** In September 2014 and December 2015, SCOR issued two subordinated notes for EUR 250 million and EUR 600 million, respectively, with the intention to refinance through the proceeds of these two notes the optional redemptions of the outstanding balance of the 6.154% undated deeply subordinated EUR 350 million notes callable in July 2016 and of the 5.375% fixed to floating-rate undated subordinated CHF 650 million notes callable in August 2016. The proceeds of these notes were also meant to be used for general corporate purposes. Had these redemptions been effective on December 31, 2015, the leverage ratio would have amounted to 20.6%. These redemptions occurred on the expected dates.
The SBF TOP 80 index is made up of 80 French stocks which are the most traded on the continuous segments not included in the CAC 40 index. The SBF 120 index consists of the 120 most actively traded French stocks. The CAC Next 20 index includes the most representative stocks in terms of free float-adjusted capitalization and share turnover not included in the CAC 40 index. The CAC Large 60 index is composed of the constituents of the CAC 40 and CAC Next 20 indices. The CAC Large 60 Equal Weight is an equal weighted index that reflects the performance of the 60 largest and most actively traded shares listed on Euronext Paris. The CAC All-shares index is composed of all the stocks listed on Euronext Paris with an annual velocity ratio of over 5%. The CAC All Tradable index includes all the stocks of the Euronext Paris market with a free float of at least 20%. The CAC Financials index is composed of the stocks included in the CAC All Tradable index belonging to the financial sector. The Euronext FAS IAS index is composed of the stocks included in the CAC All Tradable index that fulfill the following conditions:
The Group’s subsidiaries, branches and offices are connected through a central network of applications and data exchange platforms, which allow local access to centralized risk analysis, underwriting or pricing databases and also gives access to information on local market conditions, to be shared among the Group’s subsidiaries, branches and offices. In addition, by regularly rotating personnel between the various locations of the Group, the Group encourages its underwriters, actuaries, modelers, claims experts and risk controllers to share and exchange experience across its various geographic markets and business lines.
◆ the Group to develop a global culture while keeping local specificities.
On September 6, 2018, SCOR was informed of the decision by Standard & Poor’s (S&P) to affirm the financial strength rating for the Group and its main subsidiaries at “AA-”, with a “stable outlook”, as in the previous year, and to maintain the counterparty credit ratings at “AA-/A-1+”.
◆ Political Risks: including single policy and Confiscation Expropriation Nationalization Deprivation (CEND).
In addition to the above, scientific risk management techniques are promoted, and knowledge shared, via the involvement in collective studies through the Geneva Association and the teaching of insurance and scientific risk management techniques in schools and universities (e.g. the 218 Master’s at Paris Dauphine, the Zurich ETH, the University Ca’Foscari in Venice Italy and the graduations, the masters and the Executive MBA supplied by the Ecole Nationale d’Assurance (ENASS) of the Paris Conservatoire National des Arts et Métiers (CNAM)).
The focus in 2018 was again on strengthening SCOR’s front office applications to improve risk selection, anticipation and reactivity in markets and products, and simulations of results. Several of projects have been launched in recent years which will continue through 2019 through division specific solutions fully integrated with the core back-office, OMEGA. Among these projects, to start with the P&C division, the ForePlan tool provides capability to build the underwriting plan and follow its execution. Non-Life pricing is closely managed using xAct, the global in-house standard P&C treaty pricing tool, which uses standardized models, and profitability analysis, to provide full visibility of proportional and non-proportional business. The underwriting and pricing process of large industrial or specialty risks is now supported by new in-house solutions like ForeWriter and specific modules in different expertise fields such as space, agriculture, cybersecurity… Control of exposure to natural catastrophes and pricing is under improvement through the development of the SCOR Cat Platform which monitors all liabilities and accumulations through use and calibration or the model combination deemed as most efficient. A first version of a platform to monitor the MGA book of business in the US through automatic underwriting controls has been rolled-out. Its development continues in 2019. Norma, the P&C internal model, combines the risk assessment produced by these front-office tools to produce an overall P&C risk measure. Life Division has developed an IT roadmap which aims at preparing SCOR Global Life for the future by increasing its competitiveness, providing high level of service to clients, complying with all regulatory requirements (ie. IFRS 17, GDPR) and increasing the understanding of Life business. Other front-office solutions have been developed for SCOR Global Life to harmonize and further enhance the underwriting of substandard risks and develop tele-underwriting in different countries. The introduction of Artificial Intelligence completes these solutions. Underwriting solutions like Velogica are proposed to SCOR’s Life clients,
In the asset management area, SCOR Investment Partners is now equipped with a global front-office solution, Bloomberg AIM, reinforcing the real-time monitoring of all investments. The record keeping of the portfolio managed by SCOR Global Investment and the investment accounting are managed through an integrated platform, Simcorp Dimension. A global Treasury management platform, Trace, has been rolled out in all European sites, before the finalization of the worldwide deployment in 2019. All this asset management information is now available through global analytical platforms powered by strong market solutions: Markit EDM and SAP Hana.
