard to comparable functions (external competitiveness); • consistency with regard to other Group functions (internal equality).
The Board of Directors has decided that the fixed compensation of the Chairman and Chief Executive Officer may only change in the event of a significant change in his scope of responsibility or a discrepancy in terms of the positioning of his compensation versus the market. In these specific situations, any adjustment to the fixed compensation, along with the motives behind such adjustment, will be made public.
For 2021, the Board of Directors decided at its February 23, 2021 meeting that the fixed compensation would remain at EUR 1,200,000. This amount has been unchanged since January 1, 2008.
Compensation of the Chairman and Chief Executive Officer in his capacity as a director As a director of SCOR SE, the Chairman and Chief Executive Officer receives directors’ compensation, which is allocated under the conditions set out in Section 2.2.1.4.1 – Directors’ compensation policy.
It should be noted that the Chairman and Chief Executive Officer does not receive compensation for his other directorships in SCOR Group subsidiaries.
More specifically, the variable portion depends on financial and personal objectives representing the overall expected performance, and there is no minimum guaranteed amount.
It is determined as follows: • 50% on the basis of the achievement of financial objectives, set at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee; and
• 50% on the basis of the achievement of personal objectives (quantitative or qualitative), set at the beginning of each year by the Board of Directors on the recommendation of the Compensation and Nomination Committee.
At the end of each year, and for each objective, the achieved result compared to the expected target is communicated, with a justification for the achievement rate.
Under the conditions set out below, the Board of Directors enjoys a discretionary power in the application of the compensation policy for the Chief Executive Officer’s variable annual compensation, in order to ensure that the latter correctly reflects the Group’s performance. In the event that new circumstances or events – unforeseeable when the compensation policy was determined – occur during the financial year, which significantly impact – either upwards or downwards – the level of achievement of the performance criteria attached to the variable compensation, the Board of Directors may decide, on a proposal from the Compensation Committee, to use this discretionary power, on the condition of continuing to respect the principles set in the compensation policy and providing shareholders with a clear, precise and full explanation of its decision. This discretionary power would only apply to a limited portion of the annual compensation and could increase or decrease the theoretical amount achieved, in application of the performance criteria, for the financial year (with a range of maximum of plus or minus 20%), without this amount ever exceeding the overall ceiling set in the compensation policy.
In accordance with the compensation policy applicable to all Partners within the Group, a multiplier may be applied to the financial objectives (capped at a maximum of 130% of the target)
The new calculation method is systematically more demanding than the method set out in the compensation policy applicable to the Group's Partners, which provides for a linear payment equal to the achieved ROE/target ROE ratio, with a floor at 30% and a ceiling at 130%, and which was also applied until 2019 (as part of the calculation of annual variable compensation due related to 2018) to the Chairman and Chief Executive Officer.
Moreover, the Group policy states that an additional exceptional bonus (“Exceptional Contribution Bonus” – ECB) may be awarded in recognition of participation in and high contribution to the success of specific strategic projects. The ECB may reach a maximum of 25% of the target variable annual compensation of the Chairman and Chief Executive Officer.
Therefore, the total variable annual compensation of the Chairman and Chief Executive Officer may not exceed 165% of his target variable annual compensation or, consequently, 165% of his fixed annual compensation.
The variable compensation for year “Y” is paid during year “Y+1”. In accordance with the applicable regulatory provisions, the payment of the variable annual compensation is subject to the approval of the Shareholders’ Meeting.
The Board of Directors has decided that the Chairman and Chief Executive Officer will not receive any exceptional compensation for the financial year ending December 31, 2021.
At its February 23, 2021 meeting, the Board of Directors decided that a maximum of 125,000 performance shares and 100,000 stock options could be allocated to the Chairman and Chief Executive Officer in 2021.
Each year, the Board of Directors, on the recommendation of the Compensation and Nomination Committee, confirms or determines the performance conditions along with their weight, targets and achievement levels, based on the authorizations granted by the Shareholders’ Meeting. All of these conditions are made public every year in this document.
ROE over the same period (the “Target ROE”). • If the observed average ROE is lower or higher than the Target ROE, the shares will vest/the stock options will be exercisable according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the shares that will vest/the options that can be exercised under this criterion
In any case, if the observed average ROE is lower than 5%, the proportion of the shares that will vest/the stock options that could be exercised under this criterion will be 0%.
SCOR’s strategic target solvency ratio over the same period (the “Target Solvency Ratio” (1)); • If the observed average solvency ratio is lower or higher than the Target Solvency Ratio, the shares will vest/the stock options will be exercisable according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio
Proportion of the shares that will vest/the options that can be exercised under this criterion 1st to 4th 100%
In addition, notwithstanding the total or partial achievement of the performance conditions described above, the vesting of the shares and the right to exercise the stock options would be subject, in any event, to compliance by all the beneficiaries with the Group’s ethical principles as described in the Group’s Code of Conduct (the “Group Code of Conduct”). The Group Code of Conduct covers mandatory aspects of corporate responsibility, including: demonstrating integrity, protecting data and privacy, combating corruption, strictly complying with sanctions and embargos, preventing money laundering, ensuring transparency, promoting equal opportunities at work, encouraging ethical issues to be notified via a whistleblowing procedure, and promoting and respecting the principles of the United Nations Global Compact. In the event of a breach of the Code of Conduct, for instance in the event of fraud, no shares will vest, and no stock options could be exercised (clawback policy).
Other than in specific cases (1), the vesting of the performance shares and the right to exercise the stock options are subject to the Chairman and Chief Executive Officer remaining with the Group until the end of the vesting period.
