Other intangible assets with finite useful lives at 31 December 2009 were EUR 52 million compared with EUR 56 million at 31 December 2008. The largest component of this balance is the intangibles with finite lives generated from the separate joint venture agreements, GAUM and MDU in total EUR 28 million, acquired through the Converium business combination. The Group amortises its other intangibles with a finite life over a 3 to 10 year period dependent on the specific circumstances of each arrangement.
The amortisation charge associated with other intangibles with finite lives was EUR 21 million and EUR 7 million for the years ended 31 December 2009 and 2008 respectively.
Other intangible assets also include indefinite life intangible assets associated with Lloyds syndicate participations acquired through the Converium business combination. The Lloyds intangibles of EUR 14 million are deemed to have an indefinite life due to the ability to realise cash for these contractual rights through the Lloyds auction process. During 2008, the rights to one Lloyd’s syndicate participation were sold for a gain on disposal of EUR 0.5 m while on another Lloyds syndicate the contractual nature of the agreement changed giving rise to a gain on sale of EUR 5 million together with a reduction of the useful life from an indefinite period to a 10 year period. During 2009, an agreement was reached to cease underwriting in one syndicate. This agreement resulted in an impairment charge of EUR 3 million. Other intangible assets having an indefinite useful life at 31 December 2009 were EUR 19 million compared with EUR 17 million at 31 December 2008.
Intangible assets with an indefinite life are tested for impairment annually. The price of the Lloyds syndicate participations from the Lloyds auction process are key inputs to the impairment tests conducted which demonstrated that there are no indicators of impairment. Other than the EUR 3 million impairment relating to a Lloyds underwriting syndicate, no impairment charges were recognised for the year ended 31 December 2009 (2008: Nil).
Tangible assets at 31 December 2009 were EUR 40 million compared to EUR 29 million at 31 December 2008. These primarily relate to office furniture and equipment, and building fixtures and fittings.
The majority of properties held by the Group are considered as investment property. They consist of office or housing buildings, which the Group owns and leases, and office buildings and warehouses capitalised under finance lease contracts. The movements in the real estate investments and finance leases are analysed as follows: In EUR million Real estate investments Finance Leases Total
Cumulative depreciation and impairment at 31 December 2007 (79) (16) (95) Depreciation for the period (3) (5) (8) Impairment for the period - - -
Carrying value as at 31 December 2007 215 75 290 Carrying value as at 31 December 2008 215 70 285 Fair value as at 31 December 2008 329 99 428 Carrying value as at 31 December 2009 240 67 307 Fair value as at 31 December 2009 307 95 402
In addition, the sale of “le Vivaldi” property on 23 December 2009 generated a capital gain of EUR 24 million. This gain has been presented in the statement of income within investment income.
Less than one year 8 5 8 5 From one to five years 5 3 13 7 More than five years - - - -
Various entities in the Group rent their office headquarters. The largest lease contract is by SCOR Paris for its headquarters located at La Défense with a remaining lease term of 3 years. The minimum payments are as follows: 2009 2008 In EUR million Minimum payments Minimum payments
As part of its real estate investment activities described above, SCOR leases or subleases its investment buildings and warehouses. The leases generally conform to the local market conditions and have annual indexation clauses for the rental payments. The estimated minimum rental income is as follows: 2009 2008 In EUR million Minimum rents Minimum rents
The insurance business investments of the Group can be analysed as follows: Analysis by financial investment category
Net book value as at 31 December In EUR million 2009 2008
Fixed income 124 116 Investments at fair value through income– designated upon initial recognition 165 153
As at 31 December 2009 USD 51 million of insurance business investments were acquired as part of the acquisition of XL Life America Inc (2008: Prévoyance Ré EUR 160 million).
Fixed income 8,850 7,682 1,160 8 Available-for-sale investments 9,997 8,664 1,240 10 83 Equities 41 12 29 Fixed income 124 124 Investments at fair value through income 165 136 29 Loans and receivables 8,071 329 7,742 Derivative instruments - assets 104 44 60 Total insurance business investments 18,644 9,129 1,313 70 8,132 Cash and equivalents 1,325 1,325 Investments and cash as at 31 December 2009 19,969 10,454 1,313 70 8,132
Investments at fair value based on prices published in an active market (Level 1)
The Group has certain investments which are valued based on models prepared by external third parties using market inputs. These primarily comprise structured products, other than agencies for which the market which is considered active, as well as hybrid, tier 1 and tier 2 corporate debt and hedge funds. Similarly, the Group values certain derivative investments, namely the mortality and real estate swaps and S&P options, using internal valuation techniques based on observable market data. Further detail on the valuation of these derivative instruments is included within Note 8.
Investments at fair value determined using valuation technique not (or partially) based on market data (Level 3)
Available for sale investments included approximately EUR 83 million which are measured at cost (2008: EUR 118 million). These investments include primarily unlisted equity securities. During the period, there were no material gains or losses realised on the disposal of available for sale investments which were previously carried at cost.
determined using valuation technique not (or partially) based on market data Level 3
Investments at fair value through income 153 153 - - -
Investments and cash as at 31 December 2008 18,765 9,695 1,261 26 7,783
During the year ended 31 December 2009, there were no transfers into or out of the Level 3 fair value measurement category. The decrease in the Level 3 available for sale equity securities since 31 December 2008 relates primarily to a disposal, which generated a realised gain of EUR 4 million. The addition to Level 3 derivative instruments in the period relates to Atlas V & VI, the catastrophe agreements entered into in February 2009 and December 2009 respectively which are accounted for as derivatives. Refer to Note 8 for further detail on the valuation of these derivatives.
There have been no transfers between Level 2 and Level 1 in 2009.
Fair value (unrealised) gains and losses Total Total gains or (losses) included in profit or loss for the period(1) 4 (21) (17) Total gains or (losses) included in profit or loss for the period for assets still held as at 31 December(1) (21) (21)
Unrealised gains and losses on available-forsale investments (gross of tax) (1) 212 (215) (3) 140 (618) (478)
Unrealised losses < 30% (52) Unrealised gains and other (1) 48 Net unrealised loss (7)
Unrealised losses < 30% (22) Hedge funds (21) Unrealised gains and other (1) 13 Net unrealised loss (252)
The following table summarises the fixed income securities and unrealised losses by class of fixed income security: (d) Credit ratings – fixed income securities
An analysis of the credit ratings of fixed income securities is as follows: (e) Maturity – fixed income securities
As at 31 December 2008 Available-for-sale 4,136 453 1,054 254 24 172 6,093
In EUR million 2009 2008 Funds held by ceding companies 7,479 7,202 Short term investments 330 1,929 Loans secured against collateral 31 34 Other loans maturing in more than one year 206 77 Deposits 26 68 Impairment allowance (1) (1) TOTAL 8,071 9,309
The decrease of EUR 1,238 during the year is due to disposal of short term investment. In 2008 the increase of EUR 1,929 million was due to increases in short term investments.
Atlas V & VI 60 - - (17) - Mortality swap 11 10 - (5) 1 Real estate swap 3 1 1 (1) 3 S&P 500 index options 30 5 - 12 (39) Interest rate swaps - 1 - (1) (1) Forward currency contracts 3 (3) 7 9 - (9) TOTAL 104 15 9 10 (12) (45)
During 2008 SCOR Global Life SE concluded a four-year mortality swap with JP Morgan, effective 1st January 2008. On 1 September 2009, the terms of the agreement were amended to add an additional layer of protection.
Under the terms of the original 2008 agreement (“1st tranche”) SCOR Global Life SE can receive cash up to a nominal amount of USD 100 million and EUR 36 million in the event of a rise in mortality. Under the terms of the amended agreement in 2009 (“2nd tranche”) SCOR Global Life SE will also receive up to a nominal amount of USD 75 million in the event of a rise in mortality. The agreement which runs from 1 January 2008 to 31 December 2011 and 1 January 2009 to 31 December 2011 for the 1st and 2nd tranche respectively will compensate SCOR notably for a rise in mortality rates due to major pandemics, natural catastrophes or terrorist attacks.
(2nd tranche) Nominal amount USD 100million & EUR 36 million USD 75 million Risk period 1 January 2008 to 31 December 2011 1 January 2009 to 31 December 2011 Attachment point 115% 105% Exhaustion point 125% 110% Signing date 22 February 2008 1 September 2009
The objective of this transaction is to: Hedge SCOR’s direct economic exposure to the Paris commercial real estate market.
S&P 500 index options are purchased as part of the overall asset/liability duration management strategy for the Equity Indexed Annuity product line. For annuity products where policyholder values are credited based on the performance of a specified index, over the counter options are purchased as investments to provide the income needed to fund the index credits. Any basis risk and risk associated with actual versus expected assumptions for mortality and lapse rates are retained by the Group.
These options are valued based on the Black-Scholes model using observable market inputs such appropriate indexes, volatility measures and yield rates for December 2009. The notional amount at 31 December 2009 was USD 812 million (2008: USD 734 million) for which the cost of the option was USD 31 million (2008: USD 31 million). The fair value adjustment recorded at 31 December 2009 amounted to USD 13 million (2008: USD 23 million) to reduce the options to their fair value of USD 44 million or EUR 30 million (2008: USD 8m or EUR 6m). The total decrease in fair value for these contracts in 2009 recorded through income amounted to USD 17 million or EUR 12 million (2008: USD 57 million or EUR 39 million).
The Group holds investments in associated companies. The following table provides a summary of the financial information for these companies expressed in local standards.
SCOR) ASEFA 40% Spain 1,121 1,043 112 3 31 Mutre 33% France 838 776 307 (3) 32 SCOR CHANNEL 100% Guernsey 14 12 12 - 2 SCOR Gestion financière 100% France 4 - - (1) 4 TOTAL 2009 (1) 69 ASEFA 40% Spain 1,011 948 156 23 28 Mutre 33% France 489 439 93 2 19 SCOR CHANNEL 100% Guernsey 14 13 15 - 1 SCOR Gestion financière 100% France 5 - - - 5 TOTAL 2008 (2) 53 (1) Based on 2008 accounts except ASEFA and SGF which is based on 2009 provisional financial information. (2) Based on 2007 accounts except ASEFA which is based on 2008 provisional financial information.
Global P&C Total Gross receivables from ceding companies 206 327 533 150 448 598
Estimated premiums receivable from cedants, net of commission 1,532 1,259 2,791 1,682 956 2,638 Assumed insurance and reinsurance accounts receivable 1,735 1,572 3,307 1,830 1,387 3,217
Receivables from ceded reinsurance transactions 132 (16) 116 82 31 113 Assumed insurance and reinsurance accounts payable (157) (220) (377) (68) (72) (140) Liabilities for cash deposits from retrocessionaires (543) (186) (729) (543) (113) (656)
Estimated premiums payable to retrocessionaires, net of commission (298) (58) (356) (115) (45) (160) Accounts payable on ceded reinsurance transactions (881) (202) (1,083) (740) (206) (946)
Accounts receivable from and payable to cedants and retrocessionaires are mostly due in less than one year. A complete aging of financial assets is included in Note 27.
P&C Total Net value at 1st January 524 227 751 426 230 656 Capitalisation of new contracts for the period 154 239 353 91 257 348 Change in scope of consolidation and contract portfolio exchanges - - - - (29) (29)
Other changes (including change in shadow accounting) (72) - (72) 75 8 83
(1) In 2009 overdrafts are included within cash on hand and cash equivalent
During the year the Group has received and paid out operational cash relating to investment income and taxes. Dividend and interest cash receipts relating to investments held during the year were EUR 31 million (2008: EUR 35 million) and EUR 297 million (2008: EUR 360 million). Tax cash outflows during the year were EUR 17 million (2008: inflow of EUR 13 million).
Cash on hand and cash equivalent(1) 1,004 620 Short-term deposits and investments 321 1,163 Cash and cash equivalents 1,325 1,783
20.1.6.13 NOTE 13 - INFORMATION ON SHARE CAPITAL, CAPITAL MANAGEMENT, REGULATORY FRAMEWORK AND SHAREHOLDERS’ EQUITY
The shares issued in 2009 and 2008 were issued at a nominal price of EUR 7.8769723 per share.
The number of shares held as treasury shares by the Company or its subsidiaries at 31 December 2009 amounted to 6,599,717 shares compared to 4,904,551 shares at the end of 2008. These treasury shares are not entitled to dividends.
As at 31 December 185,213,031 184,246,437 Average nominal price per share in EUR 7.8769723 7.8769723
The Group’s capital management policy is to optimise the utilisation of its capital and debt structure in order to maximise the short term and long term profitability to shareholders while at the same time providing its customers with an adequate level of security as measured by internal capital allocation models, rating agencies and national regulators.
The Group reconciles its strategic objectives with the protection of its capital via the Group’s “Capital Shield” policy, which articulates the Group’s Risk Appetite. This policy is based on an economic approach and aims to protect the Group against potential shock losses, some of which are not immediately recognised from a pure accounting view. The policy builds on the following two concepts: (a) Active hedging of peak exposures through retrocession
The level of retrocession is selected to ensure that the Group’s retained risk profile respects the specific Group Risk Tolerance limits, to help the Group achieve its return on capital and solvency objectives.
Regulators are primarily interested in protecting the interests of policyholders. At the same time regulators are also interested in ensuring that the Group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.
Under the European Directive relating to reinsurance, as adopted in France in late 2008, the Group is subject to the control of insurance regulators in the various European countries in which it operates. The Group calculated its solvency based on consolidated IFRS financial statement completed with French Generally Accepted Accounting Procedure (GAAP) requirements. This was first performed by the Group in 2008 and subsequently an update was performed at the end of 2009. The results of these assessments confirm that the Group meets the requirements of the “Solvency I” directive.
At 31 December 2009 At 31 December 2008 In EUR million Book value Fair value Book value Fair value
At the Annual General Meeting of 15 April 2009, the Board of Directors proposed and the shareholders approved a dividend of EUR 0.80 per share representing a payout ratio of 46%. The dividend was fully paid in cash on 14 May 2009 for a total amount of EUR 143 million.
In 2008, SCOR SE paid a share dividend of EUR 0.80 per share in cash on 14 May 2008 for a total amount of EUR 143 million.