On September 4, 2018, SCOR acknowledged Covéa’s decision to withdraw its proposal on a potential combination with SCOR, as announced by Covéa in its press release of the same day.
With effect from January 1, 2019, SCOR Europe SE, a 100%owned subsidiary of SCOR SE, will underwrite all new and renewed business relating to risks located in the EEA that can no longer be accepted by SCOR UK Company Ltd. after the Brexit date. SCOR Europe SE will also take over all commitments from policies previously issued by SCOR UK Company Ltd. if the latter can no longer honor these following Brexit, the terms of which remain uncertain at this stage.
The Protection business accounts for 75% of total gross written premiums in 2018 and remains the main driver for premium growth (5.7% growth in gross written premiums in 2018 at constant exchange rates(2)). SCOR Global Life has maintained its leadership in the US Life reinsurance market(3), the largest life reinsurance market in the world. In the EMEA region, SCOR Global Life reinforced its franchises in key European markets such as France (including acquired business of MutRé SA), the UK, and Nordic countries.
Through its Global Distribution Solutions (GDS), SCOR Global Life has successfully deployed a number of innovative and tailored client services which aim to help insurers expand and develop their own client bases (ReMark, Velogica and SCOR Telemed). SCOR Global Life has leadership positions in many markets in the EMEA and Asia-Pacific regions.
On December 15, 2016, SCOR arranged a contingent capital facility with BNP Paribas. Under this EUR 300 million arrangement, SCOR raised its level of protection by EUR 100 million. On June 29, 2018 BNP Paribas transferred all the warrants to UBS in agreement with SCOR. UBS has thus fully substituted BNP Paribas in relation to all the rights and obligations arising from the contingent capital facility. For more information on contingent capital, see Section 4.6 – Notes to the consolidated financial statements, Note 12 – Information on share capital, capital management, regulatory framework and consolidated reserves.
For information on the Group’s solvency scale, refer to Section 1.3.7 – Solvency and Section 4.6 – Notes to the consolidated financial statements, Note 12 – Information on share capital, capital management, regulatory framework and consolidated reserves.
The total amount of subordinated debt increased to EUR 2,277 million from EUR 2,211 million in 2017 (2016: EUR 2,256 million).
◆ Deputy Chief Executive Officer and Permanent representative of BPCE, director of CE Holding Participations (France)
◆ Permanent representative of BPCE, member of the Supervisory Board of FLCP (France)
◆ Chairman of the Board of Directors of Generali France Assurances (France)
◆ Chairman of the Board of Directors of Generali France (France)
Date of first appointment: April 26, 2018 Expiration of term: 2020
Chinese – Age: 62 – SCOR SE, 5, avenue Kléber, 75116 Paris, France
American and British – Age: 60 – Leaders’ Quest Ltd, 11/13 Worple Way, Richmond Upon Thames, Surrey – TW 10 6DG, United Kingdom
◆ Member of the Corporate Social and Societal Responsibility and Environmental Sustainability Committee
The mandates of four of the twelve directors on the Board will expire at the end of the Annual General Meeting which will be held in 2019.
He can contact shareholders or answer their questions, on behalf of the Board of Directors, on corporate governance topics. These meetings or contacts will be conducted in close coordination with the Chairman and Chief Executive Officer or his staff in charge of investor relations. He shall report to the Board of Directors on this mission.
Except the employee director, and Claude Tendil, the other members are independent.
The Committee mainly discussed the following matters: ◆ compensation matters: updating of the Group compensation policy, share and stock option allocation plans, compensation of the Chairman and Chief Executive Officer and of the other members of the Executive Committee, severance indemnities, review of the “say on pay”, HR review and outlook and directors’ fees for the directors; ◆ governance matters: renewal of the Board of Directors of SCOR SE, annual review of the independence, fitness and properness of the directors and of the persons effectively running SCOR SE, review of the succession plan of the key executives of the Group, assessment of the Board and its Committees, review of the composition of the specialized Committees of the Board of Directors, review of the cost of the governance within the Group in 2017 and review of the Board Internal Charter.
