6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
October
6, 2006
SCOR
(Exact name of Registrant as specified in its chapter)
1, Avenue du Général de Gaulle
92074 Paris La Défense Cedex, France
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover
Form 20-F or Form 40-F.
Form 20-F þ Form 40-F o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes o No þ
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b): Not Applicable.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated:
October 6, 2006
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SCOR |
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(Registrant) |
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By:
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/s/ MARCEL KAHN |
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Marcel Kahn, |
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Chief Financial Officer |
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Safe Harbor statement under the U.S. Private Securities Litigation Reform Act of 1995: Certain
statements contained herein are forward-looking. These statements provide current expectations of
future events based on certain assumptions and include any statement that does not directly relate
to a historical fact or current fact. Forward-looking statements typically are identified by words
or phrases such as anticipate, assume, believe, continue, estimate, expect, foresee,
intend, may increase and may fluctuate and similar expressions or by future or conditional
verbs such as will, should, would and could. These forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause SCORs actual results,
performance, achievements or prospects to be materially different from any future results,
performance, achievements or prospects expressed or implied by such statements. Such factors
include, among others: the impact of future investments, acquisitions or dispositions, and any
delays, unexpected costs or other issues experienced in connection with any such transaction;
cyclicality of the reinsurance industry; changes in general economic conditions, particularly in
our core markets; uncertainties in estimating reserves; the performance of financial markets;
expected changes in our investment results as a result of the changed composition of our investment
assets or changes in our investment policy; the frequency, severity and development of insured
claim events; acts of terrorism and acts of war; mortality and morbidity experience; policy renewal
and lapse rates; changes in rating agency policies or practices; the lowering or withdrawal of one
or more of the financial strength or credit ratings of one or more of our subsidiaries; changes in
levels of interest rates; political risks in the countries in which we operate or in which we
insure risks; extraordinary events affecting our clients, such as bankruptcies and liquidations;
risks associated with implementing our business strategies; changes in currency exchange rates;
changes in laws and regulations, including changes in accounting standards and taxation
requirements; and changes in competitive pressures.
These factors are not exhaustive. Additional information regarding risks and uncertainties is set
forth in the current annual report of the company. We operate in a continually changing environment
and new risks emerge continually. Readers are cautioned not to place undue reliance on
forward-looking statements. We undertake no obligation to publicly revise or update any
forward-looking statements, whether as a result of new information, future events or otherwise.
This document consists of an unofficial translation for information purposes only of the French
language update (actualisation) of the reference document
(document de référence) originally filed with the French
financial markets authority (Autorité des marches financiers) on March 27, 2006 under number
D.06-0159. While efforts have been made to ensure the accuracy of this translation, SCOR shall
assume no liability for discrepancies between corresponding statements or other items in the
original French language version and this unofficial translation. In
the event of any discrepancy between this unofficial translation for information purposes only and
the original French text, the original French text shall prevail.
Société anonyme with a share capital of 763,096,713
Corporate Headquarters: 1, avenue du Général de Gaulle, 92800 Puteaux
562 033 357 RCS Nanterre
UPDATE OF THE ANNUAL REPORT (DOCUMENT DE REFERENCE)
FILED WITH THE AUTORITE DES MARCHES FINANCIERS (AMF)
ON 27 MARCH 2006 UNDER NUMBER D.06-0159
TABLE OF CONTENTS
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ii
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This
document (the Update Document) updates the annual report of SCOR filed with the
Autorité des marches financiers (AMF) on 27 March 2006 under number D.06-0159 (the Reference
Document). In this Update Document, the terms
Company and SCOR refer only to the Company SCOR; the term Group refers to the Company and its consolidated subsidiaries.
1. PERSON RESPONSIBLE FOR THE UPDATE DOCUMENT
1.1. NAME AND POSITION OF THE PERSON RESPONSIBLE FOR THE UPDATE DOCUMENT
Mr. Denis Kessler, Chairman of the Board of Directors.
1.2.
DECLARATION OF THE PERSON RESPONSIBLE FOR THE UPDATE DOCUMENT
I
declare that, having taken all reasonable care to ensure that such is
the case, the information contained
in this Update Document is, to the best of my knowledge, in
accordance with the facts and contains no
omission likely to affect its import.
I have obtained an audit completion letter from the statutory auditors, in which they indicate that
they have verified the information concerning the financial situation and the accounts provided in
this Update Document, and have read the entire Update Document.
Denis Kessler
Chairman of the Board of Directors
1.3. PERSON RESPONSIBLE FOR THE FINANCIAL INFORMATION
Mr. Jim Root
Director for Investor Relations
SCOR
1, avenue du Général de Gaulle
92800 Puteaux
Telephone : +33 (0)1 46 98 72 32
Private investors: actionnaires@scor.com
Institutional investors and equity analysts: ir@scor.com
http://www.scor.com
2. ADDITIONAL INFORMATION
2.1. PERSONS RESPONSIBLE FOR AUDITING THE FINANCIAL STATEMENTS
2.1.1 Statutory auditors
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Cabinet MAZARS & GUERARD
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ERNST & YOUNG Audit |
Represented by Lionel GOTLIB
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Represented by Pierre PLANCHON |
Le Vinci 4, Allée de lArche
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Tour Ernst and Young |
92075 La Défense Cedex
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11, Faubourg de lArche |
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92037 Paris la Défense Cedex |
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CRCC of Paris
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CRCC of Versailles |
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2.1.2 Substitute auditors
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Mr. Pascal PARANT
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Mr. Dominique DURET-FERRARI |
Cabinet MAZARS & GUERARD
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ERNST & YOUNG Audit |
Le Vinci 4, Allée de lArche
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Tour Ernst and Young |
92075 La Défense Cedex
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11, Faubourg de lArche |
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92037 Paris la Défense Cedex |
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CRCC of Paris
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CRCC of Versailles |
2.2.
INFORMATION IN THE UPDATE DOCUMENT PROVIDED BY A THIRD PARTY
Some of the information reproduced in paragraphs 3.10.3.4, 3.11, and 3.11.4 of this Update
Document is extracted from the annual report on the consolidated and
audited financial statements for the 2005
fiscal year prepared in accordance with IFRS of Revios (as defined in paragraph 3.11 of this Update
Document) and published on Revios website. This information has been accurately reproduced and,
as far as the Company is aware and is able to ascertain from the information published by Revios, no
facts have been omitted which would render the reproduced information
inaccurate or misleading.
3.
UPDATE OF THE INFORMATION CONCERNING THE COMPANY
3.1. 2006 RENEWALS
3.1.1 Recent developments in reinsurance markets
The reinsurance market is currently affected by the exceptional climatic events that took place in
2005, as well as by the tightening of the retrocession market. In
addition, the trends observed
on certain insurance markets over the past few years towards an increased retention by cedants, a
higher level of recourse to non proportional reinsurance and consolidation through mergers and
acquisitions, has been confirmed. This has resulted in a reduced volume of reinsurance on the most
mature markets.
In this context, the Group has made efforts to:
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regain shares on treaties already in its portfolio, benefiting from the long-term
relationships it has with its clients as well as from the upgrade of its rating to A-,
stable outlook by Standard & Poors; |
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(ii) |
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redevelop its client base by regaining approximately 120 cedants on 1
January 2006 and consolidate its relationships
with existing clients by accepting new business, whilst developing the technical and
financial innovation of its underwriting teams in the face of a more complex market, as
well as their responsiveness in a market that only adjusted at the end of December; and |
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benefit from the ALEA Europe renewal rights acquired on 10 December 2005, in
accordance with its underwriting policy. These rights represented
estimated gross premium income for SCOR of EUR 61 million at 1 January 2006. |
For the 2006 renewals, the Group ensured that it maintained its underwriting policy centred on
profitability and on the quality of business underwritten. The Group has refused to underwrite
business that does not meet its underwriting criteria, choosing for example to suspend relations
with approximately 39 of its Non-Life treaty clients as of 1 January 2006.
3.1.2
SCOR is making significant progress on all of the Non-Life reinsurance markets
The renewals at 1 January 2006 involved 80% of the Property & Casualty treaty
portfolio, 30% of Large Corporate Accounts business and almost the entire Credit & Surety
portfolio.
5
The
amounts of estimated gross premium income in this paragraph 3.1.2 of this Update Document do not
constitute written premiums forecasts for 2006 as the estimated gross
premium income is issued progressively over the
current and following years.
(a) |
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Estimated gross
premium income in Property & Casualty Treaty and Credit & Surety treaties renewed at 1
January 2006 increased by 25% to EUR 1,041 million. |
Property & Casualty Treaty
and Credit & Surety Treaty development at 1 January 2006
(in EUR millions)
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Renewable
premiums for Property & Casualties Treaty and Credit &
Surety at 1 January 2006 |
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833 |
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New business acquired / lost business regained * |
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+164 |
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+19 |
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Increased
shares / rates on existing treaties |
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+127 |
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+15 |
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Cancellations / share reductions |
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-83 |
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-10 |
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Estimated gross
premium income for Property & Casualty Treaty and Credit & Surety at 1 January 2006 |
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1,041 |
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+25 |
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(*) |
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of which new clients: EUR 83 million |
During these renewals, the rates observed across the various markets increased slightly and
are currently at a satisfactory level.
(1) Non-Life Treaties in Europe
The renewals in Europe on 1 January 2006 involved 97% of the zones Non-Life treaties. In a
satisfactory pricing environment, the Group recorded an increase of 26% for estimated gross
premium income in Europe in 2006, compared to the renewable portfolio at
such date, bringing the total to EUR 746 million.
The Group gained or regained many clients, including several lead underwriting positions.
With its existing clients, it increased its shares and signed new contracts.
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In France, the increase in estimated gross
premium income in 2006 is estimated at +25% compared
to the renewable portfolio at such date. The renewals enabled SCOR to regain its
position as a major player on the market. The Group took up 36 lead underwriting
positions and has benefited from the sharp rise in rates for non-proportional motor
liability reinsurance. |
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In the United Kingdom, the increase in estimated gross
premium income in 2006 is estimated at
+47% compared to the renewable portfolio at such date. On this market, which is
particularly sensitive to financial ratings, SCOR benefited from the upgrade of the
Groups rating by Standard & Poors in 2005. |
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In Spain and Portugal, the increase in estimated gross
premium income in 2006 is estimated at
+43% compared to the renewable portfolio at such date, notably due to the sharp
increase in decennial coverage. |
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In Germany and Austria, the increase in estimated gross
premium income in 2006 is estimated at
+25% compared to the renewable portfolio at such date; the Group notably benefited
from the contribution of part of the ALEA Europe portfolio. |
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In Italy, as in Eastern Europe, whose markets are amongst those most affected by
the continued shift from proportional to non-proportional cover, by increased cedant
retentions and by consolidations in insurance, the increase in estimated gross
premium income in 2006
is estimated at 11% in Italy and 8% in Eastern Europe compared to the renewable
portfolio at such date. |
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In the Northern Europe zone (i.e. Scandinavia and Benelux) the increase in
estimated gross
premium income in 2006 is estimated at +25% compared to the renewable portfolio at
such date. |
(2) Non-Life Treaties in North America
Renewals in North America at 1 January 2006 involved 62% of the zones Property & Casualty
treaty portfolio. Estimated gross
premium income was up by 19% compared to the
renewable portfolio at such date, bringing the total to EUR
104 million in this zone.