Certain group entities are subject to local regulatory requirements in the jurisdiction in which they operate which could limit their ability to pay dividends in the future.
EUR 50 million Perpetual Step-Up subordinated notes were issued on 23 March 1999. These notes are redeemable after 15 years, and at a 5-year interval, beyond the 15 years. The floating-rate notes bear interest indexed on the 6month Euribor plus (i) 0.75% for the first fifteen years of the issue, and (ii) 1.75% beyond the 15 years. Beyond the control of the issuer, this loan allows for anticipated reimbursement in the following circumstances: A change in legislation or tax law which would deprive the bondholders of all or part of the interest payments stipulated in the initial “operating note”.
A change in the accounting of the instrument on the basis of accounting principles in France or the U.S., or changes in methods used by rating agencies which become unfavourable for SCOR.
On 28 July 2006 SCOR issued a perpetual super-subordinated debt security (Tier 1 type) for an amount of EUR 350 million to finance the acquisition of Revios Rückversicherung AG. The bond issue, comprised of last-rank subordinated bearer certificates with a face value of EUR 50,000 bearing interest at an initial rate of 6.154% per annum then a floating rate indexed on the 3-month EURIBOR plus a margin of 2.90%, payable quarterly. There is no fixed redemption date but SCOR reserves the right to redeem, in part or in whole, the bonds as from 28 July 2016.
At any time from 2 July 2004 until the seventh day preceding the normal or early redemption date, bondholders were able to request conversion or exchange of the bonds for shares at a specified rate (the “conversion/exchange ratio”). During 2009 the conversion/exchange ratio was adjusted in accordance with the provisions of Article 2.6.7.3 (4) of the offering and listing prospectus in such a manner that each OCEANE gave an entitlement, via exchange or conversion, to 0.117 SCOR shares (amounting to a conversion price of EUR 17.09 per SCOR share). The Company was able to choose to provide new shares to be issued and/or existing shares.
After separation of the shareholders’ equity portion, the gross effective yield of the OCEANE bond was 6.265%. Amortisation was as follows:
Anticipated amortisation: by purchase, on or off the stock market or public offer and under other conditions as detailed within the prospectus approved by the AMF under Visa No. 04-627 on 24 June 2004.
Acquisition of a subsidiary - - Current year provision 8 37 45
Reversal of unused reserves - - Foreign exchange rate movements 1 - 1 Adjusted discount rate 18 - 18
The other reserves include mainly provision for restructuring cost of EUR 4 million (2008: EUR 15 million) and other provisions related to employee and tax litigation of EUR 6 million (2008: EUR 8 million).
In 2008, on the finalisation of the purchase accounting exercise for the acquisition of Converium, SCOR increased its estimate on the settlement of the class action law suit by EUR 59 million.
SCOR Global Life SCOR Global P&C Total In EUR million 2009 2008 2009 2008 2009 2008
Total gross insurance contract liabilities 10,670 9,803 10,291 10,226 20,961 20,029
Reinsurance recoverable Ceded claims reserves & claims expense reserves (481) (137) (473) (467) (954) (604)
Underwriting reserves, or contract liabilities, are subject to the use of estimates. Payments linked to these reserves are not usually fixed, either by amount or by due date. Liquidity information related to contract liabilities is included in Note 27.
An analysis of the credit rating of the reinsurance recoverable asset from ceded reinsurance together with an aging analysis of the reinsurance asset is also included in Note 27 – Insurance and financial risk.
Net claims payments for the current underwriting year (48) (40) Net claims payments for prior underwriting years (1992) (1,766) Total net claims payments (2040) (1,806)
The analysis of the balance sheet reserve movements of SCOR Global P&C, net of retrocession is presented as follows: Gross claims reserves & estimates -end of year (2) 8,402 8,244 7,045 6,135 6,310 5,791 9,325 9,127 9,156 Ceded claims reserves & estimates-end of year (2) 1,462 1,313 691 533 554 490 598 467 473 Net claims reserves & estimates –
Net incurred losses (3) 1 year later 8,161 8,191 6,776 5,917 5,987 5,701 9,480 9,491 - 2 years later 8,832 8,133 6,762 5,989 6,262 5,765 9,482 - - 3 years later 8,927 8,418 6,866 6,243 6,312 5,784 - - - 4 years later 9,117 8,543 7,145 6,306 6,305 - - - - 5 years later 9,273 8,853 7,205 6,302 - - - - - 6 years later 9,568 8,901 7,265 - - - - - - 7 years later 9,615 8,993 - - - - - - - 8 years later 9,749 - - - - - - - - Gross cumulative inception to date incurred losses as at 31 December 20092 12,099 10,868 8,201 7,141 7,061 6,271 10,222 10,106 Ceded cumulative inception to date incurred losses as at 31 December 20092 2,350 1,876 936 839 756 487 739 615 Net cumulative inception to date incurred losses as at 31 December 20092 9,749 8,993 7,265 6,302 6,305 5,784 9,482 9,491 -
A significant portion of SCOR Global P&C reserves relate to liabilities payable in currencies other than the EUR. The fluctuations of the EUR to those currencies are included in the data in the above table.
Gross reserves, including IBNR reserves (in EUR million) 120 128 26 28 % of Non-Life gross reserves 1.1% 1.2% 0.2% 0.3% Claims paid (in EUR million) 6 19 2 5 Net % of Group Non-Life claims paid 0.3% 1.0% 0.1% 0.3% Actual Number of claims notified under non-proportional and facultative treaties 9,492 9,135 8,234 7,971 Average cost per claim (1) (in EUR) 13,903 13,954 3,489 3,693 (1) Does not include claims which result in no ultimate cost and claims notified only for precautionary reasons for which the amount is not evaluated.
Different types of Guaranteed Minimum Death Benefits are covered, including: Return of premium: The GMDB is the amount of total deposits adjusted for partial withdrawals, if any.
Ratchet: After a given number of years, the GMDB is adjusted to the current account balance, if greater. Most common is a 1-year ratchet, meaning that the GMDB is adjusted annually on the policy's anniversary date.
Roll-up: The GMDB increases each year from the initial premium adjusted for later deposits and partial withdrawals, as the case may be, by a fixed percentage. Rollup guarantees reinsured under SCOR Global Life's agreements grant an annual accumulation percentage between 3% and 7%. In many products, especially for higher rollup percentages, an upper limit applies (e.g. 200% of the paid policyholder premium adjusted for later deposits and partial withdrawals).
The policy holders’ assets for this type of product remain with the originating ceding companies.
The GMDB Liability is determined periodically based on the information provided to SCOR Global Life by its retrocedant companies. The current account value, the guaranteed death benefit and details of the covered benefit types are taken into consideration for the evaluation of the net amount at risk and the expected future liability. For the evaluation of the liabilities, SCOR Global Life uses an actuarial model that considers 1,000 investment performance scenarios.
An analysis of the share of retrocessionaires in the Group’s insurance and investment contract liabilities by rating of the retrocessionaires and collateral from retrocessionaires in favour of SCOR at 31 December 2009 and 2008 is as follows: In EUR million AAA AA A BBB < BBB
The post-employment benefits granted by the Group vary based on legal obligations and local requirements. Group employees are entitled to short term benefits (holiday pay, sick leave and profit sharing) and long-term benefits (service awards, loyalty bonus and seniority bonus) and post-employment benefits classified as defined benefit or defined contribution plans (termination benefit, pension).
The short-term benefits granted are recognised as an expense for the period by the different entities of the Group.
Assumptions as at 31 December 2009 Expected return on assets as at 1 January 2009 7.50% 4.00% 4.60% 6.40% 4.50% Expected return on assets as at 31 December 2009 7.50% 3.00% 4.00% 7.00% 4.50%
Assumptions as at 31 December 2008 Expected return on assets at 1 January 2008 7.50% 6.00% 5.00% 6.00% 4.50% Expected return on assets at 31 December 2008 7.50% 4.00% 4.60% 6.40% 4.50%
Amortisation of past service cost 1 1 - - - - - - Settlement / curtailment (3) (3) - - (1) (1) - -
(1) Includes a EUR 2.6 million charge relating to a French plan, which was suspended during the year
Reconciliation of fair value of plan assets Fair value of assets as at 1 January 88 14 47 27 92 11 51 30 Expected return on plan assets 5 - 3 2 6 1 3 2
Asset (gains)/losses due to experience 2 - - 2 (16) (2) (8) (6)
Analysis of funded status Funded or partially funded obligation as at 31 December 152 46 72 34 143 38 68 37 Fair value of plan assets as at 31 December 95 15 54 26 88 14 47 27 Funded status as at 31 December - deficit 57 31 18 8 55 24 21 10 Unfunded obligation as at 31 December 26 24 - 2 23 21 - 2 Total funded status as at 31 December - deficit 83 55 18 10 78 45 21 12
Accrued / (Prepaid) as at 1 January 74 43 19 12 63 43 13 7
As at 31 December 2009, employer contributions for the year ahead are expected to amount to EUR 8 million (2008: EUR 9 million).
The Group has established various free share and stock option plans for the benefit of some of its employees. The terms of these awards are defined and approved by its Board of Directors at the grant date.
The total expense for the year relating to share based payment is EUR 15 million, with EUR 4 million (2008: EUR 4 million) relating to share options granted from 2005 to 2009 plans (2008: 2004 to 2008) and EUR 11 million (2008: EUR 19 million) relating to free shares granted from 2007 to 2009 plans (2008: 2006 to 2008). The share-based payment plans are described below. There have been no cancellations or modifications to any of the plans during 2009.
(1)The historical volatility used to determine the fair value of stock options is based on an historical volatility over periods corresponding to the expected average maturity of the options granted, which is partially smoothed to eliminate extreme deviations and to better reflect long term trends.
The fair value of the free shares corresponds to the market value adjusted taking into account the dividends and nontransferability costs, estimated using a forward acquisition/disposal method with a turnover assumption. The following table lists the characteristics used at the end of 2009 and 2008: Fair value at grant date (EUR)
Expected life 2 years for French 4 years for foreigners 2 years for French 4 years for foreigners 2 years for French 4 years for foreigners 2 years for French 4 years for foreigners 2 years for French 4 years for foreigners 2 years for French 4 years for foreigners
Dividend 4.87% 4.87% 4.87% 4.87% 4.87% 4.87% Risk-free interest rate 2.238% 2.422% 2.312% 2.119% 4% 4%
The main components of income taxes for the years ended 31 December 2009 and 2008 are presented below: In EUR million 2009 2008
Amounts reported in the consolidated statements of income Current tax – current year (9) (104) Current tax – true-up of prior years (26) 12 Deferred taxes due to temporary differences (100) 85 Deferred taxes from loss carry-forward 184 59 Changes in deferred taxes due to changes in tax rates (2) (8) INCOME TAX (EXPENSE)/BENEFIT 47 44
Reconciling items to actual tax (expense) / benefit: Non-taxable income 23 9 Unused tax losses 4 (4) Net capitalised losses brought forward from previous financial periods 10 38 Recognition of deferred tax assets 104 66 Changes in tax rates (2) 1 Differences between French and local tax rates 40 48 Non-taxable revenue and non-deductible charges (21) (19) ACTUAL TAX (EXPENSE)/BENEFIT 47 44
The standard tax rates for the primary locations in which the Group has operations are as follows: United Kingdom 28.00% 28.00% United States 35.00% 35.00% GROUP EFFECTIVE TAX RATE (14.71)% (15.85)% (1) The accounting classification under IFRSs of the French tax “Contribution économique territoriale” applicable starting 2010 is currently being assessed.
Deferred tax assets and liabilities and the related expense or benefit as at and for the years ended 31 December 2009 and 2008 were generated by the following items: Balance sheet as at 31 December Deferred taxes benefit
Deferred tax liabilities Deferred acquisition costs (141) (75) 1 (13) Unrealised revaluations and temporary (37) - (37) 12 Equalisation reserves (18) (46) 29 34 Value of business acquired (155) (152) (18) 29 Goodwill - - Financial instruments (6) - (18) - Claims reserves (3) (44) (1) (49) Capitalisation reserve (62) (45) (13) (3) Other temporary differences (20) (71) 2 7 Elimination of internal capital gains - - - (9) TOTALDEFERRED TAX LIABILITIES (1) (442) (433) (55) 8
Realised gains and losses on investments 177 87 Unrealised gains and losses on investments 19 (45)
On 7 May 2008, SCOR announced that it had reached a settlement with Groupama regarding the definitive amount of a guarantee relating to the acquisition of SOREMA SA and SOREMA NA and their subsidiaries (“SOREMA”) by SCOR in 2001. At the time, SOREMA was the reinsurance division of Groupama. The guarantee contemplated that Groupama would indemnify SCOR in the event of negative developments concerning the technical reserves of SOREMA entities for all underwriting years up to and including 2000. The parties agreed on a payment of EUR 240 million which occurred on 1 June 2008. SCOR’s 2007 accounts included a recoverable of EUR 250 million. Consequently, the net income for the 2008 year includes a charge of EUR 10 million, (EUR 7 million net of tax), in respect of the settlement agreement.
Other operating and administrative expenses include expenses incurred by the Group, excluding gross commissions, as follows: In EUR million 2009 2008
Staff costs 198 207 Taxes other than income taxes 17 18 External charges for services (1) 174 149 OTHER OPERATING AND ADMINISTRATIVE EXPENSES 389 374
The audit fees paid by Group to the Auditors are detailed below: Ernst&Young Mazars Amount (excluding taxes) % Amount (excluding
PWC KPMG Total Amount (excluding taxes) % Amount (excluding taxes) % Amount (excluding
The 2008 audit and related fees include incurred 2007 year end statutory audit fees for former auditors whereas for 2008 and 2009 all Group and statutory audit work is completed by Ernst & Young and Mazars.
Other restructuring costs 23 4 1 Total restructuring costs – Gross of tax 49 8 15 Total restructuring costs – Net of tax 34 5 10 20.1.6.24 NOTE 24 - EARNINGS PER SHARE
Basic and diluted earnings per share are calculated as follows for the years ended 31 December 2009 and 2008, respectively: In EUR million Net income (numerator)
Net income attributable to ordinary shareholders and estimated conversions 370 181,259 2.04 320 190,122 1.68 (1) Average number of shares during the period. See Note 1 of the consolidated financial statements (2) After stock consolidation on 3 January 2007: 1 new share equals 10 old shares (3) Change in number of convertible bonds during the period relates to the conversion and redemption of OCEANE convertible bonds. Refer to Note 14 - Financial Debt for further detail.