The Board of Directors has decided that, in the event that a new Chief Executive Officer is appointed, these same principles will apply, it being specified that a specific allocation may be made to compensate the new Chief Executive Officer for any loss of variable long-term compensation due to his/her departure from his/her previous employer.
Multi-year compensation The Board of Directors has decided not to use such a long-term compensation system that involves a cash payment, preferring to focus instead on share-based instruments that strengthen the alignment of interests with shareholders.
In the event of the termination of his term of office, the Chairman and Chief Executive Officer would be allocated benefits determined as follows: (i) in the event of dismissal for misconduct, non-renewal of his term of office as Chief Executive Officer, resignation (other than due to forced departure as set out in paragraphs (ii) and (iii) below) or following a notably negative performance by the Company (non-achievement of the performance condition (C_n) as described below), no severance pay would be due; (ii) in the event of forced departure or dismissal prior to the twelve (12) months preceding the end of his term of office as Chief Executive Officer, typically for divergent views on the Group's strategy, the Chief Executive Officer would receive severance pay equal to the sum of the fixed and variable components of his gross annual compensation paid in the twenty-four (24) months preceding the date of his departure from the Group. No severance pay would be due if the performance condition (C_n) defined below is not met. In the event of forced departure or dismissal during the twelve (12) months preceding the end of his term of office, no severance pay would be due; (iii) in the event of forced departure or dismissal resulting from an unsolicited or non-recommended offer by the Board of Directors of the Company resulting in a change of control of the Group, the Chief Executive Officer would receive severance pay equal to the sum of the fixed and variable components of his annual gross compensation paid in the twenty-four (24) months preceding the date of his departure from the Group. No severance pay would be due if the performance condition (C_n) defined below is not met.
Moreover, in the cases referred to in paragraphs (ii) and (iii) above, and excluding the case referred to in paragraph (i), the rights to the performance shares and options allocated to the Chairman and Chief Executive Officer before his departure would be maintained prorata temporis to his presence within the Group during the vesting period while remaining subject, in their entirety, to the performance conditions of each of the plans.
Supplementary pension plan Since he joined the Group in 2002, and like all the senior executives based in France and employed by the Group as at June 30, 2008, the Chairman and Chief Executive Officer is entitled to a guaranteed pension of 50% of his reference compensation, less any pension benefits acquired under other mandatory collective pension plans. Moreover, the amount paid under the SCOR plan may under no circumstances exceed 45% of the reference compensation, pursuant to the AFEP-MEDEF corporate governance code. It should be noted that, given his seniority within the Company, the Chairman and Chief Executive Officer has reached the ceiling of 45% set by the plan. Consequently, the legal provision which limits the annual increase in potential rights to 3% of the compensation of the beneficiary has no practical implications in his case.
The guaranteed pension amount is calculated according to a reference compensation based on the average contractual annual gross compensation paid by SCOR SE over the last five years and considered to constitute “wages and salaries” under French tax law. In order to benefit from the supplementary pension plan, the Chairman and Chief Executive Officer must still be a corporate officer or employee of the Company when he retires.
This plan was approved by the Board of Directors at its meeting of February 21, 2018 and by the Ordinary and Extraordinary Shareholders' Meeting of April 26, 2018 in its 4th resolution.
Other benefits As the Company representative, the Chairman and Chief Executive Officer is granted a company car with a shared driver. The insurance, maintenance, fuel and all costs related to the driver are paid by the Company. The Chairman and Chief Executive Officer also benefits from a health insurance policy under the terms of a contract dated September 16, 1988.
Moreover, in accordance with the decision taken by the Board of Directors on March 21, 2006 (and reiterated on December 12, 2008, May 4, 2011 and July 30, 2014), the Chairman and Chief Executive Officer benefits from specific life insurance in an amount equivalent to three years of his fixed and variable compensation.
The above individual insurance policy has been taken out by the Company and supplements the “all causes” death or permanent disability insurance policy for senior executives, dated June 30, 1993, and renewed or renegotiated annually. The latest version is compliant with the mandatory collective supplementary welfare plan specific to SCOR, which is applicable to an objective category of employees whose annual gross base compensation is equal to or more than three times the social security ceiling. The individual and collective “all causes” death insurance policies are renewed or renegotiated on an annual basis so that the Chairman and Chief Executive Officer will benefit from any policies that may replace the existing ones.
Non-Executive Chairman In the event of the appointment of a Non-Executive Chairman, the compensation principles set out in the compensation policy of the Chairman and Chief Executive Officer would be used as a reference. It would be the responsibility of the Board of Directors, on the recommendation of the Compensation and Nomination Committee, to adapt the structure to align it with market practices and the recommendations of the AFEP-MEDEF corporate governance code (Article 24.2). It is important to note that the Non-Executive Chairman may not be awarded variable compensation, performance shares or stock options.
02 REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.2. COMPENSATION OF THE EXECUTIVE COMMITTEE MEMBERS OTHER THAN THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The variable portion of the compensation depends on the achievement of the Group’s ROE objective, and on the achievement of individual objectives.
The total commitment of the Group in respect of defined benefit pension plans in France, Germany, the United States, the United Kingdom and Switzerland for the Executive Committee members (including the Chairman and Chief Executive Officer) amounts to EUR 46 million as at December 31, 2020, i.e. 10% of the total commitment of the Group in respect of pension plans, which represents EUR 475 million.