*** Member of the Compensation and Nomination Committee from April 26, 2018.
The Crisis Management Committee is composed of Augustin de Romanet (Chairman), Denis Kessler, Bruno Pfister, Kory Sorenson and Fields Wicker-Miurin.
Benefits of any kind EUR 5,277 In addition to the deferred amount, an amount of EUR 107,182 was paid by the Company in 2018 with regard to social security schemes and individual health coverage
Solvency ratio equal to or higher than the lower limit of the optimal range defined in the strategic plan (185%)
Ensure a high level of protection for the Group against cyber risk Develop a cyber risk coverage offer
(2) Directors appointed by the Shareholders’ Meeting on April 26, 2018 or director whose term of office began at the end of the Shareholders” Meeting on April 26, 2018.
(Alleghany, Arch Capital Group, Axis Capital Holdings, Everest Re, Great West Lifeco, Hannover Re, Munich Re, Reinsurance Group of America, Swiss Re, Validus Holdings and XL Group).
Each year, the Board of Directors examines, and then validates, the number, nature and weight of the personal objectives.
In addition, notwithstanding the total or partial achievement of the performance conditions described above, the definitive acquisition of the shares and the right to exercise all or some options would be subject, in any event, to the fulfilment of the corporate social responsibility (CSR) training obligation.
Moreover, in the cases referred to in paragraphs (ii) and (iii) above, and excluding the case referred to in paragraph (i), the rights to the performance shares and options that would have been granted to him before his departure would be maintained by remaining subject, in their entirety, to the performance conditions of each of the plans as approved by the Board of Directors at the time of the award.
Those options can be exercised at the earliest four years after the grant date, if the presence condition (four years) is respected. The exercise price is calculated without a discount, based on the weighted average opening price of SCOR’s shares on Euronext Paris over the 20 trading days preceding the grant date. The stock options can be exercised on one or more occasions from the beginning of the exercise period on March 9, 2022 until March 8, 2028 inclusive. After this date, the purchase right shall expire.
Aside from the mandatory conditions (1), if the observed average solvency ratio (condition (2)) is lower than the Target Solvency Ratio, the options will vest in accordance with the sliding scale set out in the table below: Difference between the average solvency ratio and the Target Solvency Ratio Proportion of the options that can be exercised via this criterion
The validation of performance conditions has been performed for no plan in 2018.
Moreover, the Shareholders’ Meeting also decided that (i) the total number of free shares granted under the conditions and, if applicable, subject to the fulfillment of the performance conditions set by the Board of Directors further to a proposal from the Compensation and Nomination Committee, pursuant to this authorization may not exceed 3,000,000 shares (ii) the allocation of shares to their beneficiaries will be definitive only after a vesting period of a minimum set at three years (iii) the beneficiaries will no longer be subject to an obligation to hold the shares, that the Shareholders’ meeting decided to delete.
In accordance with the authorization given by the Extraordinary Shareholders’ Meeting on April 26, 2018, the Company’s Board of Directors’ meeting of October 23, 2018, on the proposal of the Compensation and Nomination Committee meeting of October 23, 2018, decided to grant on the December 23, 2018 free shares to all employees of the Group.
Following the Company’s Board of Directors’ meeting of October 23, 2018, 29,954 performance shares were awarded on December 22, 2018 to French tax residents Partners and specific Non Partners employees of the Group (39 employees) in a qualified Long Term Incentive Plan (LTIP).
Difference between the average Solvency Ratio over over 2015 – 2017 and the average Target Solvency Ratio +31 bps 100%
(1) These shares are allocated under non-qualified plans. (2) The acquisition of these shares is subject to performance conditions. The performance shares granted before the Extraordinary Shareholders’ Meeting of December 18, 2015 are subject, for half of the grant or all of the grant, depending on the employee’s level within the organization, to performance conditions relating to the solvency ratio, the net combined ratio of SCOR SE, the technical margin of SCOR Global life and the ROE. Since the Extraordinary Shareholders’ Meeting of December 18, 2015, the performance conditions relate to the ROE and the Solvency Ratio. All the performance shares granted since 2011 as part of LTIP plans are subject to ROE and Solvency ratio performance conditions. The performance conditions are assessed after a two-year vesting period for performance shares granted before the Extraordinary Shareholders’ Meeting of December 18, 2015, after a three-year vesting period for performance shares granted as of the Extraordinary Shareholders’ Meeting of December 18, 2015, and after a six-year vesting period for all LTIP performance shares.
As at the date of the Registration Document, the Company’s Board of Directors has not exercised this delegation of authority. This authorization was granted for a period of 18 months as from the date of the Ordinary and Extraordinary Shareholders’ Meeting of April 26, 2018.