Key management personnel are those individuals having responsibility and authority for planning directing and controlling the activities of the Group. The Group considers that the members of the COMEX and the board constitute key management personnel for the purposes of IAS 24.
The total gross compensation of key management personnel, which include short-term employee benefits, post employment benefits, other long-term benefits, termination benefits and share-based payments, for 2009 and 2008 financial years is outlined below.
Fixed compensation 4,097,798 3,550,662 Variable compensation 3,176,218 2,806,777 Profit sharing - 48,832 Premiums/allowances 102,124 287,046 TOTAL CASH COMPENSATION 7,376,140 6,693,317
No retirement benefits (or commitments) have been paid to key management personnel during the period.
Issue of share options and share awards to employees of subsidiaries. Costs are charged for annually based on the underlying value of the awards granted calculated in accordance with the guidance set out in IFRS 2. See Note 18 - Stock options and share awards for further details.
SCOR SE provides parental guarantees to a number of operating subsidiaries. Under the terms of these parental guarantees contracts of insurance or reinsurance between clients and the Group companies are covered so that clients benefit from the additional financial security of SCOR SE. During the year SCOR SE granted a parental guarantee to SCOR Global Life Reinsurance Company of America, SCOR Global Life Re Insurance Company of Texas, SCOR Perestrakhovaniye and SCOR Africa Limited. These each had similar terms and conditions to those issued by SCOR SE to other legal entities within the SCOR Group.
SCOR provides loans to Group companies in the normal course of business remunerated at market rates.
Commitments given Letters of credit (3) 1,484 1,403 Pledged securities 2,874 2,708 Endorsements, surety 23 28 Other commitments given 75 80
In 2004 Converium (which has since become SHS) announced the successful private placement of USD 100.0 million of floating rate notes issued by Helix 04 Limited (“Helix”), a Bermuda special purpose exempted company. By means of a counterparty contract with the issuer, the transaction provided SCOR Switzerland with fully collateralised second and subsequent event protection for North Atlantic hurricane, U.S. earthquake, Japanese earthquake and European windstorm property catastrophe exposures. The notes paid only for second and subsequent events in any of the four peril regions during the five-year term of the transaction. This arrangement expired on 23 June 2009.
Payments from Helix to SHS were based on modelled reinsurance losses on a notional portfolio. The Helix 04 contract could first be triggered when modelled losses to the notional portfolios reach USD 154.8 million. The second trigger hit when modelled losses reach USD 176.2 million. It would then pay out according to a sliding scale of modelled losses up to USD 276.2 million.
The Helix counterparty contract was a risk mitigation non exchange traded derivative whose fair value was closely referenced to the Insurance Linked Securities market pricing of the bond. In the absence of a first qualifying event the fair value of the contract was approximately equal to the unexpired cost of the contract. At 31 December 2009 the fair value of the counterparty contract was EUR nil million (2008: EUR 2 million included in other assets on the balance sheet).
The risk management framework and governance of the Group is described in the introduction to Section 4 – Risk factors of the 2009 Registration Document which incorporates these consolidated financial statements.
Insurance risk for the Non-Life and the sensitivity of the Group to that risk is described in the 2009 Registration Document Section 4.1.1 – The Group is exposed to diverse risk factors in the non-life and life reinsurance businesses.
Concentrations of Non-Life reinsurance risks are included in the 2009 Registration Document in Section 4.1.2 – We are exposed to losses from catastrophic events.
Information on exposures to asbestos and environmental claims is included in Note 16 – Contract liabilities.
Insurance risks and the related sensitivities of the Life business to these risks is described in the 2009 Registration Document Section 4.1.1 – The Group is exposed to diverse risk factors in the non-life and life reinsurance businesses.
The cash flows of the life business have been prepared on a best estimates basis. The amounts below represent the estimated timing of the net cash flows resulting from recognised insurance liabilities. For long term life reinsurance, benefit payments are typically settled net of premiums (for treaties with periodic premium payments). Where reserves are deposited with the client, the settlement normally also includes certain other account items, primarily the release of the deposits. For contracts where deposits may be used to offset the amounts settled between SCOR and its cedants, the cash flows have been projected on a net basis.
The amount of gross deposits which have been netted against expected life benefits are EUR 3 898 million and EUR 3,978 million in 2009 and 2008, respectively.
Maturity profiles have been prepared based on undiscounted contractual maturities and include contractual interest payments. In the case of perpetual debt, or debt which is subject to multiple redemption dates, the analysis below assumes such debt is redeemed on the first possible redemption date. Of the amounts below, EUR 312 million (2008: EUR 263 million) relates to variable rate debt.
In EUR million Interest rate ranges Less than 1 year Between 1 to 5 years
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. This risk is more fully described in the 2009 Registration Document in Section 4.2.4 – We are exposed to currency risk.
Although in general all long term liabilities are discounted, in most cases there is no immediate accounting impact from a 100 basis point change in interest for the following reasons: For the German, Italian, Swiss and Austrian markets, valuation interest rates are typically locked-in at the minimum interest rate guaranteed by the ceding on the deposited assets covering the liabilities.
For Long Term Care products in France, ceding companies use valuation interest rates established by French regulators which are linked to some extent, to market rates. Reserve movements reported by ceding companies are influenced by numerous factors, including interest assumptions, where are not distinguished separately. SCOR does not actively revise the valuation interest rates during its reserving process. Due to lack of direct data, the interest rate sensitivity cannot be precisely analysed.
The Group does not consider that it is interest rate sensitive if the interest rates are fixed by local regulators. Additionally, there are no material amounts of discounted reserves in the Non-Life portfolio which would result in interest sensitivities. Finally, for lines of business where there are interest sensitivities at the level of the ceding company and for which no direct information on these sensitivities is submitted to SCOR level (e.g. the bodily injury portion of automobile), SCOR considers that the information provided by the ceding company is not necessarily representative of the evolution in interest rates. The IBNR calculations performed by SCOR using methods other than the loss ratio method do not represent a material portion of the recorded reserves and therefore the sensitivity is not considered material.
Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group’s equity prices exposure relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices, principally investments in equity securities.
All investments, whether held directly or in mutual funds, are aggregated and valued on a regular basis. This approach allows for the monitoring of changes in the portfolio and the identification of investments with higher than average volatility. The Group’s exposure is reviewed at regular Investment Committee meetings.
The premiums on the Guaranteed Minimum Death Benefit (GMBD) business underwritten by the SCOR Group in the U.S. market vary with the value of the underlying assets rather than the sum at risk. Thus, premiums would decrease under a decline of the equity values whereas the expected claims would increase thus leading to an increase in the liability. However, included in the reserve calculation is a prudent margin for this fluctuation. Accordingly, the level of reserves recorded for this business would remain unchanged in the event of a 10% decrease in equity values. As the
The following table summarises the accounting sensitivity of the Group’s consolidated income and consolidated equity (on a pre-tax basis) to market risks based on reasonably possible movements in key variables with all other variables held constant. The assumptions included are: (a) Interest rate risk
The interest sensitivities include the movements on the debt security portfolio, cash and cash equivalents, structured notes, the impact of changes in interest rates on variable rate financial debt and the GMDB and annuity business of the life operations in the US.
SCOR conducted an analysis of the sensitivity of the impairment of equity securities, by applying the accounting policy and application rules set out in 20.1.6.1 (H) to theoretical future market value changes. SCOR estimates that, excluding any impairment arising to duration, a further uniform decline of 10% from 31 December 2009 market values would generate a potential future further impairment of equity securities of EUR 12 million, net of tax (2008: with an equivalent decline, EUR (65) million). It should be noted that this figure should not be scaled up or down as the impairment rules are not a linear function of market value. For example a scenario with a market value decline of 20% would not double the potential further equity impairment.
As previously mentioned, the Life and Non-Life business are not sensitive to equity price movements.
Interest +100 basis point (1) - (201) (2) (188) % of Equity - (5.2)% (0.1)% (5.5)% Interest – 100 basis points (1) - 204 2 220 % of Equity - 5.2% 0.1% 6.4% Equity markets +10% (2) 1 72 3 62 % of Equity 0.0% 1.9% 0.1% 1.8% Equity markets -10% (2) (13) (67) (65) (62) % of Equity (0.3)% (1.7)% (1.9)% (1.8)% (1) The impact of interest rate sensitivity on income relates to financial debt at variable rates. (2) Excludes investments in hedge funds which normally do not have a uniform correlation to equity markets and securities where SCOR has a strategic investment including where the Group has a substantial shareholding but does not meet the “significant influence” criteria in IAS 28. (3) The reduction in equity represents the estimated net asset impact independently to the amount of impairment recognised in the profit and loss account. (4) Net of tax at an estimated average rate of 25%.
The Group recognised a net foreign exchange gain of EUR 14 million for the year ended 31 December 2009 (2008: EUR 7 million).
(1) This analysis excludes the impact of hedging activity. During 2009, the Group entered into a net investment hedge to reduce its exposure to variations in the net assets of USD functional currency subsidiaries as described above.
The current fact discovery deadline in the Highfields Lawsuit ended in principle 17 April 2009. No proceedings beyond that date are presently scheduled. Discovery is now under way April 2009. The parties took the common initiative before the end of this operation to appoint a mediator in order to bring the parties’ positions closer and to find a common ground. The mediation was concluded in June 2009. Without admitting any of the merits or faults invoked by the adverse party, the Group agreed upon a settlement agreement putting an end to the litigation having a net impact after tax and after recovery of insurances of EUR 5.6 million in the consolidated financial statements of the first semester 2009.
In July 2001, leaseholders of the WTC (“Silverstein Parties”) purchased a USD 3.55 billion property insurance program covering the World Trade Center (“WTC”). SCOR underwrote a 10% quota share of that program as a 100% fronted reinsurer of Allianz Global Risks U.S. Insurance Company (“Allianz”). Beginning in October 2001, various claims were brought in U.S. Federal District Court in New York to resolve whether the 11 September 2001 WTC attack constituted one or two occurrences, as well as other coverage disputes (“WTC Litigation”). Allianz, as SCOR’s 100% fronting company, was a named party to the WTC Litigation. SCOR, as the financially interested reinsurer, was associated in the defence and control of the claim against Allianz. On 6 December 2004, a jury determined that the 11 September 2001 WTC attack constituted two occurrences under the terms of the property insurance policy issued by Allianz. On 18 October 2006, the U.S. Court of Appeals for the Second Circuit affirmed the jury’s verdict. The two-occurrence verdict against Allianz did not determine the amount of damages owed by Allianz under its policy. That determination was the subject of the ongoing coverage litigation, as well as a separate court-supervised appraisal proceeding.
On 23 May 2007, over SCOR’s stated objection as the 100% fronted reinsurer, Allianz accepted a final settlement with the Silverstein Parties and the Port Authority resolving all pending litigation. Under the settlement, Allianz agreed to pay two full limits of coverage, USD 710 million, with the unpaid balance payable in increments through 2010, and conceded a number of valuation and coverage positions that Allianz had been advancing on SCOR’s behalf under the Allianz policy, including Allianz’s position that any prior or future transfers of development rights by the Silverstein Parties extinguished potential replacement cost claims for the transferred rights. In objecting to the settlement, SCOR advised Allianz that the settlement, by waiving critical coverage and valuation positions under the Allianz policy and foreclosing SCOR from obtaining a merits-based resolution of the claim, did not comply with the terms and conditions of the reinsurance certificate between SCOR and Allianz and contained ex gratia components.
On 27 September 2007, SCOR initiated claims against Allianz in an arbitration proceeding challenging both Allianz’s issuance of a policy prior to the loss that did not conform to the terms of coverage agreed by SCOR, as well as Allianz’s 23 May 2007 settlement of the claim over SCOR’s objection. The arbitration ended on 13 November 2009 by a definitive order from the arbitration panel which considered that Allianz did not exceed its rights and obligations. The additional cost of the coverage of two events, deemed covered by Allianz and by SCOR, amounts to EUR 39 million, net of retrocession and tax. This decision put a definitive end to this litigation between, on one hand, Allianz, reinsured by SCOR, and the Silverstein Parties and, on the other hand, between SCOR and Allianz.
The Group is involved in one legal proceeding concerning past environmental claims in Texas. Based on information available to us as at the date of the consolidated financial statements, the Group believes the provisions it has reserved are sufficient to cover this matter.
In addition, as a result of its acquisition of Converium (which has since become SCOR Holding (Switzerland)), SCOR assumes the burden of the following litigation matters: On 4 October 2004, the first of several putative securities class action complaints was filed in the United States District Court for the Southern District of New York (the “Court”) against Converium and several of its officers and directors. The complaints were subsequently consolidated and Public Employees’ Retirement System of Mississippi and Avalon Holdings Inc. were appointed lead plaintiffs (the “Lead Plaintiffs”).
On 28 December 2006, the Court issued an Opinion and Order granting in part and denying in part defendants’ motions to dismiss the Complaint. The Court dismissed the claims against all defendants alleging violations of Sections 11, 12 and 15 of the Securities Act as well as claims asserting violations of Sections 10(b) and 20(a) of the Exchange Act based upon allegations that Converium misrepresented and omitted material information in its 11 December 2001, initial public offering (the “IPO”) prospectus and registration statement. The Court denied the motion to dismiss those claims against Converium and its former officers alleging that those defendants violated Section
On 14 September 2007, the Court issued an opinion rejecting certain additional arguments raised by Converium and the officer defendants in their motion to dismiss with regard to Lead Plaintiffs' Exchange Act claims that it had not ruled on in its initial decision or its reconsideration decision.
On 6 May 2008, following several mediation sessions before the Honourable Daniel Weinstein (Ret.), a Memorandum of Understanding was entered to pursuant to which the Lead Plaintiffs and SCOR Holding (Switzerland) agreed to settle the claims and/or potential claims of the certified Class before the U.S. Court and the claims of non-U.S. purchasers of Converium securities in a proceeding in the Netherlands for an aggregate amount of USD 115 million (pre tax and before D&O recoveries).