However contrasting developments were observed between the United States and Canada:
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in the United States and Caribbean zone, the Group recorded an increase of 4% in
estimated gross
premium income compared to the renewable portfolio at such date. The Group
continues to reduce its exposure in this zone and this increase results primarily
from an increase in rates and regaining of clients. |
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in Canada, the Group recorded an increase of 33% in expected
premiums compared to the
renewable portfolio at such date, benefiting from its upgraded Standard & Poors rating and from an efficient commercial policy in a globally stable
rate environment. |
Renewals at 1 July 2006 represent approximately 12% of the portfolio of the
zone. On 1 July 2006
estimated gross premium income was down by approximately 2% in this zone compared to the renewable
portfolio at such date. As was the
case on 1 January 2006, there were contrasts among the markets
in the United States, Mexico/Caribbean
and Canada:
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in the United States, the Group recorded a decrease of approximately 20% in estimated gross
premium income
compared to the renewable portfolio at such date, due to the cancellation of treaties
by ceding companies or by SCOR, as a consequence of the Groups stricter underwriting
policy; |
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in Mexico and the Caribbean, the Group recorded an increase of 13% in estimated gross
premium income compared to the renewable portfolio at such date, due primarily to an
increase in rates; |
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in Canada, the Group recorded an increase in estimated gross
premium income of approximately
41% compared to the renewable portfolio at such date, benefiting again from its
upgraded Standard & Poors rating. The Group has been able to increase its shares
on existing contracts and to regain business lost in previous years. |
(3) Non-Life Treaties in Asia
On Asian treaties up for renewal at 1 January 2006 (which is less than 30% of the zones
portfolio), SCOR recorded an increase of 54% in estimated gross
premium income compared to the renewable
portfolio at such date, bringing the total to EUR 31 million (at constant exchange rates).
At current exchange rates, there was a 74% increase in estimated gross
premium income at 1 January 2006 compared to the renewable portfolio at
such dates in these markets.
The
Group regained shares and won new clients in Malaysia and China. The upgrade of
the Groups rating by Standard & Poors enabled SCOR to recommence its activity in
Australia.
Non-Life reinsurance treaties in Japan and Korea, which represent 75% of the zones business, were
renewed on 1 April 2006.
In Japan, estimated gross
premium income reached Yen 7 billion, up 6% compared to the renewable
portfolio at such date (EUR 49 million at the 31 March 2006 exchange rate). At current
exchange rates, estimated gross premium income increased by 7% compared to the renewable portfolio at
such date. Wind risk pricing in Japan increased by 5% to 10% compared to 2005 depending
on programmes. SCORs market share is increasing regularly on this market, benefiting from
the in-depth, long-term relationships it has with its Japanese clients.
In Korea, estimated gross
premium income reached WON 30 billion, up 4% compared to the renewable
portfolio at such date (EUR 26 million at the 31 March 2006 exchange rate). At current
exchange rates,
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estimated gross
premium income is up by 22% compared to the renewable portfolio at such date. In a
context of low loss experience, rates have decreased slightly.
In India, estimated gross
premium income reached INR 968 million, up 91% compared to the renewable
portfolio at such date (EUR 18 million at the 31 March 2006 exchange rate). At current
exchange rates, estimated gross
premium income is up by 113% compared to the renewable portfolio at
such date. SCOR opened a representative office in 2005 in Mumbai and is continuing to
expand in this rapidly growing market. Rates are increasing in India and SCOR has taken
positions with expanding private sector insurance clients.
Overall, estimated gross
premium income for Non-Life treaties in the Asia-Pacific / India zone have
reached EUR 124 million in 2006, up 23% compared to 2005.
The Asia-Pacific zone represents a strategic development zone for the Group, and the
Non-Life reinsurance treaty renewals on both 1 January and 1 April 2006 demonstrate the
expansion of SCORs client base across all of these markets, in line with the Groups
strategy.
At the same time, SCOR has recorded growth in its activities in Large Corporate Accounts
and Life reinsurance in Asia.
(4) Non-Life
Treaties in the rest of the world
The rest of the world zone includes the Middle East, Africa and South America. With regard
to treaties in this zone up for renewal at 1 January 2006 (i.e. 65% of the zones
portfolio), SCOR recorded an increase of 12% in estimated gross
premium income compared to the renewable portfolio on such date, bringing the total to
EUR 96 million.
(5) Credit & Surety Business
Renewals of Credit & Surety treaties at 1 January 2006 involved almost the entire
portfolio. Estimated gross
premium income was up approximately 35% to EUR 63 million compared to the
renewable portfolio on such date. The upgrade of the Groups
rating by Standard & Poors and the strategic
choice of business development in this field have enabled SCOR to retake its place as a
primary player. Over half of this increase consisted of new business.
(6) Overall
assessment of the renewals of Property & Casualty Treaties and Credit & Surety
These renewals at 1 January 2006, 1 April 2006, and 1 July 2006, along with the renewals
estimated for the rest of the year, mean that Property & Casualty Treaties and Credit & Surety can
anticipate an estimated gross premium income volume of approximately EUR 1,250 million for 2006.
(b) |
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Large Corporate Accounts |
Renewals for facultative cover in this sector are carried out throughout the year without
any particular periodicity.
At
the end of 2005, 30% of the portfolio was up for renewal,
for which estimated gross
premium income
volume increased by 45% to EUR 91 million.
This significant increase is due first to improved access to business, following the
upgrade of the Groups rating by Standard & Poors. It is also the consequence of an
increased rigidity in insurance and/or reinsurance conditions in certain market sectors where SCOR
has a strong presence, such as the Energy risks sector.
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Development
of Large Corporate Accounts business at 1 January 2006
(in EUR millions)
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Renewable premiums for Large Corporate Accounts at 1 January 2006 |
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62.5 |
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New business acquired / lost business regained |
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+30.1 |
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+48 |
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Increased
shares / rates on existing business |
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+9.1 |
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+14.5 |
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Cancellations / share reductions |
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-10.9 |
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-17.4 |
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Estimated gross
premium income for Large Corporate Accounts at 1 January 2006 |
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90.8 |
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+45 |
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These renewals at the end of 2005 and the renewals estimated for the rest of this year mean
that Large Corporate Accounts can anticipate estimated gross
premium income of around EUR 350
million for 2006.
3.2. 2006 CLAIMS
SCOR is not aware of any claims for events of a catastrophic nature1 since the beginning
of 2006.
The Group is nevertheless very closely following the development of claims registered with regard
to the major climatic events that took place in the second half of 2005. SCOR is in particular
following the claims on a case by case basis, and the limited increase since the
beginning of 2006 has not caused us to change the total reserves for these events.
3.3.
2006 COMMUTATIONS
The Group is actively pursuing its commutations policy, notably in the United States and as part of
the run-off of its Bermudan subsidiary, CRP. The commutations that have been made since the
beginning of the year are for amounts that are considerably less significant than those made
with respect to communications in 2005 and have had no significant impact on gross technical
reserves.
3.4. RETROCESSIONS
Following
the hurricanes of 2005, the cost of coverage in retrocession as well
as the requirements of
the retrocessionaires regarding risk information showed a marked increase. In this context, the
Group conducted an in-depth examination of its risks and its retrocession plan.
Regarding
acceptances, particular emphasis was given to the renewal of the
facultatives portfolio in the United States and the limitation of the
Groups exposure to risks
related to the effects of wind and floods in that region.
Taking into account the changes in the CatNat simulation model after the events of 2005, the Group
strengthened its coverage policy for storms in Europe. While retention was adapted on a global
scale to take the rapid increase of coverage expenses into account, SCOR was able to purchase
underlying protection for non-major risks and areas (Whole World except Wind Europe, Floods UK,
Risks US and Japan).
Overall,
the projected retrocession programme could be carried out in a much more difficult
and expensive retrocession market. The costs of this coverage
increased sharply when
compared to the previous year.
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SCOR defines an event of catastrophic nature as an event that
involves several risks and causes losses (before tax) net of retrocession of at
least EUR 10 million. |
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3.5. REINFORCEMENT IN AGRICULTURAL RISK BUSINESS
To keep up with the changing risks and coverage needs linked to modern agriculture, SCOR is
developing its agricultural risk reinsurance business throughout the world. As part of this
development, SCOR has reinforced its agricultural risk underwriting teams.
SCOR welcomes this new development, which is fully in line with its strategy of enhancing its
skills and capacities in the speciality lines known and understood by the Group.
Mr René Kunz, Mrs Yvonne Buschor, Mr Heiko Joergens, Mr Dominique Mercante, Mr Michael Rüegger, Mrs
Irene Uhr-Armaos and Mrs Sari-Maija Walder-Valtanen, all previously at GE Frankona Re, join
SCOR as from 1 September 2006. Based in Switzerland, this team will be part of SCOR Global P&C, SCORs
operating subsidiary combining the Groups Non-Life European
reinsurance businesses.
3.6. STRUCTURAL REORGANIZATION
SCOR is
implementing a number of major Group reorganization and structural projects.
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In connection with project New SCOR announced in
June 2005, SCOR has contributed all of its
Non-Life reinsurance activities in Europe, comprising Property &
Casualty Treaty (including Credit &
Surety and Political Risks), Large Corporate Accounts and Construction
reinsurance, to a wholly-owned subsidiary of SCOR
registered in France called SCOR Global P&C (formerly Société Putéolienne de
Participations). Such contribution was approved by the shareholders meeting held on
16 May 2006 and is retroactively effective as of 1 January 2006. |
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This reorganization represents an important step in the strategy of SCOR and has been
carried out with a view to simplifying the legal structure of the Group by
streamlining the Group into two subsidiaries dedicated to Life reinsurance and
Non-Life reinsurance business, respectively. SCOR will continue to
hold the shares of the US, Canadian and Asian Non-Life reinsurance
subsidiaries which will report to SCOR Global P&C as far as their
operations are concerned. SCOR remains
the retrocessionaire of its Life and Non-Life subsidiaries, and will be responsible
for the allocation of capital and resources within the Group, based on the
underwriting needs and the determined capacities of each entity of the Group. Its
real estate investment activities excepted, the Group is now, prior to the planned
acquisition of Revios, structured as described in the organisation chart below: |
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Chart 1: Organizational chart of the group and its principle subsidiaries at 31 August 2006.