The following table presents the aggregate gross compensation due and paid to the members of the Executive Committee (including and excluding the executive corporate officer) for 2020, 2019 and 2018: In EUR
Gross compensation of the Executive Committee members excluding the executive corporate officer (1) 6,133,601 7,862,298 8,799,225 8,101,514 8,600,715 8,184,565
02 REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.3. STOCK OPTIONS AND PERFORMANCE SHARES
The Registration Documents published by the Company in previous years show the information related to the plans for which the exercise period ended before 2020.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.3.2. FREE SHARE ALLOCATIONS TO THE MEMBERS OF THE EXECUTIVE COMMITTEE AND THE EXECUTIVE CORPORATE OFFICER IN OFFICE AS AT DECEMBER 31, 2020
Paolo De Martin 2013-2021 Long-Term Incentive Plan 48,000 - - 03/06/2021 2019-2025 Long-Term Incentive Plan 30,000 - - 02/20/2025
02 REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership
François de Varenne 2016-2022 Long-Term Incentive Plan 40,000 - - 02/24/2022 2019-2025 Long-Term Incentive Plan 30,000 - - 02/20/2025
Laurent Rousseau 2013-2021 Long-Term Incentive Plan 4,000 - - 03/06/2021 2016-2022 Long-Term Incentive Plan 5,000 - - 02/24/2022 2017-2023 Long-Term Incentive Plan 1,250 - - 12/02/2023 2019-2025 Long-Term Incentive Plan 20,000 - - 02/20/2025
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.3.3. POTENTIAL VOLUME OF NEW SHARES FROM OUTSTANDING PLANS AND AUTHORIZATIONS AS AT DECEMBER 31, 2020
Stock option plans Pursuant to the provisions of Article L. 225-184 of the French Commercial Code, the information provided in this section constitutes the special report of the Board of Directors on stock option allocations, in order to inform the Shareholders’ Meeting of transactions completed under the provisions of Articles L. 22-10-56 to L. 22-10-58 of the same code.
On June 16, 2020, the Shareholders’ Meeting authorized the Company's Board of Directors, in its 27th resolution, under the provisions of Articles L. 225-177 to L. 225-186-1 of the French Commercial Code, on the proposal of the Compensation and Nomination Committee, on one or more occasions, to allocate employees of the Company and of companies or groups related to the Company within the meaning of Article L. 225-180 of the French Commercial Code, as well as the executive corporate officer, options giving the right to subscribe to new ordinary shares of the Company to be issued as part of a capital increase, as well as options giving the right to purchase ordinary shares of the Company bought back by the Company as authorized by the law and within the limit of a number of options giving right to a maximum of one million five hundred thousand (1,500,000) shares. This authorization was given for a period of 24 months from June 16, 2020 and superseded and cancelled the unused portion of the previous authorization of April 26, 2019.
Pursuant to a decision taken by the Board of Directors on April 28, 2020 following a proposal from the Compensation and Nomination Committee at its April 24, 2020 meeting, in accordance with the authorization granted to the Board of Directors by the Ordinary and Extraordinary Shareholders' Meeting of April 26, 2019, on April 28, 2020, 100,000 stock options were allocated to the Chairman and Chief Executive Officer and 328,000 stock options were allocated to other members of the Executive Committee.
See Section 2.2.3.1 of this document for details of the stock options allocated to the members of the Executive Committee.
The exercise price is calculated without a discount, based on the average opening price of SCOR’s shares on Euronext Paris over the 20 trading days preceding the allocation date.
Half of the options will be exercisable provided that SCOR’s average ROE over three years (from January 1, 2020 to December 31, 2022) is equal to the average of SCOR’s strategic target ROE (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the stock options will be exercisable according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the options that can be exercised under this criterion
The stock options can be exercised on one or more occasions from the beginning of the exercise period on November 6, 2024 until November 5, 2030 inclusive. After this date, the exercise rights will expire.
The stock options allocated will be exercisable provided: (1) that the beneficiary remains an employee or corporate officer of the SCOR Group until November 5, 2024 inclusive, except as otherwise provided by the plan; (2) that the Group’s ethical principles as described in its Code of Conduct are respected; (3) that the annual corporate social responsibility (CSR) training obligations are met. This condition will be deemed met if a SCOR Group e-learning course on CSR-related topics is completed and the corresponding test is successfully passed.
In addition to mandatory conditions (1), (2) and (3), the exercise of all the stock options allocated is subject to the fulfilment of performance conditions.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 40% of the options will be exercisable provided that SCOR’s average ROE over three years (from January 1, 2020 to December 31, 2022) is equal to the average of SCOR’s strategic target ROE (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the options will be exercisable according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the options that can be exercised under this criterion
In any case, if the observed average ROE is lower than 5%, the proportion of the stock options that could be exercised under this criterion will be 0%.
40% of the options will be exercisable provided that SCOR’s average solvency ratio over three years (from January 1, 2020 to December 31, 2022) is at least equal to the average of SCOR’s strategic target solvency ratio over the same period (the "Target Solvency Ratio" (1)). Nevertheless, if the observed average solvency ratio is lower or higher than the Target Solvency Ratio, the stock options will be exercisable according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the options that can be exercised under this criterion
The exercise of the stock options allocated since 2008 is subject, as applicable, to the satisfaction of performance conditions. Thus, half of the options awarded under the March 23, 2009 plan and all the options awarded since the March 18, 2010 plan are subject to performance conditions. All the options allocated since the March 23, 2009 plan to the Chairman and Chief Executive Officer are subject to the satisfaction of performance conditions.
On April 26, 2019, the Shareholders’ Meeting authorized the Company’s Board of Directors, in its 24th resolution, under the provisions of Articles L. 225-197-1 to L. 225-197-6 of the French Commercial Code, on the proposal of the Compensation and Nomination Committee, on one or more occasions, to allocate employees of the Company and of companies or groups related to the Company within the meaning of Article L. 225-197-2 of the French Commercial Code, as well as corporate officers as defined under Article L. 225-197-1-II of the French Commercial Code, free allocations of existing, fully paid-up ordinary shares of the Company, and resolved that the Company's Board of Directors would determine the identity of the beneficiaries of the allocations as well as the rights and conditions attached to the conditional entitlement to receive the shares.