After an initial investigatory phase, the Directorate of Investigation of the CNC has confirmed its initial accusation and has sent the file to the Council of the CNC for a final decision. The CNC issued its decision on 12 November 2009, which puts and end to the proceeding regarding the decennial insurance against, inter alia, SCOR Ibérica Sucursal. The fine amounts to EUR 18.599 million for SCOR which is sanctioned along with other insurers and reinsurers within the construction market in Spain. SCOR has decided to appeal this decision before the Administrative Chamber of the National Hearing and filed an appeal on 21 December 2009. SCOR intends to assert strong arguments, concerning both the proceedings and the substance of the litigation, as well as upon the calculation of the fine and its proportionality.
December 2008 published pages 252 to 254 of the registration document filed with the Autorité des Marchés Financiers on 5 March 2009 under Number D. 09-0099
The report from the Statutory Auditors on the consolidated financial statements for the financial year ended 31 December 2009 is reproduced below: Report of Statutory Auditors on the consolidated financial statements
In compliance with the assignment entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of SCOR SE for the year ended 31 December 2009.
Without qualifying our opinion, we draw attention to the matters discussed in the note 1 - “accounting principles and methods“ – paragraph (D) regarding the IFRS standards effective during the period and early adopted especially IAS 27 A “Consolidated and Separate Financial Statements” and IFRS 3 (revised) “Business Combinations ” and related revisions to IAS 27 “Consolidated and Separate Financial Statements”.
Note 3 - “Acquisition of XL Life America Inc. (XLRLA)” to the consolidated financial statements describes the methods and assumptions used for the provisional valuation of net assets, and by comparison with the acquisition price, of the negative goodwill following the acquisition of XL RLA. Note 3 - “Acquisition of Prévoyance Ré” to the consolidated financial statements describes the methods and assumptions used to determine the final net assets, and by comparison with the acquisition price, the goodwill recorded following the acquisition of Prévoyance Ré.
20.3 Sources of financial information not extracted from the audited financial statements of the issuer and indication of such absence of audit Not applicable 20.4 Date of most recently audited financial information 31 December 2009.
20.8 Material change in financial or commercial situation No material change has occurred in the Group’s financial or commercial situation since the end of the financial year 2009.
21.1 page 264 Share capital 21.2 page 271 Charter and Bylaws
Number of shares outstanding 5 June 2008 1,450,523,984.67 184 147 402 31 December 2008 1,451,304,080.62 184 246 437 3 March 2009 1,450,523,984.67 184 147 402 31 December 2009 1,458,917,914.79 185,213,031 2 March 2010 1,457,885,613.93 185,081,978
Pursuant to the fourth resolution passed by the Extraordinary Shareholders’ Meeting of the Company on 18 May 2004, which decided to authorise the Board of Directors to grant officers and employees of the Company options carrying the right to subscribe to new shares in the Company, or to purchase existing shares of the said Company and granting the Board with the powers to note where applicable, at its first meeting from the close of the Company’s financial year, the number and amount of new shares issued during the said fiscal year as a result of the exercise of options, the Board of Directors of SCOR noted, on 3 March 2009, the capital increase of SCOR of EUR 1,020,375.11 through the issue of 129,539 new shares, each with a par value of EUR 7.8769723.
Pursuant to the eighteenth resolution passed by the Extraordinary Shareholders’ Meeting of the Company on 7 May 2008, which decided to authorise the Board of Directors to reduce the share capital by cancellation of treasury shares, the Board of Directors of SCOR, on 3 March 2009, decided to reduce the share capital of SCOR of EUR 1,020,375.11 through the cancellation of 129,539 treasury shares, each with a par value of EUR 7.8769723.
Pursuant to the decision of the Extraordinary Shareholders General Meeting of the Company dated 15 April 2009, in its twenty-first resolution to authorise the Board to reduce the share capital by cancellation of treasury shares, the Board of Directors of SCOR decided on 2 March 2010 the share capital reduction of EUR 1,116,623.84 by cancellation of 141,758 new treasury shares with a nominal value of EUR 7.8769723 each.
OCEANE - - - Interest-bearing date of the OCEANE Normal amortisation date 10,470,000 - - 2 August 2004 1 January 2010 Stock option plans - - - Date of availability of options
Delegation of powers granted by the Extraordinary Shareholders' Meeting of 15 April 2009 16th resolution (Delegation of powers to the Board of Directors for the purpose of deciding upon the incorporation of profits, reserves or premiums into the share capital)
17th resolution (Delegation of authority granted to the Board of Directors for the purpose of deciding on the issuance of shares and/or of securities granting access to capital or giving entitlement to a debt instrument, without cancellation of preferential subscription rights)
76,171,399 shares (15 April 2009) 76,171,399 shares (Date of the Registration Document)
20th resolution (Authorisation granted to the Board of Directors for the purpose of the issuance of shares and/or securities granting access to the Company’s capital or giving entitlement to a debt instrument, as remuneration for shares contributed to the Company in the context of any public exchange offer launched by the Company or of any contributions in kind within a limit of 10% of the share capital)
36,816,176 shares (15 April 2009) 36,816,176 shares (Date of the Registration Document)
3,000,000 shares (15 April 2009) 2,795,500 shares (Date of Registration Document)
24th resolution (Share capital increase reserved for employees of the Group)
25th resolution (Aggregate ceilings of the capital increases) 110,561,865 shares (15 April 2009) 110,268,865 shares (Date of Registration Document)
The total number of shares authorised at the date of the Registration Document, including the shares (i) to be issued in connection with the implementation of stock option plans or (ii) that could be issued under current authorisations is 116,144,551.
Moreover, SCOR reactivated on 3 October 2008 the liquidity agreement concluded with Exane BNP Paribas and allocated to this agreement 200,000 SCOR’s shares and EUR 3,000,000 (in liquid assets).
On 31 December 2009, SCOR held 6,599,717 shares compared with 4,904,551 shares at 31 December 2008. The par value of these treasury shares is EUR 51,985,788 and their book value is EUR 107,242,402.
As at 31 December 2009, the bonds convertible and/or exchangeable for new or existing shares of SCOR (OCEANEs) represented a debt of an amount of EUR 191 million. Such loan has been repaid on 4 January 2010.
Section 17.2 – Information on shareholding and stock options for members of the administrative and management bodies,
Section 20.1.6 – Notes to the Consolidated Financial Statements – Note 17: Provisions for employee benefits, and
Appendix A – Notes to the Corporate Financial Statements – Note 12: Stock Options,
The shares of Group’s companies other than SCOR are neither under option nor agreed to be put under option.
21.2 Charter and Bylaws 21.2.1 CORPORATE PURPOSE OF THE ISSUER (ARTICLE 3 OF THE BYLAWS)
The purpose of the Company, either directly or indirectly, in all countries, is as follows: a) insurance, reinsurance, cession or retrocession of business of any nature in all classes and in all countries, the assumption in any form of reinsurance contracts or liabilities of any French or foreign company, organisation, entity or association, and creation, acquisition, rental, lease, installation and operation of any undertaking related to these activities; b) the construction, lease, operation or purchase of any and all properties; c) the acquisition and management of all securities and other equity rights by any means including but not limited to subscription, transfer or acquisition of shares, bonds, corporate rights, partnerships and other equity rights; d) acquisition of equity investments or interests in any industrial, commercial, agricultural, financial, securities or real estate companies, the formation of any company, participation in any capital increases, mergers, demergers and spin-offs; e) administration, management and control of any company or other undertaking, direct or indirect participation in all transactions carried out by such companies or undertakings by any means including, but not limited, to participation in any company or equity investment; f) implementation and management of centralised cash resource management within the Group and the provision of services, to any Group company concerned, relating to the management and operations of centralised cash resources; and generally all such industrial, commercial and financial transactions, or transactions involving moveable property and real estate, as may pertain directly or indirectly to the above stated corporate purpose or as may be related to or facilitate the implementation or pursuit thereof.
After approval of the financial statements and recognition of the existence of distributable funds consisting of the earnings for the fiscal year, less prior losses and plus, if applicable, any profit carried forward, the Shareholders’ Meeting shall distribute them as follows: 1/ The profit available for distribution comprises the net profit for the financial year, less prior-year losses and all sums transferred to reserves pursuant to the law, plus any retained earnings; 2/ All or part of the profit available for distribution may be transferred by the Shareholders’ Meeting to any discretionary, ordinary or extraordinary reserves or carried forward, as deemed appropriate.; 3/ Any remaining balance shall be distributed on all the shares in proportion to their unredeemed paid-up value, it being stipulated that during a period of two years starting from the reverse split operation on the shares of the Company, pursuant to the seventeenth resolution of the Ordinary and Extraordinary Shareholders’ Meeting of 16 May 2006, shares which have been subject to the reverse split shall be entitled to an amount ten times greater than the amount to which shares which have not been subject to the reverse split shall be entitled.
In addition to the information required by law from all shareholders who, acting alone or in concert, hold either directly or indirectly a given fraction of the share capital or of the voting rights of the Company, any natural person or legal entity, acting alone or in concert, which comes to hold or ceases to hold, either directly or indirectly, a fraction of the share capital or of the voting rights of the Company equal to or greater than 2.5%, or 5%, or 10%, or 15%, must inform the Company by registered letter, return receipt requested, addressed to the registered office, within five trading days of the date of the crossing of such threshold, of the total number of shares and/or of securities giving access to share capital held either directly or indirectly or in concert by such natural person or legal entity. The failure to comply with this requirement is sanctioned, upon request of one or more shareholders holding at least 2.5% of the Company’s share capital, noted in the minutes of the Shareholders’ Meeting, by the suspension of voting rights from all shares in excess of the non-declared fraction for any Shareholders’ Meeting that may take place during a period of two years following the date of the regularisation of the notification.
Like all Life reinsurers in the U.S. market, SCOR Global Life Rückversicherung AG (formerly Revios) has utilised offshore retrocession agreements in order to better manage its capital requirements, especially those imposed by the socalled Triple X regulations. When a U.S. ceding entity retrocedes risks to a non-U.S. reinsurance entity, U.S. legislation requires that a guarantee be provided for the benefit of the U.S. ceding company in order for it to reduce its statutory reserve liabilities. In the past, Revios has relied on the use of short term Letters of Credit (“LoC”) for this purpose.
The cost of the FA is competitive with long term LoC facilities and is guaranteed for 15 years. It also has the benefit of being non-recourse to Revios.
In order to anticipate the increasing requirements of the Triple X regulations, the FA provided regulatory guarantees of approximately USD 226 million as at 31 December 2007, USD 224.75 million as at 31 December 2008 and USD 224.51million as at 31 December 2009.
Parent company guarantees issued by SCOR Global Life Rückversicherung AG (formerly Revios) to its subsidiaries
SCOR Global Life Rückversicherung AG issued parent company guarantees for the following of its European subsidiaries: SCOR Global Life Reinsurance UK Limited (United Kingdom), SCOR Global Life Reinsurance Ireland Limited (Ireland), Sweden Reinsurance Co Ltd (Sweden), and SCOR Global Life Rückversicherung Schweiz AG (Switzerland).
A credit facility agreement dated 25 June 2007, was executed between SCOR Switzerland AG (formerly Converium AG) and a bank syndicate comprised of ABN AMRO Bank N.V., Niederlassung Deutschland, Bayerische Hypo Und Vereinsbank, Deutsche Bank AG, Luxembourg Branch, Commerzbank, Crédit Suisse, Barclays Bank, and JP Morgan Chase Bank. The purpose of the agreement is to guarantee the performance of the obligations of SCOR Switzerland
SCOR, SCOR Global Life SE and SCOR Global P&C SE on one side and Deutsche Bank on the other side executed, on 24 July 2009, a stand-by letter of credit facility agreement.
Deutsche Bank agreed to issue Stand-By Letters of Credit (“SBLCs”) in a form acceptable to the American National Association of Insurance Commissioners (“NAIC”) as guarantee for commitments undertaken by SCOR, SCOR Global Life SE and SCOR Global P&C SE in the context of their reinsurance activities. The maximum face value of the letters of credit under this agreement is USD 250,000,000, as from 1 January 2009 until 31 December 2011.
Third-party information and statements by experts and declarations of any interest
As concerns the holdings held directly by SCOR, refer to: Section 7 – Management chart,
Appendix A – Notes to the Corporate Financial Statements – Note 2.3 – Subsidiaries and affiliates, and
millions) SCOR US Corporation (US) Reinsurance 100% USD 196 346 134 1,211 - - SCOR Switzerland AG (Switzerland) Reinsurance 100% CHF 400 1,283 96 1,826 - - SCOR Holding (Switzerland) AG Holding 100% USD 555 719 52 1,783 - - SCOR Reinsurance Company (Asia) Ltd Reinsurance 100% USD 26 38 43 26 - - -
Refer to Section 20 – Consolidated financial statements, Note 22 – Other operating and administrative expense for the detail of audit fees.