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In the context of the second phase of Project New SCOR, SCOR announced on 4 July
2006 the transformation of SCOR and SCOR VIE into a Societas Europaea and the creation
of a Societas Europaea at the level of SCOR Global P&C (by way of merger pursuant to
which SCOR Global P&C would absorb SCOR Deutschland and SCOR Italia). SCOR will thus
become the first French listed company to adopt the status of Societas Europaea. After
the completion of the merger, SCOR Global P&C SE will carry out its business in Germany
and in Italy via branch offices which are in the process of being created. SCOR Global
P&C will thus become the first company in France to adopt the status of Societas
Europaea through the absorption of its German and Italian subsidiaries. It will also
become the first company in Europe to complete a tripartite transaction of this kind
involving three different jurisdictions. |
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On 5 September 2006, as part of the signature of an amendment to the purchase agreement
concluded on 5 July 2006 with GLOBALE, according to which SCOR VIE would acquire Revios (for
additional information regarding this proposed acquisition, see paragraph 3.11 of this
Update Document), the Group studied the possibility of forming the
Societas Europaea at the level of SCOR VIE by means of a
merger rather than a conversion. |
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The new bylaws of the three companies will come into effect once the extraordinary
general meetings of each company have given their approval, and once each company has
been registered as a Societas Europaea with the Nanterre Commercial and Companies
Registry. |
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Societas Europaea status will in particular enable the SCOR group to strengthen its
multinational and European identity, to facilitate its acquisition transactions in
Europe, to improve its financial flexibility and also to increase its flexibility with
regard to capital allocation. The Group is
demonstrating its desire to be a company with European roots and global reach. |
|
|
|
The proposal to transform SCOR into a Societas Europaea
was filed on 5 July 2006 with the
clerk of the Commercial Court of Nanterre. The transformation of SCOR into a Societas
Europaea in accordance with the provisions of Articles 1 § 1, 2 § 4 and 37 of Council
Regulation (EC) No. 2157/2001 of 8 October 2001 on the
Statute for a European company (SE
Regulation) and Article L. 225-245-1 of the French Commercial Code, will lead to neither
the dissolution of SCOR nor the creation of a new legal entity. The decision to transform
SCOR into a Societas Europaea should be made at the SCOR general shareholders meeting,
which is scheduled to take place during the first half of 2007. SCOR
should then be registered
in the Nanterre Commercial and Companies Registry as SCOR SE (SCOR SE) and be organised
as a European corporation. |
|
|
|
The transformation will in no way affect the rights of SCOR shareholders and bondholders,
who will automatically become SCOR SE shareholders and bondholders without any action on
their part being required. They will remain shareholders and bondholders with the same
rights that they had prior to the final conclusion of the transformation. As a result,
the liability of each SCOR SE shareholder will be limited to the amount of capital to
which he or she subscribed prior to the final conclusion of the transformation. |
|
|
|
The transformation will theoretically have no impact in and of itself on the value of
SCOR shares. The number of shares issued by SCOR will not be changed simply because of
the transformation, and SCOR shares will continue to be admitted for |
12
|
|
trading on the Eurolist market of Euronext Paris S.A., on the New York Stock Exchange as
American Depositary Shares (ADS), and over-the-counter on the Frankfurt Stock Exchange. |
- |
|
On 18 July 2006, the Group announced that it had consolidated its real estate
investments into the real estate company SCOR Auber, a wholly-owned subsidiary of SCOR.
This consolidation will enable these investments to be more dynamically managed,
simplify the structures of the Groups asset management and reduce the management
expenses related to the investments. SCOR Auber currently holds a portfolio of 16
commercial real estate holdings in the Ile-de-France region with a market value of
around EUR 330 million, i.e. 3.6% of SCOR investments at 30 June 2006. |
|
- |
|
Finally, on 8 September 2006, the Group announced the launch of the modification of its
American Non-Life reinsurance structures. For additional information in this regard,
see paragraph 3.16 of this Update Document. |
3.7. IMPROVEMENT OF INTERNAL CONTROL
The Group is continuing its efforts to improve the control of its business:
- |
|
The Chief Risk Officer has developed and updated the underwriting rules and allocated
the underwriting capacity in accordance with the rules defined by the recently instituted Catastrophe Committee, in
accordance with the Groups annual underwriting policy. |
|
- |
|
The Group is continuing to conform its internal procedures to the provisions of the new
rating agencies requirements for enterprise risk management, as well as the new obligations
following the transposition in France and Europe of Directive
No. 2005/68/EC of the European Parliament and the Council (the Reinsurance
Directive). |
|
- |
|
In order to meet the Reinsurance Directive rules, as well as
those from the European Union Commissions Solvency II project, SCOR has acquired one of the
best solvency modelling tools on the market (Dynamic Financial Analysis). |
|
- |
|
The annual underwriting plan is now monitored in the quarterly reporting structures,
which should enable the Group to improve the underwriting control management charts over
the next few months. |
|
- |
|
The Group is implementing the Matrix Non-Life
treaties pricing
project of non-life treaties, which constitutes a major
element in the unification and monitoring of the underwriting, risk selection and
pricing policy. |
|
- |
|
The Group has decided to invest in the upgrade of the accounting tools used to
consolidate its accounts, and has begun a project to this effect. |
|
- |
|
Finally, in view of the development of its structures in Europe, SCOR is developing an
electronic document management system for all of its Non-Life business. |
3.8. CHANGES TO THE COMPOSITION OF THE SCOR BOARD OF DIRECTORS
As a result of (i) the death of Mr. Yvon Lamontagne on
20 March 2006 and (ii) the completion of the term
of Mrs. Michèle Aronvald, the director representing employees, following the combined general
shareholders meeting of 16 May 2006 and the deletion from the Companys bylaws of the provisions
relating to directors representing employees, in accordance with the 16th resolution of
the combined shareholders meeting of 16 May 2006,
13
the Companys Board of Directors, as of the date hereof, is comprised of the following 14 directors
(compared to 16 mentioned in the Reference Document):
- Chairman: Denis Kessler;
- Directors: Carlo Acutis, Antonio Borges, Allan Chapin, Daniel Havis, Daniel Lebègue Helman le
Pas de Sécheval, André Lévy-Lang, Herbert Schimetschek, Jean-Claude Seys, Jean Simmonet, Claude
Tendil, Daniel Valot;
-
Non-voting director: Georges Chodron de Courcel.
3.9. SCOR VIE EUROPEAN EMBEDDED VALUE AS AT 31 DECEMBER 2005: EUR 693 MILLION, UP 12%
SCOR VIE has arranged for B&W Deloitte to review its calculation of the Embedded Value at 31
December 2005. This indicator has been calculated in accordance with the CFO Forum2
principles, thereby constituting a European Embedded Value (EEV) of SCOR VIE.
SCOR VIEs Embedded Value was EUR 693 million at 31 December 2005, up 12% compared to 31 December
2004. This confirms the solidity and dynamism of SCOR VIEs portfolio.
Summary of results:
Consolidated
Embedded Value
(in EUR millions)
|
|
|
|
|
|
|
|
|
|
|
SCOR VIE |
|
SCOR VIE |
|
|
31 Dec. 2004 |
|
31 Dec. 2005 |
Adjusted Net Asset Value (after tax) |
|
|
266.9 |
|
|
|
309.6 |
|
Value of portfolio before cost of
locking-in (after tax) |
|
|
432.8 |
|
|
|
481.6 |
|
Cost of locking-in the solvency margin
(after tax) |
|
|
(80.8 |
) |
|
|
(96.4 |
) |
Value of portfolio after cost of locking-in
(after tax) |
|
|
352.0 |
|
|
|
385.2 |
|
Consolidated Embedded Value (after tax)
before cost of Options and Financial
Guarantees |
|
|
618.9 |
|
|
|
694.8 |
|
Cost of Financial Options and Guarantees
(after tax) |
|
|
|
|
|
|
(2.0 |
) |
Consolidated European Embedded Value (after
tax) |
|
|
|
|
|
|
692.8 |
|
3.9.1 European Embedded Value Methodology
The European Embedded Value is the sum of the four following elements:
|
- |
|
Adjusted Net Asset Value |
|
|
- |
|
Value of portfolio of treaties in force |
|
|
|
2 |
|
The CFO Forum is a working group of Chief
Financial Officers from large European insurance companies which established in
May 2004 a set of 12 principles with the objective of standardizing published
Embedded Values in order to make them more comparable. |
14
|
- |
|
Cost of locking-in the solvency margin |
|
|
- |
|
Cost of Financial Options and Guarantees |
(a) |
|
Adjusted Net Asset Value |
|
|
|
The Net Asset Value is calculated on the basis of the companys net equity, making
adjustments to take into account the differences between the market value and the book
value. These adjustments consist of: |
|
- |
|
removing the intangible assets, |
|
|
- |
|
removing the book value of shareholdings in the subsidiaries and replacing it
with the adjusted Net Asset Value of these subsidiaries, and |
|
|
- |
|
adding the portion of unrealised capital gains attributable to shareholders
which have not been taken into account in the value of the portfolio. |
(b) |
|
Value of portfolio of treaties in force |
|
|
|
This is calculated by projecting future profits from treaties in force at the valuation
date, using reasonable assumptions as to the future development of factors that will
impact profitability. These profits are then discounted to the valuation date. The
discount rate is defined using a top-down approach, and using the CAPM (Capital Asset
Pricing Model) formula. |
|
|
|
The future results used in the evaluation model are based on the portfolio of treaties in
force at the valuation date, excluding from the projections: |
|
- |
|
new policies underwritten after this valuation date and reinsured under in force
treaties, and |
|
|
- |
|
new treaties underwritten by the company in the future. |
The management expenses have been calculated as a percentage of premiums and/or technical
reserves. The percentage is assumed to be stable throughout the projected period.
Future financial returns are calculated on the basis of the asset allocation of each
entity as at 31 December 2005, using return on capital assumptions for each asset based
on market returns as at 31 December 2005. Except for the SCOR Life Re and the SCOR VIE
Montréal portfolios that have a dedicated bond portfolio (assuming that the bonds are
held until maturity), returns on fixed rate assets do not include capital gains or losses
at the valuation date and therefore remain constant for the projection period.
(c) |
|
Cost of locking-in the solvency margin |
|
|
|
SCOR VIEs activity requires it to hold net assets in each entity at least equal to the
minimum required solvency margin, which must bear interest. The Reinsurance Directive
regarding solvency regulations for reinsurers, which was approved by the European
authorities in 2005, has not yet been transposed into national legislation, notably in
France. The terms of this directive have therefore not been used to calculate the cost of
locking-in. The sensitivity calculations set out below assess the potential impact of
this directive. |
|
|
|
The capital amounts used to calculate the EEV at 31 December 2005 are: |
15
|
- |
|
For Europe, the minimum solvency margin in force for direct insurers as set out
in the regulations. |
|
|
- |
|
For US-based subsidiaries, 200% of the Risk-Based Capital defined by the NAIC. |
The difference between the rate of return after tax earned on assets covering the
solvency margin and the return expected by shareholders (discount rate) leads to a
locking-in cost of the solvency margin, which is valued in these calculations.
The method used to calculate the locking-in cost is conservative:
|
- |
|
The future return on blocked net equity backing the solvency margin does not
include unrealised capital gains at the valuation date. This rate of return is the
same as the one used in the projections to calculate the value of business in the
portfolio. |
|
|
- |
|
The solvency margin is 100% financed by hard
capital. No intangible asset
(DAC or VOBA), or future value of profits backing the solvency margin, which would
reduce the cost of locking-in capital, has been taken into account. The cost of
locking-in the solvency margin is not reduced by using financial leverage such as
subordinated debt. |
(d) |
|
Cost of Financial Options and Guarantees |
|
|
|
Principle 7 of the CFO Forum stipulates that a valuation of the cost of Financial Options
and Guarantees must be conducted. SCOR VIE has reviewed its portfolio in order to
identify the Financial Options and Guarantees present in its treaties. |
|
|
|
No material financial option or guarantee within the scope of the principles of the CFO
Forum has been identified in the portfolios recorded for SCOR VIE and its branches
(Europe, Canada and Asia). |
|
|
|
Conversely, Financial Options and Guarantees were identified and taken into account in
the SCOR Life Re (USA) portfolio, essentially on Annuities (accumulation savings
products with the option convert to annuities) and to a lesser extent on Universal Life
contracts. The following Financial Options and Guarantees were identified: |
|
- |
|
guaranteed rates or return guarantees on share indices, |
|
|
- |
|
guaranteed minimum benefits in the event of death, |
|
|
- |
|
buy back options, and |
|
|
- |
|
options to convert to annuities. |
The Financial Options and Guarantees on Annuities contracts (excluding conversion
options) were taken into account using a stochastic simulation of neutral-risk economic
scenarios, with regard to the yield curve of the US market and the S&P500 stock market
index. The time value of these options and guarantees was calculated based on the
difference between:
|
- |
|
the average portfolio value resulting from the projections made on the basis the
various scenarios used, |
|
|
- |
|
and a portfolio value resulting from the projections calculated on the basis of
an average scenario (intrinsic value). |
16
This time value therefore represents the risk of financial deviation in relation to the
average scenario.