The Shareholders’ Meeting also decided that (i) the total number of free shares allocated pursuant to this authorization, under the conditions and, if applicable, subject to the fulfillment of the performance conditions set by the Board of Directors further to a proposal from the Compensation and Nomination Committee, may not exceed 3,000,000 shares, and (ii) the allocation of the shares to their beneficiaries will be definitive only after a vesting period of a minimum of three years.
This authorization was given for a period of 24 months from the date of the Shareholder’s Meeting, i.e. until April 26, 2021, and superseded and cancelled the unused portion of the previous authorization granted by the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2018 in its 24th resolution.
The Shareholders’ Meeting also decided that (i) the total number of free shares allocated pursuant to this authorization under the conditions and, if applicable, subject to the fulfillment of the performance conditions set by the Board of Directors further to a proposal from the Compensation and Nomination Committee, may not exceed 3,000,000 shares, and (ii) the allocation of the shares to their beneficiaries will be definitive only after a vesting period of a minimum of three years.
The remaining half of the shares will vest provided that SCOR’s average solvency ratio over three years (from January 1, 2020 to December 31, 2022) is at least equal to the average of SCOR’s strategic target solvency ratio over the same period (the "Target Solvency Ratio" (1)). If the observed average solvency ratio is lower or higher than the Target Solvency Ratio, the shares will vest according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the shares that will vest under this criterion
The achievement of these performance conditions will be assessed by the Compensation and Nomination Committee and validated by the Board of Directors.
Pursuant to a decision taken by the Board of Directors on November 5, 2020 following a proposal from the Compensation and Nomination Committee at its November 4, 2020 meeting, in accordance with the authorization granted to the Board of Directors by the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020, 1,188,385 performance shares were awarded on November 5, 2020 to Partners and specific Non-Partners of the Group including one Comex member (832 employees).
40% of the shares will vest provided that SCOR’s average solvency ratio over three years (from January 1, 2020 to December 31, 2022) is at least equal to the average of SCOR's strategic target solvency ratio over the same period (the "Target Solvency Ratio" (1)). If the observed average solvency ratio is lower or higher than the Target Solvency Ratio, the shares will vest according to the linear scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the shares that will vest under this criterion
Pursuant to a decision taken by the Board of Directors on November 5, 2020 following a proposal from the Compensation and Nomination Committee at its November 4, 2020 meeting, in accordance with the authorization granted to the Board of Directors by the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020, 68,280 performance shares were awarded on November 5, 2020 to Partners and specific Non-Partners of the Group (67 employees) under a Long-Term Incentive Plan (LTIP).
The plan rules provide for a vesting period of six years for all beneficiaries.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 40% of the shares will vest provided that SCOR’s average ROE over six years (from January 1, 2020 to December 31, 2025) is equal to the average of SCOR’s strategic target ROE (the “Target ROE”) over the same period. If the observed average ROE is lower or higher than the Target ROE, the shares will vest according to the sliding scale set out in the table below: Ratio between the observed average ROE and the Target ROE Proportion of the shares that will vest under this criterion
Members of the Executive Committee - - 423,000 9 205,000 8 410,000 8
In 2020, the Compensation and Nomination Committee acknowledged the partial achievement of the performance conditions attached to the February and December 2017 performance share plans as described in the 2017 Registration
Document, bringing the vesting rate to 75% for Executive Global Partners and Senior Global Partners and 87.5% for the other beneficiaries. In addition to the performance conditions described below, compliance with the Group’s ethical principles as described in the Code of Conduct of the SCOR Group was required.
Ratio between the observed average ROE over 2014-2019 and the target ROE 84.3% 90%
The plans for which the shares have vested and for which the holding period ended before December 31, 2019 are not presented below.
(1) Shares allocated under non-qualified plans. (2) Vesting subject to performance conditions. The performance shares allocated before the Extraordinary Shareholders’ Meeting of December 18, 2015 are subject, for half or all of the allocation, depending on the employee’s level of responsibility within the organization, to performance conditions relating to the solvency ratio, the net combined ratio of SCOR Global P&C, the technical margin of SCOR Global Life and the ROE. Since the Extraordinary Shareholders’ Meeting of December 18, 2015 and until the Ordinary Shareholders’ Meeting of June 16, 2020, the performance conditions relate to the ROE and the solvency ratio. Since the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020, the performance conditions relate to the ROE, the solvency ratio and SCOR’s ranking within a panel of peers based on the average Total Shareholder Return (TSR) over a reference period. The performance shares allocated between 2011 and the Shareholders' Meeting of June 16, 2020 as part of LTIP plans are subject to performance conditions relating to the ROE and the solvency ratio. The performance conditions are assessed over a two-year period for performance shares allocated before the Extraordinary Shareholders’ Meeting of December 18, 2015, over a three-year period for performance shares allocated since the Extraordinary Shareholders’ Meeting of December 18, 2015, and over a six-year period for all LTIP performance shares.
Since the implementation of free share plans in the Group in 2004, a total of 26,541,732 shares have been allocated under all the various types of plans.
Employee savings plan All employees with a French employment contract (excluding corporate officers) have the possibility to invest in the employee savings plan. An agreement specifies the principle, financing, and conditions of the plan. The employee savings plan has five mutual investment funds, one of which is entirely dedicated to SCOR
On June 16, 2020, the Ordinary and Extraordinary Shareholders’ Meeting, in its 25th resolution, delegated its authority to the Company’s Board of Directors in order to increase the share capital by issuing ordinary shares reserved for employees of the Company and of French and foreign companies related to the Company within the meaning of Article L. 225-180 of the French Commercial Code, who are members of savings plans and/or mutual funds. This new authorization supersedes the authorization granted by the Shareholders’ Meeting of April 26, 2019.