28.1 page 290 Information published on the Autorité des Marchés Financiers (AMF) website (www.amf-france.org)
28.1 Information published on the Autorité des Marchés Financiers (AMF) website (www.amf-france.org)
Date Subject 8 January 2010 Disclosure of trading in the Company’s shares by members of the Board of Directors
15 December 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Georges Chodron de Courcel)
9 December 2009 Disclosure of crossing thresholds 15 December 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Daniel Havis)
3 December 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Daniel Lebègue)
26 November 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Claude Tendil)
1st July 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Peter Eckert)
19 June 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Allan Chapin)
14 April 2009 Disclosure of trading in the Company’s shares by members of the Board of Directors (Carlo Acutis)
28.3 Information published on SCOR’s company website (www.scor.com) All press releases and offering circulars published on the AMF site (point A.) are simultaneously published on SCOR’s website. In addition, the following were published on the SCOR’s website: Date Subject 10 February 2010 SCOR executes on its strategy: the successful outcome of the P&C 1/1 renewals combines growth and an increase in expected profitability – Press release 26 January 2010 SCOR appoints new Function managers – Press release 28 December 2009 Disclosure of trading in own shares – From 22 to 23 December 2009 18 December 2009 2009 Actuarial Awards: SCOR supports the development of actuarial science – Press release 21 December 2009 Disclosure of trading in own shares – From 14 to 18 December 2009 15 December 2009 Disclosure of trading in own shares – From 7 to 11 December 2009 10 December 2009 SCOR closes new EUR 75 million catastrophe bond Atlas VI – Press release
SCOR combines growth and profitability to generate a net income of EUR 278 million in the first nine months of 2009, with shareholders’ equity increasing to EUR 3.8 billion (EUR 20.84 per share) – Press release 19 October 2009 Julien Carmona joins SCOR as Chief Operating Officer – – Press release
SCOR reinforces its presence in the Netherlands and opens a Life branch office – Press release 14 September 2009 Half-year statement of the liquidity contract between SCOR SE and EXANE BNP Paribas – Press release 8 September 2009 Adjustment to the conversion/exchange ration for OCEANE convertible bonds: 0.117 SCOR share per OCEANE – Press release 4 September 2009 Standard & Poor’s upgrades SCOR’s Enterprise Risk Management (ERM) to « Strong »– Press release 4 September 2009 A.M. Best changes SCOR rating outlook from “stable” to “positive” – Press release 3 September 2009 SCOR extends mortality swap with J.P. Morgan to protect the Group from pandemic risks– Press release 30 July 2009 SCOR records net income of EUR 184 million for the First Half of 2009; robust July renewals underline the Group’s strong competitive position – Press release 30 July 2009 SCOR announces the publication of its interim financial report for the six months ended 30 June 2009 – Press release 23 July 2009 SCOR wins “Catastrophe Risk Transaction of the Year” award from the Environmental Finance – Press release 22 July 2009 SCOR purchases US-based XL Re Life America – Press release 2 July 2009 SCOR SE signs the Kyoto Statement, a major insurance and reinsurance initiative to combat climate change – Press release 30 June 2009 SCOR opens a Life and Non-Life subsidiary in South Africa – Press release 29 May 2009 SCOR share enters “CAC Next 20” index on Paris stock exchange – Press release 19 May 2009 SCOR wholly-owned subsidiary ReMark acquires ESG Direct Asia – Press release 30 April 2009 SCOR records 1st quarter 2009 net income of EUR 93 million, strong 15% volume growth and shareholders' equity reaches EUR 3.6 billion – Press release
26 May 2009 Press release – SCOR announces the disposal of its Gecimed shares 15 May 2009 Notice – Update of the number of shares 7 May 2009 Notice – Assimilation of ordinary shares. Increase of the number of outstanding ordinary shares 30 April 2009 Press release – SCOR announces that it intends to tender its Gecimed shares to the public tender offer by Gecina 23 April 2009 Press release – 2009-2010 Share Buyback program 30 March 2009 Press release – Combined General Meeting on 15 April 2009 at 10:00 27 March 2009 Notice – In the context of the reverse split of SCOR, the compensation price for not reversed split share is EUR 1.72086 per share 28.5 Information published on the Info-Financières web site (www.info-financiere.fr/search.php.com) All press releases and offering circulars published on the AMF site (point 1.1) and on SCOR’s web site (point 1.4) are simultaneously published on the Info-Financières’ website. No other information has been published on the InfoFinancières ’ website.
1.1 page 297 Significant events of the year 1.2 page 298 Balance sheets 1.3 page 300 Income statements 1.4 page 303 Table of consolidated off-balance sheet commitments 1.5 page 304 Notes to the corporate financial statements 1.6 page 332 Certification of audit of historical financial information
Pursuant to Article 28 of Regulation (EC) No. 809/2004 of the European Commission, the following information is included by reference in this Registration Document: (i) The corporate financial statements for the year ended 31 December 2008 and the Auditors’ Report pertaining thereto published on pages 275 to 311 and 312 to 313, respectively, of the registration document filed with the Autorité des Marchés Financiers on 5 March 2009 under number D. 09-0099.
SCOR SE completed a transfer, on 17 December 2009, of 100% of SCOR CANADA to SCOR Global P&C SE for an amount of EUR 148 million which generated a profit of EUR 122 million.
On 17 June 2009, following the termination without liquidation (“dissolution sans liquidation”) of FERGASCOR, all assets and liabilities of Fergascor were transferred to SCOR SE (“Transmission Universelle de Patrimoine”).
Increase in capital of SCOR Asia Pacific for an amount of USD 25 million.
Closure of World Trade Center case: SCOR and its retrocessionnaires will assume, within the framework of their respective agreements, their share of the claim relating to the World Trade Center.
Reversal of an impairment provision against SCOR U.S.shares amounting to EUR 85 million.
Share of retrocessionaires in underwriting reserves Note 4 70 - 70 6
Accrued income and deferred charges Note 4 1,295 1,295 1,211 Due and accrued interest and rental income - - - 1
Shareholders’ equity and reserves (1) Note 5 2,438 2,361 Share capital 1,459 1,451 Additional paid-in capital 745 923 Re-valuation reserves - Unavailable reserve - Other reserves 22 22 Capitalisation reserve 2 Retained earnings 2 24 Net income 199 (64) Regulated reserves 9 5
Other liabilities Note 4 1,557 1,503 Liabilities arising from reinsurance operations 7 16 Convertible bond issue 192 200 Debts to credit institutions 11 10 Negotiable debt securities issued by the company - 10 Other loans, deposits and guarantees received 1,289 1,171 Other liabilities 58 96 Accrued liabilities Note 4 4 Deferred commissions received from reinsurers (Non-Life) 1 (1) Reinsurance estimates – Retrocession 3 (7) Other accruals - 8 Net translation adjustment - -
(1) The data for financial years 2008 and 2009 are before allocation of earnings.
In EUR million Gross transactions Retroceded transactions transactions 2008 net transactions
Expenses for Life reinsurance and other underwriting reserves 75 - 75 (47)
Index default swap - - Caps and floors - - 75
Leases from buildings purchased with finance lease - - Letters of credit 403 403 310 Endorsements and sureties 8 8 9
Investment securities and assets acquired with commitment for resale - - -
The fair value of investments in associates is based on their value in use. This value is assessed based on the utility of the investment to the Company as well as the actual share price, the revalued shareholders’ equity, the actual results and the future outlook.
For active reinsurance companies, the fair value is estimated based on consolidated net assets, excluding goodwill and before elimination of shares, increased by unrealised capital gains or losses and by the Embedded Value (for Life Reinsurance) and forecasts of future profits (for Non-life Reinsurance), net of tax. It does not include the value of future business for Life companies.
At each balance sheet date, if the carrying value of an investment in associate is less than its historical cost, an analysis is conducted in order to determine if impairment is required. The assumptions and conclusions of this analysis, conducted as at 31 December 2009, are detailed in Section 2.1.
Equity securities and other variable income securities are recorded at cost, excluding expenses. The realisable value as at the balance sheet date is determined according to article R.332-20 of the French Insurance Code, and for listed securities, corresponds to the share price on the balance sheet date. For unlisted securities; the fair value is based on net assets.
End of career indemnities (IFC) and retirement indemnities (IDR): employees benefit from additional retirement benefits paid in full upon retirement. The evaluation of these indemnities depends on several factors such as age, number of year’s service and salary.
In Opinion n° 2008-17 dated 6 November 2008 relating to the accounting of stock option and share purchase and plans and free share allotment plans, the CNC redefined the accounting of such benefits granted to employees and the accounting for impairment of treasury shares held for such plans. In the event of the delivery of already existing shares, the expense should be recognised over the vesting period if the attribution of shares is based on the employee remaining with the company over the vesting period. As such, at each period end, a provision for risk is recorded for the pro rata of the estimated cost (calculated as the difference between the cost to acquire the shares and nil value) to which the pro rata of the expired period, from date of attribution, to the entire vesting period is applied.
The impact of this change in method during 2008 was recorded directly in retained earnings for EUR 31 million, before tax and EUR 21 million, after tax.
Pursuant to the provisions of article R.332-18 of the French Insurance Code, accounts not yet received from ceding companies at the end of the financial year are estimated, in order to better reflect SCOR’s reinsurance commitments in the financial statements. This method is used for the majority of the contracts signed during the current and previous financial years.
Non-Life Activity: An unearned premium reserve is calculated either pro rata temporis on a contract-by-contract basis, or using a statistical method when the results do not differ significantly from the contract-by-contract method.
The costs associated with the acquisition of new contracts, essentially commissions, are recorded as assets within the limits of contract profitability. They are amortised over the duration of the Non-Life contracts.
The impact of the change in accounting method during 2008 was calculated retrospectively at the beginning of the period and recorded directly to retained earnings for EUR 1 million.
The use of and accounting financial instruments comply with the French General Statement of Accounting Principles (“Plan Comptable Général”) of 1982 and French Decree 2002-970 dated 4 July 2002, relating to the use of forward financial instruments by French insurance companies.
Shares in and advances to land and real estate companies 158 - 84 86 156
(1) EUR -388 million decrease in equity interests including: SCOR SE completed a transfer, on 9 December 2009, of 51% of SCOR Switzerland AG to SCOR Global P&C SE for an amount of EUR 994 million.
SCOR SE completed a transfer, on 17 December 2009, of 100% of SCOR CANADA to SCOR Global P&C SE for an amount of EUR 148 million.
On 17 June 2009, following the termination without liquidation (“dissolution sans liquidation”) of FERGASCOR, all its assets and liabilities were transferred to SCOR SE (“Transmission Universelle de Patrimoine”).
At 31 December 2009, provisions against equity investments can be analysed as follows: The impairment on affiliate CRP (EUR 358 million in 2008) has been reversed with the merger into GSNIC.
SCOR U.S. Corporation: EUR 500 million compared to EUR 585 million in 2008. A reversal of the impairment estimated at EUR 85 million has been recorded due to an increase in the market value of this affiliate and its improved financial condition.
Unrealised gains and losses 1 – Real estate investments and real estate investments in process 156 155 215 61 2 - Shares and other variable-income securities (other than mutual fund shares) 4,103 3,594 4,955 1,360 3 - Mutual fund shares (other than those in 4) 6 6 3 3 4 - Mutual fund shares exclusively invested in fixed-income securities - - - 5 - Bonds and other fixed-income securities 27 27 28 1 7 - Other loans and similar bills 407 406 406 0 9 - Cash deposits (other than those in 8) and security deposits - - - 10 - Assets representative of unit-linked policies - - - a ) including: - investments valued according to article R.332-19 27 27 28 1 - investments valued according to article R.332-20 4,672 4,161 5,580 1,418 - investments valued according to article R.332-5 - - - b ) including: - investments and IFT OECD 4,879 4,369 5,571 1,203 - investments and IFT excluding OECD 78 78 295 216
For 2009, SCOR recognised EUR 5 million in financial income from loans with related companies and EUR 14 million in interest on borrowings with related companies.
Name Original Share Reserves Share Gross book Net book Loans and Receivables Guarantees Turn Net Dividends currency capital of capital value value advances against issuers and pledges given (2)
(Amounts in million) (OC) * (OC) * (OC) * (EUR) (EUR) (EUR) (EUR) (EUR) (OC) * (OC) * (EUR) Russian Federation - SCOR AFRICA LTD ZAR 0 150 99,40% 11 11 - 0 - 14 5 - 2nd Floor,West Tower, Maude Street, Nelson Mandela Square, Sandton 2196, Afrique Sud - GIE INFORMATIQUE EUR 0 0 100,00% - - 34 0 - 18 0 - 1, Avenue du Général de Gaulle 92800 PUTEAUX - SCOR GLOBAL INVESTMENT S.E. EUR 3 0 100,00% 3 3 - 0 - 4 1 - 1, Avenue du Général de Gaulle 92800 PUTEAUX, France Total A 4,246 3,741 409 230 0 - - 109 B- ENTITIES WITH EQUITY INTEREST - In France 11 7 2 8 - - - - - Other than France 2 2 28 - - - - - Total B 12 9 29 8 - - - 0
(1) Provisional data (2) SCOR guarantees in full, without limits as to amounts, the underwriting liabilities of its subsidiaries pertaining in particular to their obligations relative to the payment of claims * OC: Original Currency
Deposits and security bonds 18 2 - 20 Equipment, furniture, fittings and fixtures 23 5 - 28
As at 31 December 2009, the number of shares held as treasury shares amounted to 6,599,717 shares (i.e., 3,56% of capital) for a total of EUR 107,242,402. These shares were acquired in the context of anticipated awards to Company employees and officers as part of share allotment plans.
Accounts receivable from reinsurance transactions 44 - 14 58 31 - 4 35
USD 100 million 30-year subordinated bonds issued on 7 June 1999, callable by SCOR quarterly as from the tenth year. These floating-rate bonds bear interest based on the 3-month Libor rate plus (i) 0.80% for the first ten years of the issue, and (ii) 1.80% thereafter.
Initial EUR 100 million (EUR 93 million after repurchase of EUR 7 million during 2009) 20-year subordinated bonds, issued on 6 July 2000 callable by SCOR quarterly as from the tenth year following their issuance. These floating-rate bonds bear interest based on the 3-month Euribor plus (i) 1.15% for the first ten years, and (ii) 2.15% thereafter.
At the end of the year, a part of EUR 200 million OCEANE financial debt was converted for an amount of EUR 16 million into capital by shareholders of 7,987,792 bonds with Euro 2 nominal per bond in to 934, 576 SCOR SE shares with EUR 17.094 per share. SCOR reimbursed the remaining bondholders in cash at maturity on 4 January 2010.
Loans granted to SCOR by its subsidiaries, mainly SCOR Global P&C (cf § 2.3).
Reinsurance reserves (Life) 259 308 231 Loss reserves (Life) 116 124 147 Unearned premiums reserves (Non-Life) 211 163 154 Loss reserves (Non-Life) 652 793 978 Other underwriting reserves (Non-Life) 291 317 389 Gross underwriting reserves 1,529 1,705 1,899
The reinsurance activity of SCOR is comprised of two treaties: a quota share with SCOR Global P&C and SCOR Global Life and a facultative contract with Allianz which is 100 % retroceded to SCOR Global P&C.