The value of the options to convert to annuities was estimated using a closed formula
based on the same rate model as that used for stochastic simulations.
The reserves of the Universal Life portfolio represent a relatively small amount compared
to the reserves of the Fixed Deferred Annuities portfolio. Universal Life contracts,
however, have a similar type of risk to Fixed Deferred Annuities. Therefore the value of
the options on the Universal Life portfolio has been calculated using
the same proportion of the reserves, as used for the Fixed Deferred Annuities portfolio.
3.9.2
Analysis of Added Value
The variation in Embedded Value excluding the cost of Financial Options and Guarantees, between 31
December 2004 and 31 December 2005, is analysed in the following table:
In EUR millions
|
|
|
|
|
a
Embedded Value at 31 December 2004 (before tax and dividend) |
|
|
857.6 |
|
b Payment of dividend and tax on 2004 income |
|
|
(25.4 |
) |
c Change in value due to the operating activity of SCOR VIE (before tax) |
|
|
92.3 |
|
d Change in value due to the changes in the economic environment
(before tax) |
|
|
(5.4 |
) |
e Embedded
Value at 31 December 2005 constant exchange rates (before tax)
e =a+b+c+d |
|
|
919.1 |
|
f Impact of exchange rates (before tax) |
|
|
54.5 |
|
g
Embedded Value at 31 December 2005 current exchange rates (before tax)
=e+f |
|
|
973.6 |
|
h Tax |
|
|
(278.8 |
) |
k Embedded
Value at 31 December 2005 current exchange rates (after tax)
=g+h |
|
|
694.8 |
|
(a) Change in value due to SCOR VIE operating activity
In EUR millions (before tax)
|
|
|
|
|
Expected
return from unwinding of discount rate |
|
|
67.0 |
|
Experience
deviation during current year |
|
|
(2.1 |
) |
Change in non-economic assumptions |
|
|
(9.7 |
) |
Value of new production |
|
|
37.1 |
|
Change in value due to SCOR VIEs operating activity (before tax) |
|
|
92.3 |
|
The expected
return from unwinding of discount rates to the expected return on Embedded Value calculated in
accordance with the economic assumptions applicable at 31 December 2004.
The
experienced deviation during the current year reflects on the one hand the difference between the
elements projected for the year 2005 in the Embedded Value at 31 December
17
2004 and
the actual experience registered at 31 December 2005 closing, and on the other hand the difference for
2004 and previous accounting year estimates between the two closings. The overall deviation shown
in the table, which is close to zero, is due to offsetting positive and negative differences
between the actual technical results and the technical results projected for 2005 at 31 December
2004.
The changes in non-economic assumptions reflect the impact of changes in the technical parameters
(such as loss ratios, lapse ratios, expenses and so on) used in the projections. An overall
negative effect was recorded, mainly due to modelling improvements and adjustments to the
projection parameters of the Traditional Life portfolio underwritten by SCOR Life Re, made in
accordance with principle 9 of the CFO Forum.
The value of new business in 2005, which includes acquisition costs, includes the value of new
treaties underwritten during 2005, calculated at the underwriting date, and the value of new
business on treaties in force, calculated at the date of entry into the portfolio, corresponding to
the value generated by the 2005 production of ceding companies, reinsured with treaties
underwritten before 31 December 2004.
The total value of new business is up by +8.5% compared to 2004.
(b) Changes in value due to changes in the economic environment
The table below sets out the changes in value due to changes in the economic environment:
in EUR millions
|
|
|
|
|
Experience
in deviation during current year |
|
|
(5.9 |
) |
Changes in economic assumptions |
|
|
0.5 |
|
Changes in the economic environment (before tax) |
|
|
(5.4 |
) |
The
experience deviation during the current year corresponds to the difference between the returns
actually recorded during the year and the returns expected for 2005 according to the economic
assumptions used in the projections made at 31 December 2004.
This negative value is mainly due to falling interest rates in Europe between 31 December 2004 and
31 December 2005.
The changes in economic assumptions correspond to the change in value arising from changes, from
the previous year, in the economic assumptions (such as discount rate, interest rate on deposits
and rate of return on other financial assets) used in projections for the coming years. The
increased discount rate in the US and Canada has been offset by reduced letter of credit costs
(thanks in particular to SCORs improved Insurer Financial Strength Rating) and a decreased
discount rate in the Euro zone.
(c) Impact of exchange rates
The evolution of exchange rates in 2005 has had a positive impact of EUR 54.5 million, mainly due
to the appreciation of the US Dollar against the Euro.
18
(d) Value of Financial Options and Guarantees
At 31 December 2005, in the United States, almost the entire cost of the options was linked to
equity risk on Equity Index Annuities.
Assumptions
The choice of non-economic assumptions is based on internal experience analyses carried out by SCOR
VIE teams and on their knowledge of the different markets. In particular, claims assumptions are
mostly based on the portfolio experience of each of SCORs operating entities.
The tax charge modelled reflects current regulations as at the valuation date. The discount rate is
determined in accordance with the CAPM formula. It is equal to the risk-free rate plus a risk
premium of 350 basis points multiplied by a beta coefficient. The beta coefficient represents the
market correlation of reinsurance values with the financial markets. This coefficient was estimated
over a period of two years based on a sample of 7 international
reinsurers. This approach
is consistent with principle No. 10 of the CFO Forum.
The economic assumptions for these projections are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United |
|
|
|
|
Euro Zone |
|
States |
|
Canada |
Discount rate |
|
|
7.08 |
% |
|
|
8.17 |
% |
|
|
7.76 |
% |
Risk-free rate |
|
|
3.30 |
% |
|
|
4.39 |
% |
|
|
3.98 |
% |
Return on fixed-interest assets |
|
|
3.50 |
% |
|
|
4.69 |
% |
|
|
4.28 |
% |
Return on shares |
|
|
6.80 |
% |
|
|
7.89 |
% |
|
|
7.48 |
% |
Return on
cash |
|
|
2.42 |
% |
|
|
4.37 |
% |
|
|
3.25 |
% |
Net return
rate used for projections3 |
|
|
3.80 |
% |
|
|
4.66 |
% |
|
|
3.94 |
% |
General Comments on the assumptions:
As with all reinsurance groups, the data available to SCOR VIE are less detailed than that generally
available to ceding companies.
Furthermore, certain items of accounting information are sometimes only available with a
substantial delay and thus cannot be reflected in the Embedded Value calculations on a timescale
consistent with the timing of the release of the financial results. In this case, estimates have
been based on the experience of the portfolio.
Therefore, as for all reinsurers, the result is greater uncertainty regarding the Embedded Value
published by direct writers, both at the level of Embedded Value itself as well as the components
constituting created value from year to year.
|
|
|
3 |
|
Not including the SCOR Life Re and the SCOR Vie
Montréal portfolios, for which the projected returns are calculated on
the assumption that the dedicated bond portfolio is held to maturity. |
19
3.9.3 Sensitivity Analysis
The following table shows the sensitivity of the value of the portfolio of treaties to changes in
different assumptions.
In EUR millions
|
|
|
|
|
Value of
portfolio as at 31 December 2005 (after tax) |
|
|
385.2 |
|
Discount rate 100 bp |
|
|
47.0 |
|
Discount rate + 100 bp |
|
|
(42.3 |
) |
Claims 5% |
|
|
115.0 |
|
Expenses 10% |
|
|
7.9 |
|
Lapses + 10% |
|
|
(10.9 |
) |
Lapses 10% |
|
|
12.9 |
|
Interest
rates 100 bp4 |
|
|
(43.3 |
) |
Share risk
premium + 100 bp |
|
|
1.9 |
|
Solvency margin + 10% |
|
|
(9.6 |
) |
Estimated impact of the European directive on the reinsurance
solvency margin |
|
|
13.1 |
|
3.9.4 External opinion (B&W Deloitte)
B&W Deloitte, Actuarial Consultants, have reviewed the European Embedded Value of SCOR VIE at 31
December 2005, which has been calculated internally in accordance with principles of the CFO Forum
and under the guidelines and responsibility of the management of SCOR VIE. The review covered the
methodology used, the assumptions and the calculations.
The review was conducted in accordance with normal actuarial practice and processes. In particular,
B&W Deloitte have relied on and not sought to verify
exhaustively the data provided by SCOR VIE.
This data included information contained in the SCOR VIEs financial statements.
In the light of the above remarks, B&W Deloitte consider that the methodology is appropriate, that
the Companys assumptions are together reasonable and consistent, and that the European Embedded
Value results have been properly compiled on the basis of the
methodology and assumptions chosen by SCOR VIEs management,
as well as the principles of the CFO Forum.
The calculation of Embedded Values is based on numerous assumptions with respect to economic
conditions, operating conditions, taxes and other matters, most of which are beyond the Companys
control. Although the assumptions used are estimates, which the Company and B&W Deloitte believe
are reasonable, deviations may occur between projected assumptions
and actual experiences in the future. Such deviations may materially impact the value calculated.
|
|
|
4 |
|
This decrease is combined with a decrease of
100 bp in the interest rate on deposits and an equivalent decrease in the
discount rate. |
20
3.10.