As at the date of this Universal Registration Document, the Company’s Board of Directors has not exercised this delegation of authority, which was granted for a period of 18 months as from the date of the Ordinary and Extraordinary Shareholders’ Meeting of June 16, 2020.
02REPORT ON CORPORATE GOVERNANCE Board of Directors and Executive Committee member compensation, and share ownership 2.2.4. SUMMARY OF TRANSACTIONS IN SECURITIES BY PERSONS DISCHARGING MANAGERIAL RESPONSIBILITIES AND CLOSELY ASSOCIATED PERSONS AS DEFINED IN ARTICLE L. 621-18-2 OF THE FRENCH MONETARY AND FINANCIAL CODE (CODE MONÉTAIRE ET FINANCIER)
The table below presents all acquisitions, sales, subscriptions or exchanges of SCOR SE shares as well as all transactions involving securities linked to SCOR SE carried out by directors, the executive corporate officer and persons discharging managerial responsibilities in 2020.
Transactions carried out in 2020 for an amount greater than EUR 20,000
Mr. Jean-Paul Conoscente Acquisition of 2,250 shares for a total amount of EUR 65,340 Sale of 1,767 shares for a total amount of EUR 44,069 2,550 options becoming exercisable for a total amount of EUR 0 Exercise of 1,000 purchase options for a total amount of EUR 18,400
Mr. Vincent Foucart * Sale of 21,755 shares for a total amount of EUR 634,714 1,913 options becoming exercisable for a total amount of EUR 0 Exercise of 5,250 purchase options for a total amount of EUR 142,635
* Director whose term of office ended at the close of the Shareholders’ Meeting of June 16, 2020. ** Director whose term of office ended on November 5, 2020.
Regulated related party agreements Regulated related party agreements within the meaning of Articles L. 225-38 et seq. of the French Commercial Code are discussed in the Statutory Auditors’ special report in Section 2.3.2 – Statutory Auditors’ special report on related party agreements and commitments.
Regulated related party commitments that were approved in previous financial years and remained in force during the past financial year are described in Section 2.3.2 of the Universal Registration Document filed on March 13, 2020.
Description of the procedure referred to in Article L. 22-10-12 of the French Commercial Code In accordance with Article L. 22-10-12 of the French Commercial Code, enacted further to the implementation of French law no. 2019-486 of May 22, 2019 on business growth and transformation (known as the “PACTE law”), the Board of Directors introduced a procedure for regularly assessing whether agreements entered into in the ordinary course of business at arm’s length conditions continue to qualify as such.
The procedure sets out the criteria adopted by the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) for classifying agreements as agreements entered into in the ordinary course of business at arm’s length conditions.
In our capacity as statutory auditors of your Company, we hereby report on regulated agreements.
We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements indicated to us, or that we may have identified in the performance of our engagement, as well as the reasons justifying why they benefit the Company. We are not required to give our opinion as to whether they are beneficial or appropriate or to ascertain the existence of other agreements. It is your responsibility, in accordance with article R. 225-31 of the French commercial code (code de commerce), to evaluate the benefits resulting from these agreements prior to their approval.
We are also required, where applicable, to inform you in accordance with articles R. 225-31 of the French commercial code (code de commerce) and R. 322-7 of the French insurance code (code des assurances) concerning the implementation, during the year ended December 31, 2020, of the agreements already approved by the Annual General Meeting of shareholders.
The following information, which is required to be included in the report on corporate governance pursuant to Article L. 22-10-11 of the French Commercial Code, is displayed in Section 5 of this Universal Registration Document: share capital structure of the Company, restrictions to the exercise of the voting rights and the transfer of shares pursuant to the articles of association or provisions of the agreements brought to the knowledge of the Company, direct or indirect shareholding interests in the Company of which it is aware, list of the persons holding titles comprising special control rights and description thereof, agreements between the shareholders of which the Company is aware likely to trigger restrictions to the transfer of shares and the exercise of voting rights, rules applicable to the modification of the articles of association of the Company, powers of the Board in particular with respect to the issuance or the redemption of shares, and agreements entered into by the Company which are modified or terminated in the case of a change of control of the Company.
03 RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1. MAIN RISKS
Section 3 presents the information relative to the risks of SCOR Group and in this respect meets the accounting standards requirements relating to the nature and the extent of the risks arising from financial instruments and insurance and reinsurance contracts. Some information required by accounting standards IFRS 7 – Financial instruments: Disclosures and IFRS 4 – Insurance contracts is included in this section. Sections 3.1.2 to 3.1.5 on underwriting, market, credit and liquidity risks as well as Sections 3.2.2 and 3.2.4 to 3.2.6 on the management of those risks must be read as being part of the notes to the audited consolidated financial statements.
If the risks disclosed in this section were to occur, they could potentially have a significant impact on SCOR’s business, present and future revenues, net income, cash flows, financial position, and potentially, on its share price.
SCOR is exposed to other risks which, given their nature, are not or only implicitly modelled within the internal model, including strategic, liquidity and emerging risks.
Strategic risks are not expected to have an immediate impact on the solvency requirement of the Group over a one-year time horizon. However, if they were to occur, they could have a material impact on SCOR. For example, SCOR could be exposed to financial risks, if it would occur that SCOR is downgraded following an internal or external event. This could significantly limit its ability to underwrite new business and, in turn, significantly impact the Group’s income over a given period until the situation is resolved.
All risks described in Section 3 are managed through a variety of mechanisms in SCOR’s ERM (Enterprise Risk Management) Framework and the most important of these are described in Section 3.2 – Management of main risks.