The maturity of debt at 31 December 2009 is as follows: In EUR million Less than 1 year 1-5 years +5 years Total
The analysis of accrued income and deferred charges at 31 December is as follows
The share capital, comprising 185,213,031 shares with par value of EUR 7,8769723 totalled EUR 1,458,917,915 as at 31 December 2009.
The loss for 2008, i.e., EUR (64) million, was allocated to retained earning which, combined with a portion of additional paid-in capital (EUR 187 million), has been paid out as dividends in the amount of EUR 143 million (i.e., EUR 0.80 per share).
At the end of the year, part of the EUR 200 million OCEANE financial debt was converted into capital for an amount of EUR 16 million A total of 7,987,792 bonds with Euro 2 per bond were converted 934, 576 SCOR SE shares at EUR 17,094 per share.
The other reserves relate to the legal reserve for an amount of EUR 21 million.
EUR 11 million in reserves for post-employment benefits: retirement provisions (EUR 1.5 million), severance pay (EUR 1.6 million), supplementary retirement (EUR 6.6 million) and long term service awards (EUR 1.3 million).
EUR 10.1 million for retirement provisions relating to employees of the German branch.
SCOR premiums are the result of the implementation of two internal retrocession treaties entered into jointly with SCOR Global P&C and SCOR Global Life.
The transfer of SCOR Canada’s shares to SCOR Global P&C created a profit of EUR 122 million. The merger between Commercial Risk Partner (CRP) and GSNIC caused an overall loss of EUR (8) million (which includes EUR (388) millions loss on sale offset by a reversal of an impairment provision of EUR 380 million, which is included in other revenues). Finally, the improvement of the financial position of SCOR U.S. allowed a reversal of part of the impairment provision amounting to EUR 85 million (other revenues).
Currency losses were EUR (2.6) million in 2009 compared to a loss of EUR (4) million in 2008.
A profit of EUR 1.7 million relating to the repurchase of subordinated debt of EUR 100 million.
The SCOR Group in France is consolidated for tax purposes with SCOR as the parent company of the Group, and SCOR Global P&C, SCOR Global Life, SCOR Gestion Financière, SCOR Auber and Prévoyance Ré as subsidiaries. Under the tax agreement, SCOR benefits from the deficits of its subsidiaries, and tax benefits are transferred back to the individual subsidiary concerned, if the entity becomes profitable in the future.
Total tax losses of the consolidated French tax Group were EUR 1,080 million as at 31 December 2009.
The table below summarises the status of the various stock option plans for 2009: Plan Date of General
In addition, on 3 January 2007, the company carried out a reverse stock split of shares comprising the capital of SCOR with the exchange of one new share with a par value of EUR 7.8769723 for 10 old shares with a nominal value of EUR 0.78769723 per share.
In 2008, 109,445 subscription rights of options were exercised relating to the stock option plan of 25 August 2004, vested on 26 August 2008.
Collective incentive plan * 822 2,002 1,133 641 0 Profit sharing * 60 572 679 710 472 Net voluntary payments 144 92 48 40 169 Total payments 1,026 2,666 1,860 1,391 641 Net matching payments 584 550 381 326 193 *Paid out in the financial year for the previous financial year 13.3 - INDIVIDUAL RIGHT TO TRAINING (“DROIT INDIVIDUEL A LA FORMATION (DIF)”)
The following table presents the gross cash compensation paid in 2008 and 2009 to the Group Chairman & CEO: Chairman and CEO
Total pension benefits commitments relating to the corporate officer (“mandataire social”) amount to EUR 9.7 million.
Confirmed credits, letters of credit and guarantees given (note 15.1.2) 310 403 209 105 Other commitments given and received (note 15.1.3) 9 8 13 13 15.1 - COMMITMENTS RECEIVED AND GIVEN IN THE ORDINARY COURSE OF BUSINESS
amortisable swap (maturity 2010) of EUR 18 million intended to hedge rate variances on a mortgage. This transaction was entered into as the result of a real estate acquisition.
Exchange rate hedges generated an unrealised profit of EUR 3 millions.
Securities pledged to financial institutions - - 0 4 Investments in subsidiaries and affiliates pledged to financial institutions - - - -
SCOR SE has signed agreements with different financial institutions concerning the granting of letters of credit for EUR 403 million.
Total commitments received from banks relating to the WTC amount to EUR 86 million.
In consideration of its commitments relating to technical reserves, SCOR has granted letters of credit in the amount of USD 120 million (EUR 83 million) to cedants (of which USD 112 million or EUR 77 million in favour of Allianz for the WTC claim), compared to EUR 403 million in letter of credit capacity received from banks.
Commitments received Commitments given In EUR million 2008 2009 2008 2009
15.2 - COMMITMENTS GIVEN AND RECEIVED IN RESPECT OF HYBRID TRANSACTIONS
No facts in connection with the aforementioned commitments given and received have come to our knowledge, which may have an adverse impact on cash flows, cash positions or on our liquidity requirements. To the best knowledge of the Company, as at 31 December 2009, there were no other significant outstanding financial commitments requested by a Group entity within the context of the procedures described above.
The following litigation matters shall be mentioned: In the United States: In August 2006, Highfields Capital LTD, Highfields Capital I LP and Highfields Capital II LP (the “Highfields Funds”), as former minority shareholders of IRP Holdings Limited, a company incorporated in Ireland, commenced an action against SCOR in the Superior Court of the Commonwealth of Massachusetts (the “Highfields Lawsuit”). The complaint in the Highfields Lawsuit, which was served upon SCOR on 18 October 2006, included claims for commonlaw fraud, negligent misrepresentation and violations of a Massachusetts consumer protection statute arising out of the Highfields Funds’ purchase of an equity interest in IRP Holdings Limited in December 2001, and the conditions for setting the price at which the Highfields Funds subsequently sold their interest to SCOR in 2005, a transaction which was highly profitable to the Highfields Funds. The Highfields Lawsuit is similar to a previous lawsuit filed by the Highfields Funds in March 2004 before the U.S. District Court for the District of Massachusetts and which was dismissed for lack of subject matter jurisdiction on 16 August 2006. On 21 March 2007, the Superior Court of the Commonwealth of Massachusetts granted SCOR’s motion to dismiss the Highfields Funds' claims under the Massachusetts consumer protection law but denied SCOR's motion to dismiss the remaining claims. On 10 April 2007, the Court denied SCOR’s Motion for Summary Judgment on Statute of Limitations Grounds, and on 17 September 2007, the Court denied SCOR’s Motion for Partial Summary Judgment seeking dismissal of the Highfields Funds’ claim for negligent misrepresentation.
On 18 June 2009, SCOR commenced an action before the Commercial Court of Nanterre against an insurance company with respect to the recovery of the attorney’s fees and costs arising from the Highfileds litigation covered by the D&O insurance policy.
SCOR maintains that Highfields' action is without merit and intends to continue to defend itself vigorously. At this stage of the proceedings, we cannot estimate the likelihood or potential amount of any adverse judgment.
100% fronted reinsurer of Allianz Global Risks U.S. Insurance Company (“Allianz”). Beginning in October 2001, various claims were brought in U.S. Federal District Court in New York to resolve whether the 11 September 2001 WTC attack constituted one or two occurrences, as well as other coverage disputes (“WTC Litigation”). Allianz, as SCOR’s 100% fronting company, was a named party to the WTC Litigation. SCOR, as the financially interested reinsurer, was associated in the defence and control of the claim against Allianz. On 6 December 2004, a jury determined that the 11 September 2001 WTC attack constituted two occurrences under the terms of the property insurance policy issued by Allianz. On 18 October 2006, the U.S. Court of Appeals for the Second Circuit affirmed the jury’s verdict. The two-occurrence verdict against Allianz did not determine the amount of damages owed by Allianz under its policy. That determination was the subject of the ongoing coverage litigation, as well as a separate court-supervised appraisal proceeding.
On 29 April 2006, a fire occurred at Huntsman Corporation’s Aromatics and Olefins Plant. Huntsman Corporation (“Hunstman”) was insured by its “captive” insurer, International Risk Insurance Company (“IRIC”), and IRIC was 100% reinsured by various reinsurers, including SCOR UK Company. On 30 August 2007, certain reinsurers, including SCOR UK Company, brought suit in Federal Court in the Southern District of Texas (“Reinsurers Action”) seeking to compel Huntsman and IRIC to arbitrate their disputes regarding certain coverage and quantum issues that had arisen with reinsurers, and alternatively seeking a declaratory judgment from the Court regarding these issues. Both Huntsman and IRIC filed motions to dismiss the Reinsurers Action. Huntsman later filed suit in Texas State Court against IRIC (“Huntsman Action”), who then filed a third-party action against reinsurers in the same matter. Reinsurers sought to remove the Huntsman Action from State Court to Federal Court in the Eastern District of Texas. On 21 September 2007, reinsurers were then successful in getting the Huntsman Action transferred to the Federal Court in the Southern District of Texas (where the Reinsurers Action is now pending). On 4 February 2008, Huntsman filed a motion to have the Huntsman Action sent back to State Court. On 26 September 2008, the Court denied Huntsman and IRIC's motions to dismiss the Reinsurers Action and refused to send Huntsman Action back to State Court. Arbitrability discovery has been ordered and will be conducted absent an agreed resolution of the arbitrability issue.
On 4 October 2004, the first of several putative securities class action complaints was filed in the United States District Court for the Southern District of New York (the “Court”) against Converium and several of its officers and directors. The complaints were subsequently consolidated and Public Employees’ Retirement System of Mississippi and Avalon Holdings Inc. were appointed lead plaintiffs (the “Lead Plaintiffs”).
On 23 December 2005, the defendants moved to dismiss the Complaint and on 21 April 2006, Lead Plaintiffs moved for leave of Court to file a proposed Consolidated Second Amended Class Action Complaint, to amend their complaint to add, among other things, Securities Act claims based on Converium’s 1st March 2006 restatement of its financial accounts from 1998 through 2005.
SCOR negotiated a definitive agreement for the settlement of the claims of non-U.S. purchasers of Converium securities. A petition will be submitted within the next weeks before the Court of Appeal of Amsterdam, in the Netherlands, which is the only Court likely to maintain jurisdiction in order to grant a legal ground to the payment of indemnification to the shareholders not residing in the US homogeneous with the indemnification received by the US shareholders. The proceeding before this Court in relation to its jurisdiction and is being carefully followed with by SCOR but the process may be long. The Court may take more than six months to issue an order upon the eligibility of SCOR’s petition.
These annual financial statements have been approved by the Board of Directors at their meeting on 2 March 2010. Our role is to express an opinion on these financial statements, based on our audit.
In the specific context of the financial crisis, we examined the control system in place relative to the inventory of direct and indirect exposures, and the system in place for their assessment, as well as the valuation methods and writedown policies applicable to certain financial instruments. We have obtained assurance that the information provided in the aforementioned notes is appropriate, and that the approaches and policies described were properly applied by the company.
Notes 6 and 17 to the annual financial statements describe the uncertainties relating to the potential litigation encountered by the company.
We examined the Group’s procedures to identify these risks, to evaluate and reflect them in the annual financial statements.
These assessments were made as part of our audit of the annual financial statements taken as a whole and therefore served in forming our audit opinion expressed in the first part of this report.
We have no matters to report regarding: the fair presentation and the conformity with the financial statements of the information given in the directors’ report and in the documents to the shareholders with respect to the financial position and the financial statements; the fair presentation of the information given in the directors' report in respect of remunerations and benefits granted to the relevant directors and any other commitments made in their favour in connection with, or subsequent to, their appointment, termination or change in current function.
This report has been approved by the Board of Directors on 2 March 2010.
It has been incorporated in the 2009 Registration Document of SCOR SE (“SCOR”) which is available on the Company’s web site (www.scor.com) and on the AMF web site (www.amf-france.org).
The worldwide basis of the Group’s personnel elected at universal suffrage with two turns an employee to be their representative to the Board of Directors. Luc Rougé, elected candidate, has been proposed by the Board to the approval of the Shareholders’ meeting. The Shareholders’ general meeting held on 15 April 2009 voted widely in favour of such candidate.
The main conclusions drawn from this analysis are the following: The responses are complete, constructive and positive. The feedback reflects an able and strong Board, composed of varied personalities, experimenting and participating in an active and constructive manner in carrying out proceedings. The responses highlight the efficacy of the Boards, notably the Audit Committee and the Strategy Committee and the ability of the Board to follow the management and to assess performances, strategies and risks. The feedback attests to the Board’s confidence in the quality of financial reporting due to the work of the Audit Committee.
The following were identifiable as reoccurring areas for improvement in the responses: The need to send files earlier; The completion of risk analyses more thoroughly within the Risk Committee; The improvement of formalities for the Remuneration and Nomination Committee.
An informal assessment has been performed during 2009 by the Compensation and Nomination Committee. Such assessment concluded to a global improvement of the items mentioned during the 2008 assessment.
For historical reasons, the duties of the entire Directors end at the Shareholders’ meeting to be held in 2011. In these circumstances, the Board of Directors chose a simultaneous renewal of all of its members, in order to allow a full rethinking of its composition in the light of the new corporate governance rules. Duties of 4 and 2 years will be proposed to the vote of the Shareholders’ meeting of 2011, in order to comply with the AFEP-MEDEF Code.
Pursuant to the Internal Regulations, the Board of Directors of the Company determines the policies of the Company’s businesses, oversees their implementation and supervises the management’s administration. The Board meets at least four times a year. In accordance with legal provisions, it settles the financial statements, proposes dividends and makes investment and financial policy decisions. The Board also determines the amount and the nature of the sureties, securities and guarantees, which can be granted by the Chairman and Chief Executive Officer on behalf of the Company.