FINANCIAL INFORMATION AT 30 JUNE 2006
3.10.1
Selected financial information at 30 June 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS |
|
|
French GAAP |
|
In EUR millions |
|
30 June 06 |
|
|
30 June 05 |
|
|
2005 |
|
|
2004 |
|
|
2004 |
|
|
2003 |
|
|
|
Gross written premiums |
|
|
1,372 |
|
|
|
1,184 |
|
|
|
2,407 |
|
|
|
2,561 |
|
|
|
2,528 |
|
|
|
3,691 |
|
Gross earned premiums |
|
|
1,275 |
|
|
|
1,151 |
5 |
|
|
2,429 |
6 |
|
|
2,728 |
|
|
|
2,684 |
|
|
|
4,031 |
|
Current operating result |
|
|
188 |
|
|
|
140 |
|
|
|
242 |
|
|
|
199 |
|
|
|
185 |
|
|
|
(142 |
) |
Group net result after tax |
|
|
102 |
|
|
|
72 |
|
|
|
131 |
|
|
|
75 |
|
|
|
69 |
|
|
|
(314 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
7,466 |
|
|
|
8,050 |
|
|
|
7,974 |
7 |
|
|
8,211 |
|
|
|
8,093 |
|
|
|
7,415 |
|
Cash and cash equivalent |
|
|
1,736 |
|
|
|
1,612 |
|
|
|
1,667 |
|
|
|
1,826 |
|
|
|
1,799 |
|
|
|
1,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net technical reserves
and liabilities relating
to financial contracts |
|
|
8,642 |
|
|
|
8,818 |
|
|
|
8,758 |
8 |
|
|
9,020 |
|
|
|
9,076 |
|
|
|
9,943 |
|
Loans and debts |
|
|
851 |
|
|
|
927 |
|
|
|
954 |
|
|
|
1,342 |
|
|
|
1,083 |
|
|
|
836 |
|
Group shareholders equity |
|
|
1,672 |
|
|
|
1,705 |
|
|
|
1,719 |
|
|
|
1,335 |
|
|
|
1,324 |
|
|
|
619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In EUR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SCOR equity
shares in circulation at
31/12 |
|
|
968,769,070 |
|
|
|
819,269,070 |
|
|
|
968,769,070 |
|
|
|
819,269,070 |
|
|
|
819,269,070 |
|
|
|
136,544,845 |
|
Earnings per share |
|
|
0.11 |
|
|
|
0.09 |
|
|
|
0.15 |
|
|
|
0.09 |
|
|
|
0.08 |
|
|
|
(2.31 |
) |
Diluted earnings per share |
|
|
0.10 |
|
|
|
0.08 |
|
|
|
0.14 |
|
|
|
0.09 |
|
|
|
0.08 |
|
|
|
(2.31 |
) |
Net asset value per share |
|
|
1.75 |
|
|
|
1.77 |
|
|
|
1.79 |
|
|
|
1.65 |
|
|
|
1.63 |
|
|
|
4.55 |
|
Diluted net asset value
per share |
|
|
1.73 |
|
|
|
1.78 |
|
|
|
1.78 |
|
|
|
1.63 |
|
|
|
1.62 |
|
|
|
4.55 |
|
Share price at the end of
period |
|
|
1.71 |
|
|
|
1.66 |
|
|
|
1.82 |
|
|
|
1.39 |
|
|
|
1.39 |
|
|
|
1.31 |
|
|
3.10.2 First half 2006: SCOR records a net income of EUR 102 million, up 42%
The Board of Directors, meeting of 29 August 2006, chaired by Denis Kessler, approved SCORs 2006
half-year accounts. These accounts are presented excluding any impact from
|
|
|
5 |
|
The Group financial report at 30 June 2005
recorded gross earned premiums of EUR 1,130 million at 30 June 2005. The
difference is due to the reclassification of reserves for unrealized
claims (in
decennial civil liability insurance outside of France) from premium reserves to claim
reserves. See note 1 Accounting standards applied in the
notes to the
consolidated financial statements prepared under IFRS for the Group at
30 June 2006 in paragraph 3.10.3.5 of this Update Document. |
|
6 |
|
The Reference Document and the Group financial report at 30 June 2006 showed gross earned premiums of EUR 2,387
million at 31 December 2005. The difference is due to the reclassification of
reserves for unrealized claims (in decennial civil liability insurance outside
France) from premium reserves to claims reserves. See Note 1
Accounting principles applied in the notes to the consolidated financial
statements prepared under IFRS for the Group at 30 June 2006 in paragraph
3.10.3.5 of this Update Document. |
|
7 |
|
The Reference Document showed investments of
EUR 8,082 million at 31 December 2005. The difference is due to a
reclassification involving reinsurance deposits on financial contracts. See
note 1 Accounting standards applied in the notes to the consolidated
financial statements prepared under IFRS for the Group at 30 June 2006
in paragraph 3.10.3.5 of this Update Document. |
|
8 |
|
The Reference Document showed net technical
reserves and liabilities relating to financial contracts of EUR 8,858 million
at 31 December 2005. The difference is due to a reclassification involving
reinsurance deposits on financial contracts. See note 1
Accounting standards applied in the notes to the consolidated financial statements
prepared under IFRS for the Group at 30 June 2006 in paragraph 3.10.3.5
of this Update Document. |
21
the
contemplated acquisition of Revios, announced on 5 July 2006
(for additional information on this contemplated
acquisition, see paragraph 3.11 of this Update Document).
3.10.2.1 Sharp increase in business and income of the Group is confirmed
In the first half of 2006, the Groups global revenues (Life and Non-Life), expressed in terms of
gross written premiums, amounted to EUR 1,372 million, up 16% compared to the first half of 2005.
This increase is due on the one hand to strong growth in Property
& Casualty Treaty business (+26%) and Large Corporate
Accounts (+24%) as far as damage and liability reinsurance is
concerned, and on the other
hand to the stability of Life reinsurance business.
Operating income for the first half of 2006 stood at EUR 188 million, up 34% compared to the first
half of 2005. This is distributed between a Non-Life operating income of EUR 153 million and a Life
operating income of EUR 35 million.
Net income
after tax in the first half of 2006 was EUR 102 million, up 42%
compared to the first half of 2005.
Shareholders equity of the Group at 30 June 2006 was EUR 1,672 million, recording a slight
decrease of 2.7%, or EUR 47 million, compared to 31 December 2005. This is principally
due to the following factors:
- the payment of a EUR 48 million dividend for 2005 on 19 May 2006;
- a net income of EUR 102 million for the 2006 first half;
- a negative translation differential for the Euro value of the shareholders equity of our mainly
North American subsidiaries in the amount of EUR 34 million due to the depreciation of the US
Dollar;
- the variation in unrealised capital gains and losses on available for sale (AFS) securities, net
of shadow accounting and deferred taxes in the amount of EUR 49 million;
- the
purchase of shares for the Groups own account in the amount of
EUR 18 million, to cover the
share award plans.
Permanent capital, which includes the Groups shareholders equity and long-term debts, amounted to
EUR 2,392 million.
The
Groups total cash-flow (defined as the sum of operating, financing and investment cash flows) was
positive for the first half of 2006, amounting to EUR 69 million.
Net liabilities relating to contracts, which include technical reserves on insurance contracts as
well as liabilities linked to financial contracts net of retrocessions, reached EUR 8,642 million
at 30 June 2006, compared to EUR 8,758 million at 31
December 20059. This slight
apparent decrease is due to a translation differential. At constant exchange rates, net liabilities
relating to contracts are up by 1.9%.
Group general expenses stood at EUR 105 million. Relative to premiums, the Groups cost ratio has
improved, standing at 7.7% in the first half of 2006 compared to 8.7% in the first half of 2005.
|
|
|
9 |
|
The Reference Document mentioned an amount of
net liabilities relating to treaties as EUR 8,858 million at 31 December 2005.
The difference is due to the reclassification of reinsurance deposits on
financial contracts. |
22
3.10.2.2 Results by line of business
In Non-Life reinsurance (Property & Casualty Treaties and Large Corporate Accounts), premium income
reached EUR 844 million in the first half of 2006, up by 28% compared to the first half of 2005.
The
dynamic observed during the Non-Life treaty renewals in Europe at 1
January 2006 (representing
97% of the zones Non-Life portfolio) where expected premiums
were up by 25% compared to the renewable portfolio at such date, continued with respect to the
Non-Life treaty renewals on 1 April 2006 (Asian and Indian markets), with an increase of 23% in the
expected premiums compared to the renewable portfolio at such date, and with
respect to the Non-Life treaty renewals on 1 July 2006 (mainly the Middle
East) with an increase of 21% in the expected premiums compared to
the renewable portfolio at such date. For more information on renewals in
Non-Life treaties, see paragraph 3.1 of this Update Document.
Large Corporate Accounts (based on gross premiums written) was up by 24% in the first half
of 2006 compared to the first half of 2005.
In total, Non-Life business in Europe was up by 34% in the first half of 2006 compared to the first
half of 2005 with gross written premiums of EUR 502 million. In Asia and the rest of the world,
gross written premiums reached EUR 225 million (+ 14% compared to the first half of 2005). In North
America, gross written premiums rose to EUR 117 million (+ 38 % compared to the first half of
2005).
The
combined ratio
10 for Non-Life reinsurance business stood at 98.2% (including CRP) in
the first half of 2006, compared to 99.7% (including CRP) for the first half of 2005. Excluding
CRP, a subsidiary in run-off, the combined ratio amounted to 97.7% in the first half of 2006
compared to 97.2% in the first half of 2005.
This ratio records the increase in retrocession costs (net of losses, commissions and reinstatement
premiums). For the first half of 2006, the net cost of retrocession was 5.8 Combined Ratio Points,
compared to 2.1 Combined Ratio Points for the same period in 2005.
Gross written premiums in Life reinsurance reached EUR 528 million in the first half of 2006, and
are stable compared to the first half of 2005.
The increase in SCOR VIE gross written premiums in the first half of 2006 is in line with the 5%
increase that was announced on 28 February 2006 in the volume of
Life reinsurance expected premiums at 1
January 2006, which represent around 50% of the SCOR Life reinsurance portfolio, in which items are
underwritten throughout the year. Life reinsurance business is thus expanding in Europe, Canada and
Asia.
In the United States, a market where the ratings of the agency A.M. Best exercise considerable
influence on market activity, business remains affected by the Groups rating level.
Life reinsurance operating income reached EUR 35 million for the first half of 2006, compared to
EUR 28 million for the first half of 2005, representing an increase of 25%.
10 The combined ratio is equal to the sum of
claims, earned commissions, and general expenses, divided by the
earned premiums over the period under consideration, net of
retrocession.
23
3.10.2.3 Active investment management has led to an increase in the contribution made by investment
income in a more volatile financial market environment
Investment income for the first half of 2006 stood at EUR 239 million, compared to EUR 214 million
in the first half of
200511, representing an increase of 12%.
In the
first half of 2006, investment income before financial management
fees can be broken down as
follows: EUR 173 million in investment income (up 9% compared to the first half of 2005), EUR 22
million in changes in fair value by income (compared to EUR 29 million in the first half of 2005)
and EUR 47 million in capital gains from disposals net of writedowns (compared to EUR 18 million in
the first half of 2005). This investment result includes a slight foreign exchange loss of EUR 3
million.
At 30 June 2006, investments amounted to EUR 9,199 million, compared to EUR 9,635 million at 31
December 2005. Investments at 30 June 2006 were distributed as follows: bonds (54%), cash and
equivalents (19%), loans and receivables (14%), shares (10%) and real estate (3%).
|
|
|
11 |
|
The investment income of EUR 197 million at 30
June 2005 published in the Groups financial statements of 30 June 2005
was presented net of EUR 17 million in financial management expenses. |
24
3.10.3
Consolidated Interim Report at 30 June 2006
3.10.3.1 Key figures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS |
|
|
|
|
|
In EUR millions |
|
30 June 2006 |
|
|
31 December 2005 |
|
|
30 June 2005 |
|
|
|
Gross written premiums |
|
|
1,372 |
|
|
|
2,407 |
|
|
|
1,184 |
|
Gross earned premiums |
|
|
1,275 |
|
|
|
2,429 |
12 |
|
|
1,151 |
13 |
Current operating result |
|
|
188 |
|
|
|
242 |
|
|
|
140 |
|
Group net result after tax |
|
|
102 |
|
|
|
131 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
7,466 |
|
|
|
7,974 |
14 |
|
|
8,050 |
|
Cash and cash equivalent |
|
|
1,736 |
|
|
|
1,667 |
|
|
|
1,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net technical reserves and
liabilities relating to financial
contracts |
|
|
8,642 |
|
|
|
8,758 |
15 |
|
|
8,818 |
|
Loans and debts |
|
|
851 |
|
|
|
954 |
|
|
|
927 |
|
Group shareholders equity |
|
|
1,672 |
|
|
|
1,719 |
|
|
|
1,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In euros |
|
|
|
|
|
|
|
|
|
|
|
|
Number of SCOR shares in circulation |
|
|
968,769,070 |
|
|
|
968,769,070 |
|
|
|
819,269,070 |
|
Earnings per share |
|
|
0.11 |
|
|
|
0.15 |
|
|
|
0.09 |
|
Diluted earnings per share |
|
|
0.10 |
|
|
|
0.14 |
|
|
|
0.08 |
|
Net asset value per share |
|
|
1.75 |
|
|
|
1.79 |
|
|
|
1.77 |
|
Diluted net asset value per share |
|
|
1.73 |
|
|
|
1.78 |
|
|
|
1.78 |
|
Share price at the end of period |
|
|
1.71 |
|
|
|
1.82 |
|
|
|
1.66 |
|
|
Warning
Certain statements in this interim report are forward-looking and therefore subject to risks
and uncertainties that could cause actual results, performance or events to differ materially from
those in such statements. Details of these risks are set out in the companys 2005 Annual Report.