Uncertainties related to the evolution of the Covid-19 crisis and its impact on SCOR’s risk profile On March 11, 2020, the World Health Organization (WHO) declared the Covid-19 outbreak a global pandemic. The Group adopted early and strict prevention measures to protect the health of its employees and has been active in regularly sharing its knowledge and expertise on the pandemic. Thanks to the resilience of its operational capability, the Group has been able to continuously serve its clients during this on-going crisis.
Please refer to Section 1.3.5.1 – Covid-19 and to Section 4.6 – Notes to the consolidated financial statements, Note 2 – Significant events of the year and Covid-19 for detailed information.
In the current environment, there are a number of uncertainties that affect how the pandemic continues to develop and therefore its ultimate impact on people and the wider economy. These uncertainties fall into two main areas: epidemiological and medical uncertainties and social and economic uncertainties.
There are uncertainties that relate to: • the ongoing transmission rate of the virus (depending on e.g.
effectiveness of lockdown/social distancing/“track and tracing” measures, whether individuals develop lasting immunity to the virus following infection or vaccination, the emergence of more contagious virus strains, or the speed of the roll-out of the vaccine to the general population); • the number of deaths resulting from infection with Covid-19 (related to e.g. the fatality rate of the virus and new mutations and the ability to provide effective treatments and/or vaccine development); • the excess mortality from related factors other than deaths from infection with Covid-19 e.g. mortality from people that were prevented from receiving healthcare (including preventative screening for other conditions) and mortality related to the economic shock; • potential further lockdown measures: following an easing of lockdown measures and encouragement to return to normal activities by many countries mid of 2020, new and severe additional waves of infection have emerged towards the end of 2020, leading many countries to impose new and stricter lockdown measures and social distancing requirements to slow the spread of the virus. However, it is impossible to know to what extent people will continue to observe social distancing and sanitary rules during everyday interactions. It is therefore possible that on-going waves worsen, take longer to disperse or that further waves of infection occur in many countries, with the necessity of imposing further lockdown measures. Therefore, although the immediate economic impacts of imposing lockdowns are severe, it is more difficult to predict the extent and persistency of these measures over time and thus the longerterm economic impacts; • future support to the economy: the scope, quantum, and pace of government and central bank support to the economy are much larger than in previous crises. While the fiscal and monetary policies should limit the number of defaults and therefore enable a quicker post-crisis recovery, it is uncertain whether these measures will be sufficient to tackle the full spectrum of the economic consequences from the Covid-19 crisis, particularly in the event of future infection waves and lockdowns, and to what extent these measures will be maintained. Uncertainties on the sustainability of this support could inhibit investment, innovation, and productivity, and destabilize financial markets. Whilst consensus forecasts are more optimistic than in June, given a better than anticipated rebound of the activity in the second and third quarter, the delay or ineffectiveness of the vaccine roll-outs could result in an increasing share of the negative shock on GDP level and growth rate becoming permanent.
Despite the Covid-19 downside impacts on the overall economy in 2020, SCOR is expected to be fully capable to pursue its strategy as defined within its current strategic plan, Quantum Leap, which runs from July 1, 2019 to December 31, 2021.
A deterioration of financial markets and the global economy will have significant implications for SCOR’s activities and results The Group’s results could be significantly affected by the economic and financial situations in Europe and other countries around the world. The threat of a global economic depression due to sanitary, cyclical and/or commercial reasons (e.g. the ongoing U.S – China trade war) remains, and a lasting macroeconomic deterioration could affect SCOR’s activities and results. The current low interest rate environment is reaching previously unknown levels and, in the event that interest rates rise, the current exceptional level of indebtedness would become a source of major financial instability. Current monetary policy seems to have reached a point where any additional easing would probably have little significant economic effect. These trends could result in financial markets experiencing a period of very high volatility, with consequences including waves of corporate bankruptcies and potentially sovereign defaults in vulnerable regions, a fall in the value of the main asset classes (bonds, equity, real estate), and even a major liquidity crisis. In the absence of a quick and mass roll-out of vaccines against Covid-19 to the general population, the economic outlook remains negative. In addition, the current decline in the US economy, and continuing economic disparities between European countries might have further political and economic impacts. For further information on investments, see Section 1.3.9.2 – Net investment income and investment income on invested assets and Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments.
SCOR is also dependent upon customer behavior and premium growth. The Group’s premiums could decline in the case of an unfavorable macroeconomic environment and its profit margins could erode. In an economic downturn, the demand for SCOR’s and its clients’ products could be adversely affected. Factors such as government and consumer spending, corporate investment, the volatility and strength of both debt and equity markets, and inflation, all affect the business and economic environment and ultimately, the size and profitability of SCOR’s business. In addition, the ongoing low interest rate environment continues to stimulate the inflow of alternative capital, which has been contributing to the current soft market i.e. the reduction in (re)insurance premium rates.
The impact of the current health and economic crisis due to Covid-19 on SCOR’s reinsurance business is presented in Section 3.1.2 – Underwriting risks related to the P&C and Life reinsurance business.
Although the risk of inflation is less likely in the current macroeconomic environment, at least in the short term, the economy could experience a period of stagflation, combining a decline in activity with a surge in prices following the current explosion of money creation and public debt. In this case, underwriting volume would also be negatively impacted, and with it the net combined ratio, the net income and the net asset value of the Group.
The risk of deflation, defined as a fall in prices and usually associated with an economic slowdown, can also not be ruled out in the current environment, characterized by the imminent risk of depression and lack of room for maneuver in relation to economic policies.