The following table presents the results of the review of the independence of each Director made in 2009 with regard to the criteria stated above: Criteria 1 2 3 4 5 6 7 8 Independent Denis Kessler No No No Yes Yes Yes Yes Yes No Carlo Acutis Yes Yes Yes Yes Yes Yes Yes Yes Yes Gérard Andreck Yes Yes Yes Yes Yes Yes Yes Yes Yes Antonio Borgès Yes Yes Yes Yes Yes Yes Yes Yes Yes Allan Chapin Yes No Yes Yes Yes Yes Yes Yes No Peter Eckert Yes Yes Yes Yes Yes Yes Yes Yes Yes Daniel Havis Yes Yes Yes Yes Yes Yes Yes Yes Yes Daniel Lebègue Yes Yes Yes Yes Yes Yes Yes Yes Yes André Lévy-Lang Yes Yes Yes Yes Yes Yes Yes Yes Yes Luc Rougé No Yes Yes Yes Yes Yes Yes Yes No Guillaume Sarkozy (1) Yes Yes Yes Yes Yes Yes Yes Yes Yes Herbert Schimetschek Yes Yes Yes Yes Yes Yes Yes Yes Yes Jean-Claude Seys Yes Yes Yes Yes Yes Yes Yes Yes Yes Claude Tendil Yes Yes Yes Yes Yes Yes Yes Yes Yes Daniel Valot Yes Yes Yes Yes Yes Yes Yes Yes Yes (1) Representing Médéric Prévoyance, Director
The Internal Regulations require that candidates for Director inform the Board of the position they currently hold as Director or Officer in other entities, as the Board has the duty to ensure compliance with the rules regarding the accumulation of position as Director. Once appointed, Directors must inform the Board of any appointment they hold as a company officer within a period of five days following the event. Finally, Directors must inform the Board of the position they have held as Director in other entities during the course of the financial year within a period of one month following the end of this financial year.
firstly, Directors are prohibited from trading in SCOR securities while in possession of information which, when made public, is likely to have an impact on the share price. The restriction remains in place two days after this information has been made public by a press release, secondly, they are prohibited, directly or indirectly, from carrying out any transaction in the Company’s securities during unstable periods, which they are made aware of by the Company or during any period preceding a major event affecting the Company, likely to influence its market price.
The following table displays the attendance of the members of the Board of Directors during 2009: Board members Attendance rate (%)
Denis Kessler 100 Carlo Acutis 75 Gérard Andreck 87.5 Antonio Borgès 62.5 Allan Chapin 100 Georges Chodron de Courcel, non-voting Director 100 Peter Eckert (1) 100 Daniel Havis 100 Daniel Lebègue 87.5 André Lévy-Lang 62.5 Luc Rougé 100 Guillaume Sarkozy (2) 60 Herbert Schimetschek 100 Jean-Claude Seys 87.5 Claude Tendil 100 Patrick Thourot (3) 66.7 Daniel Valot 100 (1) Peter Eckert is a Director since 15 April 2009 (2) Médéric Prévoyance, represented by Guillaume Sarkozy, is a Director 15 April 2009 (3) Patrick Thourot is no longer a Director since 15 April 2009 d) Committees of the Board of Directors
The Chairman of the Committee may convene any individual likely to provide relevant information for a clear understanding of a given point; the presence and information provided by this individual being limited to the relevant items on the agenda. The Chairman of the Strategy Committee must exclude the non-independent members of the Committee from the review of the discussions which might create an ethical problem or a conflict of interest.
The average attendance rate of the Committee Members was 82.5%. The following table states the attendance rates of the members of the Strategy Committee in 2009: Board members Attendance rate (%) Denis Kessler, Chairman 100 Carlo Acutis 40 Gérard Andreck 60 Antonio Borgès 80 Allan Chapin 100 Georges Chodron de Courcel, non-voting Director 80 Peter Eckert (1) 100 Daniel Havis 100 Daniel Lebègue 100 André Lévy-Lang 60 Guillaume Sarkozy (2) 0 Jean-Claude Seys 100 Herbert Schimetschek 100 Claude Tendil 100 Patrick Thourot (3) 100 Daniel Valot 100 (1) Peter Eckert is Director since 15 April 2009 (2) Médéric Prévoyance, represented by Guillaume Sarkozy, is Director since 15 April 2009 (3) Patrick Thourot is no longer a Director since 15 April 2009
The Committee is responsible for reviewing the financial situation of the Group, its compliance with internal policies, in addition to audits and reviews carried out by the auditors and by the internal control unit. It ensures the quality and transparency of the Group’s financial statements.
The Audit Committee has adopted a set of Internal Regulations, setting forth two imperative missions: Accounting mission, including the analysis of periodic financial documents, the review of the relevance of choices and correct application of accounting methods, the review of the accounting treatment of any material transaction, review of the scope of consolidation, review of off-balance sheet commitments, control of the selection and remuneration of statutory auditors, oversight of any accounting and financial reporting documents before they are made public; Ethical and internal control responsibilities. In this context, 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”), analysing 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.
The Compensation and Nomination Committee members are Allan Chapin, André Lévy-Lang, Georges Chodron de Courcel, Non-Voting Director, Claude Tendil Chairman and Daniel Valot. According to its Internal Regulations, the Committee is composed of between three and five members appointed by the Board of Directors of the Company and chosen among the members of voting and Non-Voting Directors. The term of their mandate coincides with their term of office within the Board of Directors or Non-Voting Director.
The Committee met four times in 2009. Its works dealt with the stock allotment and subscription plans, the modalities of remuneration of the Chairman and Chief Executive Officer and other members of the Executive Committee of the Group. The Committee focussed on the renewal and composition of the Board of Directors. The Committee also worked on the general organisation and on the succession schemes of the key officers of the Group.
The average attendance rate of the Committee Members was 85%. The following chart states the attendance of the members of the Compensation and Nomination Committee in 2009: Board members Attendance rate (%) Allan Chapin 75 Georges Chodron de Courcel 100 André Lévy-Lang 75 Claude Tendil, Chairman 100 Daniel Valot 75
The Risk Committee members are Antonio Borgès, Peter Eckert, Chairman, Daniel Havis, Daniel Lebègue, André Lévy-Lang, Guillaume Sarkozy (as representative of Médéric Prévoyance), Jean-Claude Seys and Daniel Valot.
The Committee is responsible for highlighting the main risks to which the Group is exposed, regarding both assets and liabilities and for ensuring that the means put in place to monitor and manage those risks have been effectively implemented. It examines the Group’s risks and the Group’s ‘Enterprise Risk Management’ (ERM) policy. The Committee met five times in 2009, primarily to discuss the following matters: analysis of the main exposures of the Group (in particular pandemia), risk appetite, retrocession policy and coverage, solvency and contemplated Solvency II, internal model of assets and liabilities and capital allocation management, standards and guidelines for assets management, internal control and Directors’ and Officers’ liability insurance.
During its meeting held on 2 November 2009, the Committee adopted a new chart providing for its missions and its functioning.
For 2008, the variable compensation of the Chairman and Chief Executive Officer has been determined according to the following criteria: personal criteria: reinforcement of the ERM and finalisation of the internal model ; implementation of the new Group’s organisation following the acquisitions of Revios and Converium ; prospective management of the executives and of the key employees ; implementation of the subsidiary dedicated to the asset management ; general management; financial criteria: Return on Equity (RoE) achieved by SCOR.
In the case of departure during financial year n: all the variable part of his compensation for year n-1 will be payable during year n as soon as the Company’s financial statements for year n-1 are settled by the Board of Directors; in addition, in the case of dismissal, the amount of the variable part of his compensation for year n will be (i) determined on the basis of the variable compensation for year n-1 and prorated on the basis of the departure date for the current year n, and (ii) paid as soon as the Company’s financial statements for year n-1 are settled by the Board of Directors.
In case of dismissal or imposed departure due to a change in the structure of the share capital or in the strategy, substantially affecting the content of his duties or making the continuation of his activities and the normal exercise of his powers of the Company, the Chairman and Chief Executive Officer: will receive an indemnity corresponding to the sum of all the fixed and variable elements of his annual gross compensation, paid by the Company during the two years prior to his departure. This severance pay is subject to the performance conditions adopted by the Board of Directors, under the recommendation of the Compensation and Nomination Committee. These performance conditions can be referred to in the Board of Director’s Management report; concerning the options granted prior to his leaving, within the stock options plans, and which he is unable to exercise according to these plans, he will benefit from an indemnity, compensating for this loss of the right to exercise the options, the amount of which will be determined by an independent expert using the Black & Scholes evaluation method, as at the date of his departure; will receive an indemnity, including the loss of the right to the shares, equal to the number of shares concerned by the average price of SCOR shares on his departure date, in connection with the shares that have been granted to him for free prior to his leaving but the rights of which have not been acquired yet.
On meeting on 16 March 2009, the Board of Directors, upon authorisation granted by the Extraordinary general meeting of the Shareholders on 7 May 2008, and upon the recommendation of the Compensation and Remuneration Committee of 11 March 2009, decided to allot 125,000 performance shares to the Chairman and Chief Executive Officer. The granting will be effective at the end of a vesting period of two years and subject to the satisfaction of performance conditions as defined by the Compensation and Nomination Committee. Such granting is also submitted to a nontransferability period of two years at the end of which the shares will be available and be freely assigned. The Chairman and Chief Executive Officer shall retain 10% of these shares in the registered form until he ceases to hold his duties of corporate officer. He shall also acquire on the market un number of shares equal to 5% of the shares freely assigned to him. An allotment of 125,000 shares subscription options to the benefit of the Chairman and Chief Executive Officer was decide by the same Board of Directors, upon authorisation granted by the Extraordinary general meeting of the Shareholders on 7 May 2008, and upon the recommendation of the Compensation and Remuneration Committee of 11 March 2009. The exercise of these subscription options is subject to the satisfaction of the same performance conditions as those of the performance shares.
Moreover, the Chairman and Chief Executive Officer receives benefits in kind, of the following nature:
(a) a health insurance policy under the terms of a contract dated 16 September 1988; (b) an “all causes” death or permanent disability insurance policy for Company Executives, dated 30 June 1993.
(c) death or permanent disability insurance for an accident, underwritten on 1 January 2006; it is specified that the
Like all the Group’s Executive officers based in France and employed by the Group as at 30 June 2008, the Chairman and Chief Executive Officer benefits from pension coverage capped at 50% of the reference salary, provided he has been with the Group for a minimum of five years. The rights to this pension are vested progressively, based on seniority over a period of 5 to 9 years, on the basis of the average compensation received over the last five years with the Group. The right to a supplementary pension is only acquired under the condition that the beneficiary is a corporate officer or an employee of the Company when he claims his rights for the pension, according to the rules in force at that time.
The modalities of the participation of the Shareholders to the General meetings and notably the main powers of the Shareholders’ General meetings, the description of the Shareholders’ rights as well as the modalities of the exercise of the voting rights are set forth by the Article 19 of the Company’s by-laws, an electronic version of which is available on SCOR’s web site (www.scor.com).
SCOR has integrated the internal control system in the actions made to strengthen the Enterprise Risk Management (ERM) framework in the Group. The internal control system is the responsibility of the Group’s General Management.
This report was prepared with the contribution of the Group Risk Management Department, the risk management departments of the operating companies, the Group Internal Audit Department, the General Secretary’s Department and the Finance Department. It was presented to the Accounting and Audit Committee on 1st March 2010 and approved by the Board of Directors of the Company on 2nd March 2010.
judgment are particularly high in a reinsurance company. In effect, the accounting data are subject to numerous estimates, primarily because of the evaluation by the reinsurer of claim reserves, either those not yet declared to the ceding companies or the reinsurer, or those for which development is uncertain or subject to a number of assumptions.
In particular: The Group Risk Management Department includes the Group Actuarial Department, the Group Retrocessions Department, the Group Risk Management Department, the Corporate Actuarial Department and the Group Financial Analysis & Risk Modelling (“Finmod”).
G R O U P I N T E R N A L A U D I T
The main tasks of the Group Risk Management Department are to further develop the Enterprise Risk Management (ERM) framework and to promote an ERM culture within the Group so that risks are managed consistently within each department. The Group Risk Management Department is supported in these tasks by the departments in charge of Risk Management at SCOR Global P&C, SCOR Global Life and SCOR Global Investments.
To this end, the Group Risk Management Department has defined a framework (“ERM framework”) which aims at structuring and promoting ERM within the Group and implementing a harmonised, formalised and structured internal control system according to Group standards. Experts, who report to the different Risk Management Departments are dedicated to the coordination of internal control initiatives within SCOR, SCOR Global P&C and SCOR Global Life and support the managers if necessary.
The approach used to develop the internal control system was adopted and is monitored by the Risk Committee. The principal characteristics of this approach are as follows: establishment of an Internal Control Group Policy specifying the approach, the reference framework, the Group principles, the responsibilities of the different participants in internal control and the quality requirements. Various application guides supplement this policy, appointment of global process owners (GPO) at the Group, SCOR Global P&C, SCOR Global Life and SCOR Global Investments levels and local process owners (LPO). The GPOs’ responsibility is to document the processes, identify the related critical risks, define the appropriate key controls and to ensure their deployment and application in the various entities of the Group. The LPOs’ main responsibilities are to review the processes and key controls defined by the GPOs and to comply with this documentation or justify to the GPO why they have to differ, monitoring, upon completion of the initial documentation through (a) a self-assessment procedure on the maturity (quality) of their processes and controls by the GPOs and LPOs and (b) periodic missions of the Group Internal Audit Department. An insufficient level of maturity requires an action plan to be established.
Compliance to local regulations and constraints is ensured by hub compliance officers.
This approach was deployed first during 2009 on the processes assessed as highly critical. It is being rolled out on the processes deemed critical.
To be in line with the ERM and internal control approach, SCOR has created Group standards or has revised existing local documents in order to create Group references.
The Information Charter, which describes the importance of information for SCOR’s Paris entities and establishes the framework for using information systems, has been revised to become a Group reference (“SCOR IT Policy”) and will be presented to the Executive Committee. It especially sets forth the applicable security measures and the legal considerations involved in using information technology resources. The other purposes of this Charter are to avoid misuse of professional and personal information and to guarantee compliance with the confidentiality of said information.
Furthermore operational risks are being identified, listed and assessed within each critical process.
All the above-mentioned initiatives and processes are coordinated by the Group Risk Management Department, supported by the Risk Officers of SCOR Global P&C and SCOR Global Life.