The Groups financial information is prepared on the basis of IFRS accounting and valuation rules
and interpretations issued and approved by the European Union, on
June, 30, 2006 as well as on
the rules of presentation for the recommendation CNC 99R01 as set out in the general regulations of
the AMF.
|
|
|
12 |
|
The Reference Document and the Group financial report at 30 June 2006 showed gross earned premiums of EUR 2,387
million at 31 December 2005. The difference is due to the reclassification of
reserves for unrealized claims (in decennial civil liability insurance outside
France) from premium reserves to claims reserves. See Note 1
Accounting principles applied in the notes to the consolidated financial
statements prepared under IFRS for the Group at 30 June 2006 in paragraph
3.10.3.5 of this Update Document. |
|
13 |
|
The Group financial report at 30 June 2005
indicated gross earned premiums of EUR 1,130 million at 30 June 2005. The
difference is due to the reclassification of reserves for unrealized claims (in
decennial civil liability insurance outside France) from premium reserves to
claims reserves. See Note 1 Applicable accounting principles in the
notes to the consolidated financial statements proposed under IFRS for the
Group at 30 June 2006 in paragraph 3.10.3.5 of this Update Document. |
|
14 |
|
The Reference Document showed investments of
EUR 8,082 million at 31 December 2005. The difference is due to a
reclassification involving reinsurance deposits on financial contracts. See
note 1 Accounting standards applied in the notes to the consolidated
financial statements prepared under IFRS of the Group at 30 June 2006 in
paragraph 3.10.3.5 of this Update Document. |
|
15 |
|
The Reference Document showed net technical
reserves and liabilities relating to financial contracts of EUR 8,858 million
at 31 December 2005. The difference is due to a reclassification involving
reinsurance deposits on financial contracts. See note 1 Accounting
standards applied in the notes to the consolidated financial statements
prepared under IFRS standards of the Group at 30 June 2006 in paragraph
3.10.3.5 of this Update Document. |
25
on 30 June 2006, as well as the presentation rules of CNC recommendation 99R01, in accordance with
the General Regulation of the AMF.
3.10.3.2 Consolidated financial statements established under IFRS
(a) Balance
sheet16
|
|
|
|
|
|
|
|
|
|
|
At 30 June |
|
At 31 December |
In EUR millions |
|
2006 |
|
2005 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
239 |
|
|
|
230 |
|
Goodwill |
|
|
200 |
|
|
|
200 |
|
Voba |
|
|
27 |
|
|
|
17 |
|
Other intangible assets |
|
|
12 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Tangible assets |
|
|
10 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
7,466 |
|
|
|
7,974 |
|
Real estate investments |
|
|
288 |
|
|
|
317 |
|
Available for sale investments |
|
|
5,609 |
|
|
|
5,964 |
|
Investments at fair value |
|
|
221 |
|
|
|
395 |
|
Loans and accounts receivable |
|
|
1,305 |
|
|
|
1,264 |
|
Derivative instruments |
|
|
43 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
Investments in related companies |
|
|
24 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
Retroceded technical reserves |
|
|
903 |
|
|
|
983 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
2,637 |
|
|
|
2,692 |
|
Deferred tax assets |
|
|
190 |
|
|
|
229 |
|
Assumed insurance and reinsurance accounts receivable |
|
|
1,374 |
|
|
|
1,326 |
|
Retrocession accounts receivable |
|
|
148 |
|
|
|
229 |
|
Tax due |
|
|
0 |
|
|
|
(0 |
) |
Other accounts receivable |
|
|
361 |
|
|
|
356 |
|
Deferred acquisition costs |
|
|
564 |
|
|
|
553 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
|
1,736 |
|
|
|
1,667 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
13,015 |
|
|
|
13,580 |
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
1,672 |
|
|
|
1,719 |
|
Share capital |
|
|
763 |
|
|
|
763 |
|
Additional paid-in capital |
|
|
147 |
|
|
|
147 |
|
Consolidated retained earnings |
|
|
687 |
|
|
|
661 |
|
Revaluation reserve |
|
|
(44 |
) |
|
|
5 |
|
Consolidated result |
|
|
102 |
|
|
|
131 |
|
Share based payment |
|
|
17 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
1,672 |
|
|
|
1,719 |
|
|
|
|
|
|
|
|
|
|
Financial debt |
|
|
851 |
|
|
|
954 |
|
Subordinated debt |
|
|
229 |
|
|
|
233 |
|
Financial debt securities |
|
|
491 |
|
|
|
520 |
|
Bank borrowings |
|
|
131 |
|
|
|
201 |
|
|
|
|
|
|
|
|
|
|
Contingency reserves |
|
|
52 |
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
Liabilities associated with contracts |
|
|
9,545 |
|
|
|
9,741 |
|
Technical reserves insurance contracts |
|
|
9,501 |
|
|
|
9,686 |
|
Liabilities relating to financial contracts |
|
|
44 |
|
|
|
55 |
|
Other liabilities |
|
|
896 |
|
|
|
1,105 |
|
Deferred income tax liabilities |
|
|
66 |
|
|
|
86 |
|
Derivative instruments liabilities |
|
|
3 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
Assumed insurance and reinsurance accounts payable |
|
|
183 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
Retrocession accounts payable |
|
|
482 |
|
|
|
645 |
|
|
|
|
|
|
|
|
|
|
Tax due |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Other accounts payable |
|
|
162 |
|
|
|
230 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
13,015 |
|
|
|
13,580 |
|
|
|
|
|
16 |
|
Certain reclassifications were made in the consolidated balance sheet at 31 December
2005 to ensure consistency of presentation with the balance sheet at 30 June 2006. See note 1
Accounting standards applied in the notes to the consolidated
financial statements prepared under IFRS for the Group at 30 June 2006 in paragraph 3.10.3.5 of this Update
Document. |
26
(b) Statement of income 17
Statement of income
|
|
|
|
|
|
|
|
|
|
|
|
|
In EUR millions |
|
At 30 June 2006 |
|
At 31 December 2005 |
|
At 30 June 2005 |
|
|
Gross written premiums |
|
|
1,372 |
|
|
|
2,407 |
|
|
|
1,184 |
|
Change in unearned premiums |
|
|
(97 |
) |
|
|
22 |
|
|
|
(33 |
) |
|
Gross earned premiums |
|
|
1,275 |
|
|
|
2,429 |
* |
|
|
1,151 |
** |
|
Other income from reinsurance operations |
|
|
3 |
|
|
|
1 |
|
|
|
0 |
|
Net investment income |
|
|
239 |
|
|
|
460 |
|
|
|
214 |
|
|
Total income from ordinary activities |
|
|
1,516 |
|
|
|
2,889 |
|
|
|
1,365 |
|
|
Claims and policy benefits |
|
|
(869 |
) |
|
|
(1872 |
) |
|
|
(855 |
) |
Gross commission on earned premiums |
|
|
(312 |
) |
|
|
(545 |
) |
|
|
(257 |
) |
Retroceded income/loss |
|
|
(38 |
) |
|
|
(22 |
) |
|
|
(12 |
) |
Investment management expenses |
|
|
(19 |
) |
|
|
(34 |
) |
|
|
(17 |
) |
Acquisition and operating expenses |
|
|
(51 |
) |
|
|
(99 |
) |
|
|
(53 |
) |
Other current operating expenses |
|
|
(38 |
) |
|
|
(60 |
) |
|
|
(28 |
) |
Other current operating income |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Total other current operating income and expenses |
|
|
(1,328 |
) |
|
|
(2,632 |
) |
|
|
(1,222 |
) |
|
CURRENT OPERATING RESULT |
|
|
188 |
|
|
|
257 |
|
|
|
143 |
|
|
Goodwill change in value |
|
|
0 |
|
|
|
(3 |
) |
|
|
(3 |
) |
Other operating expenses |
|
|
0 |
|
|
|
(13 |
) |
|
|
0 |
|
Other operating income |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
OPERATING RESULT |
|
|
188 |
|
|
|
242 |
|
|
|
140 |
|
|
Financing expenses |
|
|
(28 |
) |
|
|
(57 |
) |
|
|
(30 |
) |
Income from associated companies |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Income tax |
|
|
(58 |
) |
|
|
(54 |
) |
|
|
(38 |
) |
|
CONSOLIDATED NET INCOME |
|
|
102 |
|
|
|
131 |
|
|
|
72 |
|
|
Minority interests |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
GROUP NET INCOME |
|
|
102 |
|
|
|
131 |
|
|
|
72 |
|
|
|
|
|
* |
|
The Reference Document indicated an amount of gross earned premiums amounting to EUR 2,387
million at 31 December 2005. The difference is due to the reclassification of reserves for
unrealized claims (in decennial civil liability insurance outside France) from premium
reserves to claims reserves. See Note 1 Applicable accounting principles in the notes to
the consolidated financial statements prepared under IFRS for the Group at 30 June 2006 in
paragraph 3.10.3.5 of this Update Document. |
|
** |
|
The Group financial report at 30 June 2005 indicated an amount of gross earned premiums
amounting to EUR 1,130 million at June 30, 2005. The difference is due to the
reclassification of reserves for unrealized claims (in decennial civil liability insurance
outside France) from premium reserves to claims reserves. See Note 1
Accounting standards applied in the notes to the consolidated
financial statements prepared under IFRS for
the Group at 30 June 2006 in paragraph 3.10.3.5 of this Update Document. |
|
17 |
|
Certain reclassifications were made in the comparative statements of income at 30
June 2005 and 31 December 2005 to ensure consistency of presentation with the statement of
income at 30 June 2006. See note 1 Accounting standards applied to the consolidated
financial statements prepared under IFRS for the Group at 30 June 2006 in paragraph 3.10.3.5
of this Update Document. |
27
(c) Consolidated
data by segment18
Statement of income by segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In EUR millions |
|
At 30 June 2006 |
|
|
At 30 June 2005 |
|
|
|
|
|
|
|
Non |
|
Intra- |
|
|
|
|
|
|
|
|
|
|
Non |
|
Intra- |
|
|
|
|
|
Life |
|
Life |
|
group |
|
Total |
|
|
Life |
|
Life |
|
group |
|
Total |
|
|
|
|
|
|
Gross written premiums |
|
|
528 |
|
|
|
844 |
|
|
|
|
|
|
|
1,372 |
|
|
|
|
525 |
|
|
|
659 |
|
|
|
|
|
|
|
1,184 |
|
|
Change in unearned premiums |
|
|
(7 |
) |
|
|
(91 |
) |
|
|
|
|
|
|
(97 |
) |
|
|
|
(29 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(33 |
) |
|
|
|
|
|
|
Gross earned premiums |
|
|
521 |
|
|
|
753 |
|
|
|
0 |
|
|
|
1,275 |
|
|
|
|
496 |
|
|
|
655 |
19 |
|
|
|
|
|
|
1,151 |
|
|
|
|
|
|
|
Other income from insurance operations |
|
|
0 |
|
|
|
11 |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Investment income |
|
|
74 |
|
|
|
98 |
|
|
|
|
|
|
|
173 |
|
|
|
|
57 |
|
|
|
102 |
|
|
|
|
|
|
|
158 |
|
|
Realised gains/losses on investments |
|
|
3 |
|
|
|
52 |
|
|
|
|
|
|
|
55 |
|
|
|
|
19 |
|
|
|
(6 |
) |
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of investments |
|
|
4 |
|
|
|
18 |
|
|
|
|
|
|
|
22 |
|
|
|
|
1 |
|
|
|
28 |
|
|
|
|
|
|
|
29 |
|
|
Change in investment depreciation |
|
|
0 |
|
|
|
(9 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
|
(0 |
) |