Exercise of stock options for a total amount of EUR 1,278,696 Sale of shares resulting from the exercise of stock options for a total amount of EUR 2,928,156 Sale of shares for a total amount of EUR 1,677,465.27 Acquisition of shares for a total amount of EUR 2,004,000
This resolution is intended to authorize a new share repurchase program under the following conditions: This authorization would allow the Board of Directors, with the option to sub-delegate under the conditions provided for by applicable regulation, to buy, sell and transfer Company shares pursuant, inter alia, to the provisions of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of April 16, 2014, Articles L. 225-209 et seq. of the French Commercial Code and to the General Regulation (Règlement général) of the French Financial Markets Authority (Autorité des marchés financiers).
We performed those procedures which we considered necessary to comply with professional guidance issued by the national auditing body (Compagnie nationale des commissaires aux comptes) relating to this type of engagement. These procedures consisted in verifying that the information provided to us is consistent with the documentation from which it has been extracted.
The purpose of this plan is to define the conditions of application of the supplementary retirement plan put in place by the Company for the benefit of: ◆ all the managers, within the meaning of the professional agreement of March 3, 1993, who worked in the Group on the day the plan came into effect; ◆ executives of the Group who do not hold a contract of employment who, under their mandate, are covered by the general social security system ARRCO and AGIRC supplementary pension plans, who are employed by the Company on the day of the effective date of this plan.
REPORT ON CORPORATE GOVERNANCE Audit report on the corporate governance report 02 2.4. AUDIT REPORT ON THE CORPORATE GOVERNANCE REPORT
3.2. STRATEGIC RISKS 133 3.2.1. Risks related to the macroeconomic environment affecting SCOR’s strategy 133 3.2.2. Risks related to legal and regulatory developments 134 3.2.3. The valuation of SCOR’s intangible assets and deferred tax assets may significantly affect its shareholders’ equity and the price of its securities 135 3.2.4. Risks related to the competitive environment 136 3.2.5. Downgrade risk 137 3.2.6. Other strategic risks 138 3.3. UNDERWRITING RISKS RELATED TO THE P&C AND LIFE REINSURANCE BUSINESSES 140 3.3.2. Life reinsurance 144 3.3.3. interdependence and accumulation risks between SCOR’S Areas of Business 146 3.3.4. Risks related to reserves 147 3.3.5. Retrocession and other risk mitigation techniques 149 3.4. MARKET RISKS 150 3.4.1. Overview of market risks 150 3.4.2. Management of market risks 151 3.4.3. Sensitivity to market risks 152 3.5. CREDIT RISKS 154 3.5.1. Overview of credit risks 154 3.5.2. Management of credit risks 155 3.6. LIQUIDITY RISKS 157 3.6.1. Overview of liquidity risks 157 3.6.2. Management of liquidity risks 158 3.6.3. Maturity profiles 158 3.6.4. Financial liabilities 159 3.7. OPERATIONAL RISKS 160 3.7.1. Overview of operational risks 160 3.7.2. Management of operational risks 162 3.8. INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES 162
Although risk management mechanisms have been designed and rolled out across the Group in order to prevent all risks from having a significant impact, there is no guarantee that these mechanisms achieve their intended objective. Many of SCOR’s methods for managing risks and exposures are based on observed historical market behavior, statistics based on historical models, or expert judgment. As a result, these methods may not fully predict future exposures, which may be significantly greater than estimated, particularly in unstable or volatile markets and environments. Other risk management methods depend upon the evaluation of information regarding markets, clients, natural catastrophes or other matters that is publicly available or otherwise accessible to SCOR. This information may not always be accurate, complete, up to-date or properly evaluated.
SCOR has a large investment portfolio. In the event of extreme prolonged market events, such as global credit crises, SCOR could incur significant losses in its investment portfolio.
The International Association of Insurance Supervisors (IAIS) is developing a new approach to evaluating and mitigating systemic risk in the insurance sector and SCOR may be impacted by the revised systemic risk framework scheduled to become effective in 2020. This revised systemic risk framework could result in a higher capital requirement, a Higher Loss Absorbency (HLA) and greater regulatory burdens such as the establishment of resolution plans.
Consequently, the Group’s reinsurance activities are sensitive to the way its existing and prospective clients perceive its financial strength, notably through its ratings.