Monitoring of the internal control procedures falls under the remit of General Management which is supported by two departments: the Group Risk Management Department and the Group Internal Audit Department with the aim of optimising resources and having regular, formalised reporting of the state of documentation and structuring of internal control procedures. Furthermore, the Finance Department has developed the “management representation letters” process, detailed in part f) on financial reporting, which also incorporates certain points relative to internal control of accounting and financial reporting.
The Group Internal Audit Director reports his activity to the Accounting and Audit Committee of the Board of Directors of the Company.
(A) Concerning SCOR Global P&C: the calculation of technical reserves (including IBNR - Incurred But Not Reported) having a significant impact on the balance sheet and income statement, is largely based on contractual and accounting data, the relevance of which is verified upstream. This calculation of technical reserves inventories is subject to the following successive controls: by the actuaries in charge of reserving through control reports for which the proper implementation is verified by the Group Actuarial Department; by the Chief Actuary, particularly for methods, tools and results; (B) Concerning SCOR Global Life: the reinsurance treaties are either reviewed individually or are pooled within an affiliation treaty based on certain criteria defined in advance; the treaties are then subject to reserving estimates, which are reviewed at each quarterly closing either by the actuaries or at meetings attended by underwriters, technical assistants and actuaries.
In addition, and without calling into question the implementation of internal control rules by SCOR and its managers, General Management requests, within the framework of the reporting and quarterly consolidation procedure, that all local managers of Group entities, as well as Senior Managers of SCOR Global P&C and SCOR Global Life, make a specific quarterly statement to the Chairman and Chief Executive Officer, and to the Group Chief Financial Officer in the management representation letters as to the reliability and fair presentation of the accounts of the entities they manage and the effectiveness of the internal controls. The results are analysed and monitored by a committee including the General Secretary of SCOR, the Group Accounting Director and the Head of the IFRS Centre of Excellence. The key points are communicated to the Executive Committee.
It is the Chairman's responsibility to prepare and submit for the Board of Directors' approval a report on internal control and risk management procedures implemented by the company and to provide the other information required by article L. 225-37 of the French Commercial Code (code de commerce) relating to matters such as corporate governance.
Our role is to: report on any matters as to the information contained in the Chairman's report in respect of the internal control and risk management procedures relating to the preparation and processing of the accounting and financial information, confirm that the report also includes the other information required by article L. 225-37 of the French Commercial Code (code de commerce). It should be noted that our role is not to verify the fairness of this other information.
Measures taken to improve energy efficiency: Individual setting of heat pumps; Setting of central air conditioners; Consumption monitoring; Optimisation of energy resources through Technical Building Management; Replacement of standard bulbs with energy-saving bulbs upon each change; Replacement and modernisation of the building technical management system; Automatic and centralised management system of lighting and technical equipments; Consideration of energy consumption when replacing equipment; Replacement of one Air Treatment Plant with a cooling system previously running at R22 (HCFC) by HFC system.
Implementation of a network to detect leaks of water and hydrocarbon (fuel, oil); Installation of a retention basin to hold acids or chlorine used for the descaling of certain materials or the treatment of channels, in the local technical sub-soil; Installation of an oil retention basin in local electricity generation groups; Implementation of selective waste sorting (oils, wood, gravel, soiled barrels, food, paper); Cleaning service providers being asked to use “environment-friendly products” (consultation in process).
Objectives assigned by the Company to its foreign subsidiaries: The consumption of water resources, raw materials, and energy with any measures taken to improve energy efficiency and use of renewable energy, land use conditions, emissions into the air, water, and soil which significantly affect the environment and for which the list will be determined by order of the ministers responsible for the environment and industry, sound or odor nuisances, and waste; Measures taken to limit threats to the biological equilibrium, the natural environment, and protected animal and plant species; Evaluation or certification measures taken in environmental matters; All measures taken to ensure conformance of the company’s activities to applicable legislative and regulatory provisions; Expenses incurred to prevent the company’s activities having consequences on the environment; The existence within the company of internal environmental management services, training, and related employee information resources dedicated to reducing environmental risk, as well as the organisation to address pollution accidents with consequences beyond the company’s site.
ACTUARY Specialist who applies probability theory to Life and Non-Life insurance and reinsurance in order to measure risks and calculate premiums, as well as technical or mathematical reserves.
ASSUMED BUSINESS Transaction whereby a reinsurer agrees to cover part of a risk already underwritten or accepted by an insurer. The opposite of ceded business.
ATTACHMENT POINT The amount of losses above which an excess of loss reinsurance contract becomes operative.
C CASUALTY INSURANCE Insurance primarily concerned with the losses caused by injuries to third parties by the policyholder and the legal liability imposed on the insured resulting there from.
CESSION OR CEDED BUSINESS Transaction whereby an insurer (cedent or ceding company) either mandatorily or facultatively transfers part of its risk to the reinsurer against the payment of premium. The opposite of ceded business is assumed business.
CLAIMS AND CLAIMS EXPENSE Amount relating to actual or estimated claims made by an insured for an indemnity under an insurance contract for loss events that occurred in the accounting year.
CREDIT AND SURETY INSURANCE Credit insurance provides insurance coverage against loss to a supplier caused by customer failure to pay for goods or services supplied. Surety insurance relates to sureties and guarantees issued to third parties for the fulfilment of contractual liabilities.
DEFERRED ACQUISITION COSTS (DAC) Costs associated with the acquisition of new contracts, mainly commissions, are recorded as assets and amortised on the basis of the residual term of the contracts for Non Life business and on the basis of the recognition of future margins for Life contracts. DAC is subject to impairment resting conducted within the liability adequacy test.
DEPOSIT, FUNDS WITHHELD Amounts which may be deposited with the ceding company to guarantee the reinsurer’s liability. Income from securities deposited accrues to the reinsurer.
E EMBEDDED VALUE Frequently used measure of the value of expected future cash flows in life insurance and life reinsurance from the shareholder’s point of view, expressed as the value of net assets plus the present value of expected profits on the insurance portfolio less cost of capital and administrative expenses.
F FACULTATIVE REINSURANCE Reinsurance on an item-by-item or risk-by risk basis. Facultative reinsurance is usually written for very large-line risks. It may be either proportional or non proportional.
GROUP POLICY A single insurance policy that provides insurance coverage for several persons forming a homogeneous group, and generally belonging to the same company or association, against certain risks such as death, accident, sickness.
I IMPAIRMENT EXPENSE The write down which is recorded when the current fair value of the asset is less than its accounted book value.
L LEADING INSURER Primary insurer and first signatory of an insurance policy for co-insurance. The leading insurer defines the clauses and the conditions of the policy.
LOW OR WORKING LAYER EXCESS OF LOSS REINSURANCE Reinsurance that absorbs the losses immediately above the reinsured’s retention layer. A low layer excess of loss reinsurer will pay up to a certain monetary amount at which point a higher layer reinsurer or the ceding company will be liable for additional losses. Also known as working layer reinsurance.
MATHEMATICAL RESERVE Amount that a Life insurance or capitalisation company must set aside and capitalise in order to meet its commitments to the insured.
MORTALITY The relative incidence of death of Life insureds or annuitants holding a Life insurance policy.
NON-PROPORTIONAL (EXCESS OF LOSS) REINSURANCE Reinsurance contract written to protect the ceding company from all or part of claims in excess of a specified amount retained (priority). This generally takes the form of Excess of Loss (or XL) or excess of annual loss reinsurance.
NON-TRADITIONAL REINSURANCE Initially, this concerned a multi-year, multiline form of reinsurance whose contract terms included an aggregate limit of liability and loss sensitive features (e.g. profit sharing or additional premium). Currently, it also encompasses technical and investment accounts within a single cover, securitisation of insurance risks, credit derivatives, and climate derivatives.
P POLITICAL RISK All political or administrative events, actions or decisions that could lead to losses for companies contracting or investing abroad.
PREMIUMS EARNED Premiums an insurance company has recorded as revenues during a specific accounting period.
R RATE Scale showing the various premium rates applied to risks belonging to a given category of insurance (as in motor rates, fire rates).
REINSURANCE CONDITIONS All the clauses included in the reinsurance treaty. In economic terms, “reinsurance conditions” cover the rates established for the commission, the share in profits, the frequency of presentation of accounts and payment of interest on the deposits, or on the absence of deposits, which together determine the reinsurers’ probable profit margin.
REQUIRED INTERNAL RISK CAPITAL The amount of capital, calculated by the internal capital model, required to cover all of the Group’s known risk exposures. The amount is calculated with reference to a risk measure at a selected threshold (e.g. 99% Tail Value at Risk).
RETENTION Share of the risk retained by the insurer or reinsurer for its own account.
RETROCESSION Transaction in which the reinsurer transfers (or cedes) all or part of the risks it has assumed to another reinsurer, in return for payment of a premium.
S SCOR GLOBAL LIFE (SGL) AND SCOR GLOBAL LIFE SE SCOR Global Life refers to the operating segment recording all business underwritten by entities in the life operating segment. SCOR Global Life SE refers to the legal entity.
TECHNICAL RESULT The balance of income and expenses allocated to the insurance business and shown in the technical statement of income.
UNDERWRITING YEAR The year commencing with the effective date of a policy or with the renewal date of that policy, to be distinguished from the Accounting year. For example, a claim may occur during the current accounting year, but which relates to a policy commencing in a prior underwriting year.
UNEARNED PREMIUM RESERVES For each reinsurance contract, these cover the portion of premiums written during the year relating to the period between the balance sheet closing date and the date at which the reinsurance contract expires.
UNIT-LINKED CONTRACT Life insurance contract or capitalisation certificate for which the amount guaranteed and bonus amounts are expressed, not in a specific Euro amount, but by reference to one or more units of account such as mutual fund units or real estate investment trust units. Contractual guarantees are directly linked to upward or downward variations in a security listed on a regulated market or in the value of a real estate asset.
Therefore, the Registration Document’s sections referred to in the table of compliance set forth under Section 4 hereafter, are fully incorporated to this Report of which they are deemed to be an integral part. Statements and information relating: to the resolutions submitted to the Shareholders’ Meeting, pursuant to the provisions of Articles R.225-83, 4° of the French Commercial Code; to the 2009 stock-option plans and stock purchase plans; and to the 2009 free shares allocation plans, are presented in separate reports of the Board of Directors.
The total of financial assets of SCOR SE is EUR 4,188,596,791.
For additional information on the operating and financial situation of SCOR SE and its subsidiaries, as well as on their activities’ development in 2009, please refer to Section 9, Section 20 and Appendix A of the Registration Document.
None of the expenses referred to in paragraph 5 of Article 39 of the French General Tax Code is considered as nondeductible for tax income 2009.
OPERATING RESULTS OF SCOR SE DURING THE LAST FIVE FINANCIAL YEARS
d) Net Profit after taxes, depreciations and reserves. 57 68 28 (64) 199
III. - Profit and loss per share : b) Net Profit before taxes, depreciations and reserves. 0.06 0.07 0.19 (0.35) 1.08
IV. - Salaries : c) Amount of paid employees benefits (Healthy contribution, others benefits, etc.) (2). 13 7 6 11 13
3. SOCIAL CONSEQUENCES OF SCOR’S ACTIVITIES (Information pertaining to article R.225-104 of the French Commercial Code)
The following table presents the geographical and per entity distribution of the Group's employees (1): Distribution by geographical zone
In terms of contract types, the Group's personnel members in France are divided as follows: Key figures 2009
Total personnel on 31 December 519 249 Of which FTC 3 1 Temporary (in person/years) 2009 FTC 8.33 Training / work experience contracts 14.08 Trainees pursuant to agreements 16.58 3.3. Information concerning plans to reduce the number of employees and protect jobs, reclassification efforts, reemployment, and support measures
Moreover, in an effort to promote balance between professional and family life, as far back as 1991, the Group negotiated a company agreement on part-time work that would allow for various types of schedule arrangements. The fact of working part time must not result in any professional discrimination, notably in terms of compensation, training, advancement or professional development of the employees.
Training / work experience contracts 20 Trainees pursuant to agreements 47
(*) prorated for the presence time and including bonuses, individual incentives and collective incentives not saved.
Deferred compensation 2009 In EUR thousands Profit sharing (*) 3,003 Collective incentive (*) Gross employer matching contribution paid 480
Monthly average number 20.58 Average duration of the contracts (in days) 62.22 Payments to temporary work companies (in EUR thousands) 1,945
Key figures on 31 December 2009 Total Of which women Part-time employees 47 42 Employees using mobile scheduling 145 109 Average number of days of annual holidays 27.03 Average number of RWD days 15.89 Number of public holidays 13
Total Of which women Illness 1,910 1,513 Long-term illness 592 559 Workplace and commuting accidents 29 29 Maternity 1,852 Authorised leave 19 559 291 Total 4,942 4,244 Total in % of the personnel 3.86 Unpaid leave 629
Participation in elections 2009 Personnel Delegates executives panel - non-executives panel -
Works Council 2009 Operating budget (in EUR thousands) 4 Employee benefits (in EUR thousands) 403 Children's holidays (in EUR thousands) 110 Total (in EUR thousands) 517 Average per employee (in EUR) 986,6 3.6. List of agreements signed in 2009 in France
• Amendment to the agreement signed on June 21, 2004 for the purpose of integrating SCOR Global Investments SE into the UES SCOR, signed on May 29, 2009 3.7. Manner in which SCOR takes into account the territorial impact of its activities in terms of employment and regional development
Analysis of the Group business development, results and financial situation Sections 3, 9 and 20 2009 fiscal year’s important events for the Group and SCOR SE Section 5.1.5, 6 and
STATEMENTS DEALING WITH THE MANAGEMENT OFSCOR SE IN 2009 : Company’s securities - Amount of issued capital, capital increase and additional information Section 21.1.1 and
Board of Directors - Composition Section 14.1.1 - List of the other functions and offices held by the Board Members Section 14.1.1 - Delegation of competences / powers granted to the Board Section 21.1
2 The Company did not hold any cross shareholding in 2009. 3 To our knowledge, there is no element which could have an impact in the event of a tender offer. In this respect, the 2010-2011 stock buyback program submitted to the Shareholders’ Meeting convened to approve the financial statements of the financial year 2009 expressively excludes its use in the event of a tender offer, pursuant to applicable laws and regulations.