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
Foreign exchange gains/losses |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
7 |
|
|
|
2 |
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Investment income |
|
|
80 |
|
|
|
159 |
|
|
|
0 |
|
|
|
239 |
|
|
|
|
84 |
|
|
|
131 |
|
|
|
0 |
|
|
|
214 |
|
|
|
|
|
|
|
Total income from ordinary business activities |
|
|
602 |
|
|
|
922 |
|
|
|
(8 |
) |
|
|
1,516 |
|
|
|
|
580 |
|
|
|
786 |
|
|
|
0 |
|
|
|
1,366 |
|
|
|
|
|
|
|
Claims and policy benefits |
|
|
(388 |
) |
|
|
(482 |
) |
|
|
|
|
|
|
(869 |
) |
|
|
|
(418 |
) |
|
|
(438 |
) |
|
|
|
|
|
|
(856 |
) |
|
Gross earned commissions |
|
|
(149 |
) |
|
|
(162 |
) |
|
|
|
|
|
|
(312 |
) |
|
|
|
(115 |
) |
|
|
(142 |
) |
|
|
|
|
|
|
(257 |
) |
|
Retrocession gross written premiums |
|
|
(37 |
) |
|
|
(62 |
) |
|
|
|
|
|
|
(98 |
) |
|
|
|
(15 |
) |
|
|
(51 |
) |
|
|
|
|
|
|
(66 |
) |
|
Variation in retrocession unearned premiums |
|
|
0 |
|
|
|
(1 |
) |
|
|
|
|
|
|
(0 |
) |
|
|
|
1 |
|
|
|
(3 |
) |
|
|
|
|
|
|
(2 |
) |
|
Retroceded earned premiums |
|
|
(36 |
) |
|
|
(62 |
) |
|
|
|
|
|
|
(98 |
) |
|
|
|
(14 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
(68 |
) |
|
Retroceded claims |
|
|
34 |
|
|
|
19 |
|
|
|
|
|
|
|
53 |
|
|
|
|
14 |
|
|
|
38 |
|
|
|
|
|
|
|
52 |
|
|
Retroceded earned commission |
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
7 |
|
|
|
|
1 |
|
|
|
3 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
Net income from retrocession |
|
|
2 |
|
|
|
(40 |
) |
|
|
|
|
|
|
(38 |
) |
|
|
|
1 |
|
|
|
(13 |
) |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
Investment management expenses |
|
|
(1 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
(1 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
(17 |
) |
|
Acquisition and operating expenses |
|
|
(16 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
(51 |
) |
|
|
|
(18 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
(53 |
) |
|
Other current operating expenses |
|
|
(14 |
) |
|
|
(32 |
) |
|
|
8 |
|
|
|
(38 |
) |
|
|
|
(1 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
(28 |
) |
|
Other current operating income |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
Total other current income and expenses |
|
|
(567 |
) |
|
|
(769 |
) |
|
|
8 |
|
|
|
(1,328 |
) |
|
|
|
(552 |
) |
|
|
(671 |
) |
|
|
0 |
|
|
|
(1,222 |
) |
|
|
|
|
|
|
CURRENT OPERATING RESULT |
|
|
35 |
|
|
|
153 |
|
|
|
0 |
|
|
|
188 |
|
|
|
|
28 |
|
|
|
115 |
|
|
|
0 |
|
|
|
143 |
|
|
|
|
|
|
|
Goodwill Change in value |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Other operating expenses |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Other operating income |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
0 |
|
|
|
(3 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
|
|
|
|
OPERATING RESULT |
|
|
35 |
|
|
|
153 |
|
|
|
0 |
|
|
|
188 |
|
|
|
|
28 |
|
|
|
112 |
|
|
|
0 |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
18 |
|
Some reclassifications were made in the
comparative statement of income at 30 June 2005 to ensure consistency of
presentation with the statement of income at 30 June 2006. See note 1
Accounting standards applied in the notes to the consolidated financial
statements prepared under IFRS for the Group at 30 June 2006 in
paragraph 3.10.3.5 of this Update Document. |
|
19 |
|
The Group financial report at 30 June 2005
recorded gross earned premiums of EUR 634 million at 30 June 2005. The
difference is due to the reclassification of reserves for unrealized
claims (in decennial and liability insurance outside France) from premium reserves to claim
reserves. See note 1 Accounting standards applied in the notes to the
consolidated financial statements prepared under IFRS for the Group at
30 June 2006 in paragraph 3.10.3.5 of this Update Document. |
28
Gross written premiums by geographic area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In EUR millions |
|
Life |
|
Non-life |
|
Total Group |
|
|
30/06/2006 |
|
30/06/2005 |
|
30/06/2006 |
|
30/06/2005 |
|
30/06/2006 |
|
30/06/2005 |
Gross written premiums |
|
|
528 |
|
|
|
100 |
% |
|
|
525 |
|
|
|
100 |
% |
|
|
844 |
|
|
|
100 |
% |
|
|
659 |
|
|
|
100 |
% |
|
|
1,372 |
|
|
|
100 |
% |
|
|
1,184 |
|
|
|
100 |
% |
Europe |
|
|
295 |
|
|
|
56 |
% |
|
|
283 |
|
|
|
54 |
% |
|
|
502 |
|
|
|
59 |
% |
|
|
376 |
|
|
|
57 |
% |
|
|
797 |
|
|
|
58 |
% |
|
|
659 |
|
|
|
56 |
% |
North America |
|
|
186 |
|
|
|
35 |
% |
|
|
200 |
|
|
|
38 |
% |
|
|
117 |
|
|
|
14 |
% |
|
|
85 |
|
|
|
13 |
% |
|
|
303 |
|
|
|
22 |
% |
|
|
285 |
|
|
|
24 |
% |
Asia and rest of the world |
|
|
47 |
|
|
|
9 |
% |
|
|
42 |
|
|
|
8 |
% |
|
|
225 |
|
|
|
27 |
% |
|
|
198 |
|
|
|
30 |
% |
|
|
271 |
|
|
|
20 |
% |
|
|
240 |
|
|
|
20 |
% |
The gross premiums are broken down according to the geographic location of the subsidiary.
(d) Shareholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
reserves |
|
|
|
|
|
|
|
|
|
Currency |
|
|
|
|
|
|
|
|
|
|
|
|
paid-in |
|
(includ |
|
Revaluation |
|
Treasury |
|
translation |
|
Share-based |
|
Other |
|
Total Group |
In EUR millions |
|
Capital |
|
capital |
|
income/loss) |
|
reserves |
|
stocks |
|
reserve |
|
payments |
|
reserves |
|
share |
|
Shareholders equity at 31 December 2004 in IFRS |
|
|
645 |
|
|
|
55 |
|
|
|
658 |
|
|
|
43 |
|
|
|
-13 |
|
|
|
-63 |
|
|
|
7 |
|
|
|
3 |
|
|
|
1,335 |
|
|
Assets held for sale (AFS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-89 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
-85 |
|
Hedging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shadow accounting gross of deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
|
|
|
|
-5 |
|
|
|
|
|
|
|
|
|
|
|
40 |
|
Effect of currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97 |
|
|
|
|
|
|
|
|
|
|
|
97 |
|
Payable or deferred taxes taken directly or assigned to capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 2 |
|
|
|
4 |
|
Share-based payments plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
Other variances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-2 |
|
|
|
|
|
|
|
|
|
|
|
-5 |
|
|
|
-7 |
|
|
Net revenue recognized in shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-38 |
|
|
|
-2 |
|
|
|
96 |
|
|
|
5 |
|
|
|
-7 |
|
|
|
54 |
|
|
Consolidated net income (loss) for the year |
|
|
|
|
|
|
|
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131 |
|
|
Total recognized income and losses for the period |
|
|
|
|
|
|
|
|
|
|
131 |
|
|
|
-38 |
|
|
|
-2 |
|
|
|
96 |
|
|
|
5 |
|
|
|
-7 |
|
|
|
185 |
|
|
Capital transactions |
|
|
118 |
|
|
|
106 |
|
|
|
-1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223 |
|
Dividends paid |
|
|
|
|
|
|
-14 |
|
|
|
-10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-24 |
|
|
Shaerholders equity at 31 December 2005 |
|
|
763 |
|
|
|
147 |
|
|
|
778 |
|
|
|
5 |
|
|
|
-15 |
|
|
|
33 |
|
|
|
12 |
|
|
|
-4 |
|
|
|
1,719 |
|
|
Assets held for sale (AFS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-126 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
-123 |
|
Hedging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shadow accounting gross of deferred taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 |
|
Effect of currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-36 |
|
|
|
|
|
|
|
|
|
|
|
-36 |
|
Payable or deferred taxes taken directly or assigned to capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
-1 |
|
|
|
|
|
|
|
-5 |
|
|
|
19 |
|
Share-based payments plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
5 |
|
Other variances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-18 |
|
|
Net revenue recognized in shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-49 |
|
|
|
-18 |
|
|
|
-34 |
|
|
|
5 |
|
|
|
-5 |
|
|
|
-101 |
|
|
Consolidated
net income (loss) at 30 June 2006 |
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102 |
|
|
Total recognized income and losses for the period |
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
-49 |
|
|
|
-18 |
|
|
|
-34 |
|
|
|
5 |
|
|
|
-5 |
|
|
|
1 |
|
|
Capital transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
|
|
|
|
|
|
|
|
-48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-48 |
|
|
Shareholders
equity at 30 June 2006 in IFRS |
|
|
763 |
|
|
|
147 |
|
|
|
832 |
|
|
|
-44 |
|
|
|
-33 |
|
|
|
-1 |
|
|
|
17 |
|
|
|
-9 |
|
|
|
1,672 |
|
|
29
(e) Consolidated
off-balance sheet items
|
|
|
|
|
|
|
|
|
In EUR millions |
|
At 30 June 2006 |
|
|
At 31 December 2005 |
|
|
Commitments received |
|
|
1041 |
|
|
|
1201 |
|
|
|
|
|
|
|
|
|
|
Unused credit lines |
|
|
46 |
|
|
|
199 |
|
Endorsments and sureties |
|
|
24 |
|
|
|
12 |
|
Letters of credit |
|
|
971 |
|
|
|
990 |
|
Other commitments |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Commitments given |
|
|
2,630 |
|
|
|
2,912 |
|
|
|
|
|
|
|
|
|
|
Endorsments and sureties |
|
|
40 |
|
|
|
25 |
|
Letters of credit |
|
|
581 |
|
|
|
645 |
|
Collateralised securities |
|
|
1 894 |
|
|
|
2 080 |
|
Other commitments |
|
|
115 |
|
|
|
162 |
|
|
|
|
|
|
|
|
|
|
Securities received as collateral from reinsurers and
retrocessionnaires |
|
|
31 |
|
|
|
27 |
|
30
Consolidated
statement of cash flow
|
|
|
|
|
|
|
|
|
In EUR millions |
|
At 30 June 2006 |
|
|
At 31 December 2005 |
|
|
Net income |
|
|
102 |
|
|
|
131 |
|
|
Realized gains/losses on investment |
|
|
(55 |
) |
|
|
(90 |
) |
Change in writedowns and other provisions |
|
|
15 |
|
|
|
38 |
|
Change in deferred acquisition costs |
|
|
(1 |
) |
|
|
(10 |
) |
Net appropriations to technical reserves and financial liabilities |
|
|
63 |
|
|
|
(789 |
) |
Change in fair value of financial instruments accounted for at trading (excl. Cash and cash equivalent) |
|
|
(22 |
) |
|
|
(39 |
) |
Other items not involving cash flow included in operating income |
|
|
56 |
|
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
Operating cash flow excl. working capital changes |
|
|
157 |
|
|
|
(796 |
) |
|
Change in loans and receivables |
|
|
40 |
|
|
|
174 |
|
Cash flows from other assets and liabilities |
|
|
(192 |
) |
|
|
28 |
|
Net taxes paid |
|
|
0 |
|
|
|
0 |
|
|
Net operating Cash Flow |
|
|
5 |
|
|
|
(594 |
) |
|
Acquisitions of consolidated entities, net of cash acquired |
|
|
0 |
|
|
|
0 |
|
Disposal of consolidated entities, net of cash ceded |
|
|
0 |
|
|
|
0 |
|
|
Cash flows linked to change in scope |
|
|
0 |
|
|
|
0 |
|
|
Purchase/sale of real estate investments |