SCOR mitigates its underwriting risks related to the P&C and Life reinsurance businesses through the purchase of riskmitigation covers, both on the traditional retrocession market and on the capital markets via alternative risk transfer solutions
In particular, SCOR is exposed to single or multiple terrorist attacks through some P&C treaties and national terrorism pools. Terrorism exposures are monitored on a worldwide basis as a fully integrated part of the Underwriting Management Framework. Underwriting guidelines stipulate the rules and procedures for terrorism risk for Reinsurance and Specialty Insurance. SCOR monitors this risk using a very conservative approach.
SCOR is engaged in the development of advanced liability catastrophe analytics, and data mining and modeling techniques for improving its prediction capabilities for man-made casualty event losses.
SCOR’s long term mortality reserves are based on a number of assumptions and information provided by third parties, which, if incorrect and/or incomplete, could have an adverse effect on the Group. For further information on risks related to reserves, see Section 3.3.4 – Risks related to reserves.
◆ choose and exercise a policy option which increases the policyholder’s expected benefit.
◆ The Life division’s Risk Management Department organizes quarterly meetings of the Life Risk Committee which is responsible for reviewing the main risks to which the division is exposed.
This analysis is performed by the Life division’s reserving actuaries and reviewed by the Group Actuarial Department which also performs its own full analysis. These analyses are recorded in an annual actuarial report; ◆ regular external reviews of the Life division’s reserves adequacy are performed including those required by local regulators.
Rental income from the property portfolio is exposed to the variation in the indices on which the rents are indexed (for instance, the Construction Cost Index in France) as well as risks related to the rental market (changes in supply and demand, changes in vacancy rates, impact on market rental values or rent renewals) and lessee default. On the other hand, the indexation may provide an attractive hedge against inflation.
Assets have been categorized within the above aging analysis according to their original due date. The due date for each of these instruments may vary depending on the type of asset. insurance and reinsurance receivables business credit terms are typically based on normal terms of trade, as specified within contracts. Insurance and reinsurance receivables include estimates, which are presented as current. The available-for-sale investments and fair value through income categories presented above include fixed income securities and equity securities. For fixed income securities, amounts are only presented as non-current if the security has not been redeemed on the date of maturity and therefore the amount receivable is past due. For equity securities, due to the absence of a contractual date of redemption, these instruments are presented as current. Other assets presented in the above aging analysis, including derivative instruments, loans and receivables, cash and cash equivalents and other accounts receivable, are presented in a similar manner as those instruments described above, depending on the existence of a redemption date.
The table below reflects gross cash outflows: Life insurance contract liabilities In EUR millions < 1 year 1-5 years 6-10 years > 10 years Total
◆◆ The consolidated financial statements as at December 31, 2016 are included from pages 143 to 222 and the Statutory Auditors’
The consolidated financial statements for the year ended December 31, 2018 are presented below: 4.1. CONSOLIDATED BALANCE SHEET
Cash and cash equivalents at January 1 Note 11 1,001 1,688 1,626
Allocation of prior year net income - - - 286 - (286) - - -
Net income for the year ended December 31, 2016 - - - - - 603 - 3 606
Revaluation – Assets available for sale - - (25) - - - - - (25)
NOTE 26. SUBSEQUENT EVENTS 247 4.6. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On November 14, 2018, the IASB voted to propose a one-year deferral of the effective date for IFRS 17 to January 1, 2022. The IASB also decided to propose extending to 2022 the temporary exemption for insurers to apply IFRS 9, so that both IFRS 9 and IFRS 17 can be applied at the same time. This proposal is yet to be included in the respective IFRS and to be endorsed by the EU.
The following table presents information about the credit risk exposure related to financial assets that meet the SPPI criteria: In EUR millions
The identifiable assets acquired and liabilities assumed have been recorded at their fair values for purposes of the opening balance sheet and included in the consolidated accounts of SCOR using the Group’s accounting principles in accordance with IFRS during the first quarter of 2018. The net assets amounted to BRL 63.8 million (EUR 16.2 million, based on the EUR/BRL exchange rate at the acquisition date).
The distribution of gross written premiums by geographic region for SCOR Global Life, based on market responsibility, is as follows: In EUR millions 2018 2017 2016
(1) Relates to Château Mondot (See Note 3 – Acquisitions and disposals).
In order to estimate the fair value of SCOR Global P&C for the purpose of impairment testing, SCOR uses a discounted cash flow model comprised of an earnings model, which considers forecasted earnings and other financial ratios for the reportable segment over a five-year period. The first year is based on the assumptions from the Vision in Action strategic plan and the last four years are extrapolated using a conservative approach based on past experience. Business plans include assessments of gross and net premium expectations, expected loss ratios and expected expense ratios together with actuarial assumptions such as the coefficient of changes in ultimate net reserves together with assumptions as to the mean time to payment of existing reserves and future business. Future cash flows beyond this period are extrapolated using a growth rate of 5.5%. SCOR uses risk-free interest rates for each currency as well as the Group’s estimated cost of capital of 6.19%, as derived from the Capital Asset Pricing Model (CAPM).