EIOPA Solvency II reviews could lead to additional requirements for insurance and reinsurance undertakings. The Covid-19 crisis will likely increase risks for the Solvency II review with the regulatory impetus on systemic regulation, including recovery and liquidity planning. Restrictions on dividends could be extended, bearing in mind that over the course of 2020 EIOPA and the ACPR had called for no dividends distribution from regulated entities, which SCOR SE has complied with by the decision of its Board of Directors. Furthermore, following the exit of the United Kingdom from the European Union, the introduction of a new local regulatory framework could lead to additional requirements for SCOR.
In the meantime, the IAIS has been developing a common framework for internationally active insurance groups (IAIGs), the “ComFrame”. It is the IAIS’s intention to develop Insurance Capital Standards (ICSs) to be applied by all IAIGs with full implementation in 2025. This development could jeopardize the extent of recognition of diversification effects or the use of internal models and involve risks in terms of competition on a level playing field.
SCOR is involved in court, arbitration and other formal or informal dispute resolution proceedings in its normal course of business as well as the proceedings further described in Section 4.6 – Notes to the consolidated financial statements, Note 26 – Litigation. Based on its current assessment, SCOR considers that these proceedings should not pose a material risk to the Group.
Additionally, SCOR’s strategy and competitive position might be impacted by climate change. Due to possible future pressures on certain carbon-intensive sectors to either reduce or suspend their operations, because of their impact on global carbon emissions linked to climate change, the demand for (re)insurance of these sectors may decline in the future. If SCOR has not sufficiently developed business (either client relations or expertise) in other sectors to replace this loss of revenue (e.g. in renewable energy sectors), SCOR may lose its competitive advantage in relation to its market peers.
In addition, ongoing regulatory developments and discussions on global standards may impact SCOR in the future. Please see Section 3.1.1.2 – Risks related to legal and regulatory developments for more information on these ongoing regulatory developments.
Disruptions to financial markets, and more particularly credit market conditions, could also affect SCOR’s ability to access liquidity. Please see Section 3.1.5 – Liquidity risks, for further details.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.1.7. RISKS RELATED TO ACQUISITIONS SCOR has made a number of acquisitions around the world. Acquisitions involve risks that could adversely affect its operating results, including the substantial amount of management time that may be diverted from operations to pursue and complete acquisitions. Acquisitions could also result in additional indebtedness, costs, contingent liabilities, impairment and amortization expenses related to goodwill and other intangible assets. In addition, acquisitions may expose SCOR to operational challenges and various risks.
Specific risks relating to the acquired businesses are as follows: • Integration of the acquired activities: integrations may take longer, be more expensive or more difficult than expected. The success of integrations may depend on operational and commercial planning, execution of systems and procedures, and on the retention of key employees. Difficulties could result in higher integration costs or fewer synergies than expected.
3.1.2.1. P&C REINSURANCE The main risks linked to the P&C reinsurance business (and insurance activity) underwritten by SCOR’s P&C business unit are P&C long-tail risks, such as large liability losses, natural catastrophes, and other P&C short-tail risks, such as acts of terrorism, as well as other risks beyond its direct control, such as systemic crises or the cyclicality of the business.
With respect to climate change, SCOR’s P&C underwriting business could be exposed to physical climate risks, caused by changes in the frequency and severity of certain natural catastrophe events that are predicted in climate warming scenarios. Although scientific understanding of the causal mechanisms between climate warming and the occurrence of particular natural phenomena are still being established, catastrophe events that are potentially impacted include hurricane (including storm surge and pluvial flooding components), flood (both river flooding and pluvial flooding), heatwave, wildfire and drought. In the event that climate change causes an increase in the occurrence and/or severity of natural phenomena for which the Group provides protection, or has knock-on impacts on other business lines underwritten, claims frequency and/or severity on property, business interruption/ contingent business interruption and agricultural lines of business could increase, with possible impacts on long-term profitability and ongoing insurability.
Although a number of material uncertainties remain, such that it is difficult to project with any degree of accuracy or certainty the potential impact on the P&C lines of business, those that are most at risk of being exposed to losses as a result of the pandemic are Credit & Surety and Property, particularly with respect to Business Interruption. The exposures from the Credit & Surety business originate from secondary economic impacts, mainly resulting from measures taken by governments to protect people’s lives. While fiscal and monetary measures (including trade credit backstops) will help mitigate the impact on (re)insurance losses for Credit & Surety, the nature and effectiveness of these measures remains uncertain.
The potential exposure to Business Interruption losses remains uncertain, not least because the meaning and application of contract language is the subject to pending and potential future disputes and the legal and regulatory landscape remains unsettled and is continuing to evolve in the multiple jurisdictions in which SCOR operates. Ultimately, coverage under each contract must be determined by examining the facts of the claim, the contract language, and the applicable law. Legal disputes are expected to take several years to resolve.
Concentration risk related to its broker business SCOR generates its P&C business both through brokers and through direct relationships with insurance company clients. The risk for SCOR is mainly the concentration of premiums written through a limited number of brokers. A significant reduction in the business generated through these brokers could potentially reduce premium volume and net income.
3.1.2.2. LIFE REINSURANCE The main underwriting risks for SCOR’s Life business unit are described below.
SCOR’s most material Life risk exposure is from the reinsurance of long-term mortality, with the majority of this business concentrated in the U.S. The materiality of the Life claims originating from the Covid-19 pandemic is therefore related, to a large extent, to the ongoing development of the pandemic in the U.S. and, most importantly, the infection fatality rate of those lives reinsured by SCOR.
Covid-19 has particularly impacted older lives, people with preexisting medical conditions, and those from lower socio-economic backgrounds. Although there is still uncertainty in relation to the overall outcome of the pandemic on SCOR’s Life business, it should be noted that SCOR’s exposure to the pandemic is mitigated by a number of factors. These include the effect of underwriting (which results in a healthier cohort of lives than the general population) and certain characteristics of the reinsured portfolio, which tends to cover higher socio-economic groups (who are likely to have better access to healthcare and are better able to adhere to containment measures) and to include proportionately fewer older lives than the general population.