The loans and receivables category includes funds held by ceding companies as collateral for underwriting commitments measured at cost. Non-derivative financial assets, where payment is fixed or determinable and which are not listed on an active market, are also included within this category and are recognized at amortized cost using the effective interest rate method. Loans and receivables include shortterm deposits or investments with a maturity of more than three months but less than twelve months at the date of purchase or deposit. Loans and receivables include a provision for recoverability if deemed necessary.
In 2016, the movements were due to the following operations: ◆ the Board of Directors’ meeting held on April 27, 2016 decided to reduce the Group’s share capital by cancellation of 672,638 treasury shares for EUR 16 million (EUR 5 million in share capital and EUR 11 million in additional paid-in capital); ◆ the issuance of new shares relates to the exercise of stock options for EUR 10 million (EUR 4 million in share capital and EUR 6 million in additional paid-in capital). This resulted in the creation of 554,112 new shares throughout the year.
The Groups’ capital management objectives are to: ◆ match the profile of its assets and liabilities, taking into account the risks inherent to the business; ◆ maintain strong credit ratings and healthy capital ratios in order to support its business objectives and maximize shareholder value; ◆ ensure a high degree of capital fungibility; ◆ retain financial flexibility by maintaining strong liquidity and access to a range of capital markets; ◆ allocate capital efficiently and support the development of business by ensuring returns on capital employed meet the requirements of regulators and shareholders; and
On June 5, 2015, SCOR issued in EUR 250 million dated subordinated notes on the Luxembourg Euro market, redeemable by SCOR at each interest payment date, from June 5, 2027. The coupon has been set at 3.25% (until June 5, 2027, the first call date), and resets every 10 years at the prevailing 10-year EUR mid-swap rate +3.20% (until June 5, 2047, final redemption date).
In determining the amount of its reserves, the Group uses actuarial techniques that take into account quantitative loss experience data, together with qualitative factors, where appropriate. The reserves are also adjusted to reflect the volume of business underwritten, reinsurance treaty terms and conditions, and diversity in claims processing that may potentially affect the Group’s commitment over time.
Change in reserves from portfolio movements and actuarial calculation (675) 344
A reconciliation of the income tax expense, obtained by applying the French tax rate of 34.43% for 2018, 44.43% for 2017 and 34.43% for 2016 to income (loss) before corporate income taxes and excluding share in results of associates, to the actual corporate income tax expense recorded in the consolidated statement of income is presented in the table below. The effective tax rate in 2018 is 34.7% (2017: 16.3% and 2016: 21.7%).
In 2017 the French corporate income tax rate was 44.43%. This followed the enactment of two additional contributions to the French corporate income tax for companies with revenues exceeding EUR 3 billion (these contributions which were applicable to 2017 only were aimed at financing the refund of the 3% dividend tax which had been censored by the French Constitutional Council). The 2017 financials recorded the impact of the decrease in the French corporate income tax rate which was a loss of EUR 19 million for 2017 through profit and loss (decrease in the measurement of the net DTA).
Change in ceded unearned premiums reserves - 35 35 - 8 8 (2) (12) (14)
Net income attributable to ordinary shareholders 322 187,341 1.72 286 186,532 1.53 603 185,022 3.26
Refer to Note 26 – Subsequent events, for a description of legal actions initiated by SCOR against Thierry Derez, Covéa SGAM, Covéa Coopérations, Barclays and Rothschild in connection with an unsolicited proposed combination with SCOR.
In compliance with the engagement entrusted to us by your Annual General Meeting, we have audited the accompanying consolidated financial statements of SCOR SE for the year ended December 31, 2018.
Deferred tax assets on tax losses carried forward An asset of EUR 438 million related to tax losses carried forward is recognized in the balance sheet of the Group at financial year ended 2018. Deferred tax assets are recognized on net operating losses carried forward to the extent that it is probable that future taxable income will be available against which they can be offset. As stated in note 17 of the notes to consolidated financial statements, management makes assumptions and estimates related to income projections to determine the availability of sufficient future taxable income. To the extent that net operating losses carried forward could not be utilized or would expire, deferred income tax expenses may be recorded in the future to reduce corresponding deferred tax assets. We consider deferred assets on losses carried forward to be a key audit matter, given the Management’s judgement related to their recognition in the balance sheet.