Policyholder behavior risks SCOR’s Life business unit is also exposed to risks related to policyholder behavior, including risks such as lapsation and adverse selection.
Adverse selection refers to the problem of asymmetry of information between the insured and the insurer. An individual applying for life or health insurance cover usually has better knowledge about his or her own state of health than the insurer. The risk to the (re)insurer is of policyholders deliberately deciding among other things to: • take out a policy in the knowledge that either their chance of claiming is high or higher than average; • terminate a policy in the knowledge that their chance of claiming is low or lower than average ; or • choose and exercise a policy option which increases the policyholder’s expected benefit.
Additional risks Other factors could have an adverse impact, whether related to policyholder behavior such as resale or purchase of policies by third parties with no insurable interest, or other risk factors such as risks related to product guarantees.
In the event of a very large natural catastrophe or terrorist attack, the losses generated in the P&C and Life business units could potentially accumulate, with losses on financial assets related to the potential reaction of markets (i.e. movements in interest rates, exchange rates, spreads and/or equity market prices). In the same way, a major pandemic event may cause financial market turmoil and/or have an economic impact.
In addition, depending on the frequency and nature of losses, the speed with which claims are made and the terms of the policies affected, it may be required to make large claim payments within a short period. SCOR may be forced to fund those obligations by liquidating investments in distressed market conditions, or by raising funds under unfavorable conditions. For further information on such risks, see Section 3.1.5 – Liquidity risks.
Market risks can be influenced by various over-arching factors, including political, macro-economic, monetary, societal and environmental trends. Environmental trends include risks linked to sustainability, including those as a consequence of climate change, which can impact any of the market risks listed above. Specifically, climate risks correspond to the risk that the value of assets could be negatively impacted by acute physical risks, risks linked to the transition to a low-carbon economy and the potential for risks to SCOR’s reputation linked to investment choices.
Impact of Covid-19 on invested assets It is currently too early to assess the final impact of Covid-19 on the global economy. The potential outcomes vary depending on the spread of the virus in worst-affected countries and the severity of lockdown measures imposed, the possibility of further waves of infections and the re-imposition of lockdown measures in countries where the rate of infection is currently under control, the speed and effectiveness of the vaccines roll-out and the impact of central bank stimuli and government actions to support their economies.
Based on current economic projections, the rate of downgrade and defaults is likely to increase compared to the situation pre-Covid19, which exposes SCOR’s invested assets portfolio to increased default and credit spread risk. However, as of now, the support from central banks strongly mitigates these risks. In light of the current macro-economic outlook due to Covid-19, SCOR’s invested assets will also be exposed to other market risks, particularly interest rate risk, given the current low-interest rate environment.
Finally, the interest rate risk depends on the duration mismatch between assets and liabilities. As such, changes in interest rates can affect the shareholders’ equity and the solvency ratio of the Group.
Section 3.2.4.6 – Monitoring sensitivity to market risks provides an overview of the sensitivity of the Group’s consolidated income and consolidated equity to interest rate risk for the previous three financial years. As at December 31, 2020, the impact on the Group’s consolidated income and equity of a +100 basis points shift in interest rates is assessed to be EUR +23 million and EUR 415 million, respectively. The impact on the Group’s consolidated income and equity of a -100 basis points shift in interest rates is assessed to be EUR -23 million and EUR +391 million, respectively.
3.1.3.2. CURRENCY RISKS Currency risk is the risk of loss arising due to adverse changes in or volatility of foreign exchange rates. This would impact the value of SCOR’s assets (e.g. through direct investments in assets denominated in various currencies) and liabilities (e.g. reinsurance treaties with liabilities denominated in specific currencies).
SCOR has issued debt instruments in currencies other than the Euro, currently Swiss Francs, and to the extent that these are not used as a hedge against foreign currency investments, it may be similarly exposed to fluctuations in exchange rates. Most debts are hedged. For more information on the forward sales and purchases and swaps of currencies used to hedge these risks see Section 4.6 – Notes to the consolidated financial statements, Note 8 – Insurance business investments. For more information on debts issued in different currencies, see Section 4.6 – Notes to the consolidated financial statements, Note 14 – Financial liabilities.
03RISK FACTORS AND RISK MANAGEMENT MECHANISMS Main risks 3.1.3.3. CREDIT SPREAD RISKS Credit spread risk on invested assets is the risk of incurring a financial loss arising from the change in the market assessment of the counterparty risk of financial instruments or counterparties. Credit spread variations could have a direct impact on the market value of the fixed-income securities and loans, and as a consequence, on the realized or unrealized capital gains or losses of the fixed-income securities held in the portfolio.
3.1.3.4. EQUITY RISKS Equity prices are likely to be affected by risks which affect the market as a whole (uncertainty on economic conditions in general, such as anticipated changes in growth, inflation, interest rate fluctuations, sovereign risk, etc.) and/or by risks which influence a single asset or a small number of assets (specific or idiosyncratic risk). This may lead to a decrease in prices of the equity held by SCOR and may impact its realized or unrealized gains and losses. A material or long-lasting decline in the prices of SCOR’s equity holdings may also result in the impairment of its equity portfolio which would affect its net income.
3.1.4. CREDIT RISKS Credit risk is the risk of incurring a loss as a result of an unexpected change in the financial situation of a counterparty.
The retrocessionaires’ share in the reserves broken down by retrocessionaires’ credit rating is included in Section 4.6 – Notes to the consolidated financial statements, Note 16 – Net contract liabilities.