As part of an audit conducted in accordance with professional standards applicable in France, the auditor exercises professional judgment throughout the audit and furthermore: ◆ identifies and assesses the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for the audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
◆ The General Secretariat contributes to the management of the following functions: — legal and functional governance of the Group, — compliance, with the Group Chief Compliance Officer reporting to the General Secretariat (special attention is given to anti-trust/competition law, anti-money laundering and terrorism financing, sanctions and embargoes, antibribery, anti-fraud, data protection and privacy, insider trading and conflicts of interest),
— management of the regulatory supervision of the Group and coordination at legal entity level with the relevant legal departments,
The primary investment objective of SCOR is to generate recurring investment income in accordance with the risk appetite framework of the Group, and to ensure that the Group: ◆ is able to meet its claims and expense payment obligations at all times; and
The recognition and measurement of underwriting reserves (in particular mathematical reserves) and related intangible assets including deferred acquisition costs are based on contractual and settlement data and subject to the following controls: ◆ 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, Executive Management requests, within the framework of the reporting and quarterly consolidation procedure, that all local managers of
SCOR SE has increased its capital into SCOR US Corporation by USD 500 million (EUR 425 million) through a contribution in kind by transferring its USD 250 million (EUR 221 million) surplus notes with SCOR Reinsurance Company to SCOR US Corporation and a capital injection of USD 250 million (EUR 204 million).
Internal and external investment management expenses and interest expenses (22) (15)
This caption includes the various subordinated or unsubordinated notes issued by the Company as described in 5.2.4.
At December 31, 2018, provisions against such investments can be analyzed as follows: ◆ SGF SAS: EUR 3 million in 2018 (EUR 3 million in 2017); ◆ ASEFA: EUR 0 million in 2018 (EUR 1 million in 2017).
As at December 31, 2018, the number of shares held as treasury shares amounted to 9,137,286 shares (4.73% of capital) for a total value of EUR 337,921,306. These shares were acquired in the context of anticipated awards to Company employees and corporate officers as part of share allocation plans and under its share buy-back program launched in July 2017 and completed in December 2018.
◆ Loans granted to SCOR SE by its subsidiaries EUR 46 million. Their breakdown as of December 31, 2018 is as follows: — EUR 32.5 million with SCOR Auber SAS; — EUR 9.9 million with SCOR Investment Partners SE; — EUR 3.4 million with SGF SAS.
The Total pension benefits commitments relating to the corporate officer amount is EUR 22 million.
The technical reserves of your company amount to EUR 2 million for Life reinsurance and EUR 3,011 million for Non-Life reinsurance as at December 31, 2018. As stated in Note 5.2.7 of the notes to the corporate financial statements, the technical activity of your company is primarily related to internal retrocession treaties implemented as part of the Group dedicated program. The technical reserves of your company are therefore predominantly a reflection of technical reserves in accordance with reinsured contracts. These reserves are estimated based on the methodology described below. As explained in Note 5.1.8 of the notes to the corporate financial statements, the Non-Life technical reserves are determined at year-end at a level that covers the estimated amount of its commitments as well as estimated claims management costs for both reported and unreported claims. Ultimate claims cost for a contract is estimated based on statistical experience for similar policies. Technical reserves for Life reinsurance are submitted by ceding companies and completed by estimates calculated by Life actuaries using statistics based on historical data and information provided by underwriters. The Company is required to have adequate reserves to cover its commitments after consideration of estimated investment returns, mortality, morbidity and lapse rates, and other assumptions. These estimates include significant uncertainties and require a significant degree of judgement from management. In this context, we considered the measurement of technical reserves as a key audit matter.
SCOR’s Human Resources policy is based on unifying values that reflect its commitment to its clients, to the employees themselves and to the shareholders. Alongside financial capital, human capital is an essential resource for the Group. Financial capital ensures solvency, while human capital ensures profitability. In this sense, one of SCOR’s strategic objective resides in its ability to attract, mobilize and retain the talented people to achieve excellence in terms of expertise. Inadequate remuneration policy, lack of initiatives to develop employees skills, or insufficient consideration for diversity may contribute to an operational risk of lack of key people attraction and retention (see Section Risk factors – operational risks). In this respect, the Group’s human capital management strives to retain women and men working in the Group, particularly through a fair remuneration policy based on meritocracy, and through structuring actions designed to develop employees skills and promote diversity.
2018 achievements: ◆ Implementation of non-discriminatory measures for older employees are applied in certain locations, especially in Paris where an agreement on employees non-discrimination and equal treatment was renewed for the 2017-2019 period, recruitment and job retention, career planning, skills management for older employees.
◆ Participation in the “Officiel du Handicap” event (a unique national initiative gathering high level public authorities, companies and associations) organized by “Mission Handicap” (a French organization promoting the employment for the employees with disabilities).
◆ In 2018, on average, approximately 17 hours of training were given per employee(1)(2).
◆ As a Societas Europaea, SCOR has set up a European Committee covering all of its European subsidiaries and branches including the one located in Switzerland, corresponding to almost 60% of worldwide workforce. The SCOR Common European Companies Committee is made up of employee representatives from all of SCOR’s European subsidiaries, who meet to exchange information concerning the Group, and to maintain an on-going dialogue between employees and management.
SCOR maintains multiple guidelines and policies that relate to or impact some aspects of data privacy and/or protection: ◆ Group Data Protection Guideline, which aims at establishing a common minimum standard to be applied by SCOR for processing Personal Data; ◆ Group Data Breach Response Guideline, which aims at helping staff identify a data breach, have them take the appropriate escalation path and company response; ◆ Group Information Security Policy, which aims at setting SCOR’s commitment on IT security and defining the IT security governance.
On their own scale, the Group’s operational divisions contribute to the development of climate change adaptation and mitigation solutions in their respective core activities.
SCOR also joined the Philippine program for covering typhoons and earthquakes in 2018. The program includes covering national and local government assets, such as public primary and secondary schools.
The focus is put on greenhouse gas emissions for which the Group has reiterated its objective of intensity reduction by 2020 in the French Business Climate Pledge issued in November 2017. Launched in 2017, a pilot program regarding carbon offsetting supplements was renewed and enhanced in 2018.
SCOR conducts its operations from office buildings of varying size that it either owns or rents in thirty countries.
The Group consumed more than 18 GWhs in 2018 to operate the premises occupied by its staff (lighting, heating, cooling – including data centers – and power for operating various equipment). Most of the energy consumed by the Group’s sites that were encompassed in the scope of the environmental survey comes from electricity (68%). The share of renewable now accounts for 67% of electricity purchases compared with 31% in 2015.
Correspondance table Business model description Section 1.1. Brief description of the Group’s business activities
Lastly, sites surveyed include other tenants’ energy and water consumption and to a lesser extent waste production. Therefore, the environmental impact of the Group is overestimated. Other tenants’ employees hosted by these sites account for 12.8% of the employees of the legal entities fully consolidated in the financial statements.
The Declaration was established in accordance with the protocols used by SCOR (hereinafter the “Guidelines”), which its significant elements are presented in the Declaration (and available on request at the Company head office.
On the basis of our work, our responsibility is to formulate a limited assurance on: ◆ the compliance of the Declaration with the provisions of article R. 225-105 of the Commercial Code; ◆ the reliability of the information provided in accordance with the 3° of the I and of the II of article R. 225-105 of the Commercial Code, that is the results of the policies, including the key performance indicators, and the actions, related to the main risks, hereinafter the “Information”.
(1) Social information: Headcount at December 31; Turnover; Total compensation; Average fixed remuneration; Average bonus; Number of meetings with staff representatives; Number of European Committee meetings; Number of collective agreements signed; Number of collective agreements signed regarding health and safety at work; Number of training hours. Environmental information: Volume of sorted and recycled paper waste; Energy consumption; Greenhouse gas emissions related to operationnal processes; CO2 emission/employee.
Procedure whereby an insurance company in turn insures itself with an outside company (the reinsurer) for part or all of the risks it covers, in return for payment of a premium.
Consistently defines the four following concepts: SCOR’s risk appetite, SCOR’s risk preference, SCOR’s risk tolerance and “footprint” scenario.
III. Profit and loss per share: a) Net profit after taxes, and before depreciations and reserves 2.71 0.05 2.87 4.16 1.92 b) Net profit after taxes, depreciations and reserves 2.59 (0.02) 3.36 4.38 2.01
IV. Salaries: c) Amount of paid employees benefits (Healthy contribution, others benefits, etc.) 34 33 29 27 26
The following table presents the volume of transactions and trends in the SCOR SE share price on the Euronext Paris stock market throughout the financial year 2018: Month Volume Value
Table of the Company’s results in the course of the five last financial years Appendix F – 1.2.1
◆ Adjustment of the conversion basis for securities granting access to the share capital Section 2.3.1.6
Powers of the Board in particular with respect to the issuance or the redemption of shares Sections 2.3.1.6,5.1.3 and 5.1.2