|
|
36 |
|
|
|
1 |
|
Purchase/sale of financial investments |
|
|
226 |
|
|
|
542 |
|
|
Cash flows linked to purchase / sale and maturity of financial assets |
|
|
262 |
|
|
|
543 |
|
|
Sale of tangible and intangible assets |
|
|
0 |
|
|
|
0 |
|
Purchase of tangible and intangible assets |
|
|
0 |
|
|
|
0 |
|
|
Cash flows linked to purchase and sale of tangible and intangible assets |
|
|
0 |
|
|
|
0 |
|
|
Net cash flows from investing activities |
|
|
262 |
|
|
|
543 |
|
|
Inssuance of capital instruments |
|
|
0 |
|
|
|
224 |
|
Reimbursment of capital instruments |
|
|
0 |
|
|
|
(183 |
) |
Transactions in treasury shares |
|
|
(18 |
) |
|
|
(5 |
) |
Dividends paid |
|
|
(48 |
) |
|
|
(24 |
) |
|
Cash flows linked to transactions with shareholders |
|
|
(66 |
) |
|
|
12 |
|
|
Cash generated by issuance of financial debt |
|
|
0 |
|
|
|
9 |
|
Cash impacted by reimbursment of financial debt |
|
|
(88 |
) |
|
|
(268 |
) |
Other variations |
|
|
0 |
|
|
|
0 |
|
|
Cash flows linked to Group financing |
|
|
(88 |
) |
|
|
(259 |
) |
|
Net cash flows from financing activities |
|
|
(154 |
) |
|
|
(247 |
) |
|
|
|
|
|
|
|
|
0 |
|
|
Cash and
cash equivalents as at 1 January |
|
|
1,667 |
|
|
|
1,825 |
|
|
Cash flows from operating activities |
|
|
5 |
|
|
|
(594 |
) |
Cash flows from investing activities |
|
|
262 |
|
|
|
543 |
|
Cash flows from financing activities |
|
|
(154 |
) |
|
|
(247 |
) |
Foreign exchange variation impact on cash equivalents |
|
|
(44 |
) |
|
|
140 |
|
|
Cash and cash equivalents at the end of the period |
|
|
1,736 |
|
|
|
1,667 |
|
|
31
3.10.3.3 Notes to the financial statements
(a) Significant events
Group net
income for the first half year of 2006 is EUR 102 million.
The gross
written premiums amounted to EUR 1,372 million, up 16% compared
to the first half of
2005. This growth is due to the sharp increase in Non-Life business
treaties renewed at 1 January 2006, and the expansion
of large corporate accounts business benefiting notably from the
renewal of a part of the ALEA Europes portfolio on
which SCOR has acquired the rights of renewal in December 2005.
The
provision for restructuring has been reversed, since the compensation
has been paid to the leaving staff.
(b) Turnover
Gross written premiums at 30 June 2006 were up 16% at variable exchange rates when compared to the
same period in 2005. They amounted to EUR 1,372 million versus EUR
1,184 million at the end of June 2005.
(c) Written premiums Life/ Non-Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June |
|
At 30 June |
|
|
In EUR millions |
|
2006 |
|
2005 |
|
Variation |
|
Gross Written Premiums Non-Life |
|
|
844 |
|
|
|
659 |
|
|
|
+28 |
% |
Gross Written Premiums Life |
|
|
528 |
|
|
|
525 |
|
|
|
+0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Written Premiums |
|
|
1,372 |
|
|
|
1,184 |
|
|
|
+16 |
% |
|
In Non-Life Reinsurance, the increase of 28% is mainly due to the new Group underwriting policy and
the business development observed for the renewals since the
Groups rating upgrade20
which occurred in August 2005, and since the acquisition in December 2005 of the renewal
rights to the Alea Europe treaties.
In Life
Reinsurance, gross written premiums were stable. This business segment represents 38% of
the Groups overall business versus 44% at 30 June 2005.
The
geographical distribution of the Groups turnover at the end of June 2006 is as follows: Europe
58% (56% at 30 June 2005), North America 22% (24% at 30 June 2005), Asia and the rest of the world 20%
(20% at 30 June 2005)21.
|
|
|
20 |
|
By the rating agency Standard & Poors. |
|
21 |
|
The distribution indicated in the Group half-yearly report at
30 June 2005 was the distribution of written premiums for
Life Reinsurance (54% in Europe, 38% in North America, 8% in Asia and the rest of the world). |
32
(d) Technical result
The
combined ratio (claims + commissions + overheads) / premiums earned in Non-Life
Reinsurance was 98.2% at 30 June 2006 (97.7% excluding CRP)
versus 99.7% for the same period of
2005 (97.2% excluding CRP). These ratios show the technical performance of recent underwriting
years (2002 and after).
Net combined ratio* Non-Life
* (claims
+ commisions + overheads) / premiums earned
The ratio
is calculated net of retrocession.
The net
combined ratios at end June 2005 and 2006 are based on the
ultimate loss of the technical
reserves established by Group actuaries.
33
(e) Financial Results
Net
investment revenues net of fees (excluding borrowing costs) at 30
June 2006 were EUR 220 million,
versus EUR 197 million at 30 June 2005, an increase of 12%. This development is mainly due to
an increase of realized capital gains and an increase of realized
gains and losses on asset sales. The change in fair value
by income amounted to EUR 22 million versus EUR 29 million at 30 June 2005. Asset management
expenses amounted to EUR 19 million at 30 June 2006
versus EUR 17 million at 30 June 2005.
Investment income (excluding investment management expenses)
(f) Tax
The tax
expense at 30 June 2006 is EUR 58 million versus EUR
38 million at 30 June 2005.
The company has received an adjustment proposal dated 26 July 2006 following a control of the
accounts of SCOR SA for the period 1 January 2002 to 31 December 2003.
(g) Net income for the period
Group net income is EUR 102 million compared to EUR 72 million for the same period in 2005.
34
3.10.3.4 Post-closing events
Acquisition of Revios Rückversicherung AG
The SCOR
Board of directors approved, on 4 July 2006, the execution of an agreement relating
to the acquisition of Revios Rückversicherung
AG22.
Based in Cologne, Revios Rückversicherung
AG is the former Life reinsurance unit of the Gerling Global Re group, which
has successfully developed autonomously since 2002. Revios has since become the leading European
reinsurer specializing in Life reinsurance, with offices in 17 countries. In 2005 Revios underwrote
a premium volume of EUR
1,24223 million in 42 countries throughout the world.
This
combination is fully in line with the SCOR group strategy in place since 2002 and in
particular with the SCOR Moving Forward Plan published in September 2004.
The total
purchase price for the planned acquisition of 100% of the equity capital of Revios
Rückversicherung AG is EUR 605 million. SCOR will also be reimbursing EUR 50 million of Revios
Rückversicherung AGs outstanding subordinated debt to GLOBALE
Rückversicherungs-Aktiengesellschaft24.
SCOR will
finance this acquisition through:
|
|
a rights issue for approximately EUR 300 million, |
|
|
|
a deeply subordinated debt issue up to EUR 350 million. |
This transaction is subject to obtaining the required regulatory and antitrust approvals, and
should be consummated by the fourth quarter of
200625.
Subordinated debt issue for the Revios acquisition
The EUR
350 million deeply subordinated bond issued launched on 19 July 2006 by SCOR, as part of the
financing of the Revios acquisition, has been a great success. The interest rate for the
notes is 6.154%.
3.10.3.5 NOTE 1 Accounting standards applied
Accounting methods and principles
Presentation of applied standards and interpretations
|
|
|
22 |
|
The completion of this acquisition remains subject to the
satisfaction of various conditions precedent that are
customary for this type of transaction, as well as the approval of insurance and reinsurance
regulators and the antitrust authorities in various countries. As of
the date of this Update Document, all authorizations of the
competition authorities to whom the proposed merger was submitted
have been obtained. For additional information, see paragraph 3.11.4
of this Update Document. |
|
23 |
|
Following publication of Revios 2005 IFRS audited consolidated financial statements on 7 September 2006,
this amount was EUR 1,243.1 million. |
|
24 |
|
SCOR will also pay interest on (a) the acquisition price for the period between the signing and closing of
the acquisition transaction and (b) on Revios subordinated debt for the period between 1 January 2006 and the
date the transaction is closed. |
|
25 |
|
As of the date of this Update Document, all authorizations of the
competition authorities to whom the proposed merger was submitted
have been obtained. For additional information, see paragraph 3.11.4
of this Update Document. |
35
The Groups financial statements were prepared in accordance with international accounting
standards (International Financial Reporting Standards IFRS) and the interpretations issued on
30 June 2006, as adopted by the European Union. They take into account the recommendation CNC
99R01 as set out in the general regulations of the AMF.
SCORs financial statements at 30 June 2006 did not include the potential impact of standards and
interpretations, the application of which may be delayed until the opening of the accounts on 1
January 2007.
The accounting and assessment methods adopted for the financial statements at the end of 30 June
2006 were the same as those applied at the end of 31 December 2005, except for the changes set out
below, related to the fair value option by result.
Moreover, the new standards and interpretations adopted by European Union and applicable on 30 June
2006, have no impact on the Group. In particular, the fair value option introduced under IAS 39, by
European Commission regulation 1864/2005, modifying EU regulation No. 1725/2003 and applicable since
1 January 2006, has had no effect on the accounts for the first half 2006 and would have had no
effect on the previous year accounts.
Some reclassifications have been done in the balance sheet at 31 December 2005 and
in the statements of income at 30 June 2005 and at 31 December 2005, in order to ensure the
consistency of the presentation with the balance sheet and the statement of income at 30 June 2006.
Accounting options for first-time adoption of IFRS
IFRS financial information is established in accordance with the provisions of IFRS 1 First-Time
Adoption of International Financial Reporting Standards. For this first financial year, SCOR has
adopted the following additional options in accordance with IFRS 1 with regard to the retrospective
accounting of assets and liabilities under IFRS.
Business combinations
SCOR has opted not to restate business combinations prior to 1 January 2004, as permitted under
IFRS 3. As permitted under IFRS 1, SCOR will not apply IAS 21 Effects of Changes in Foreign
Exchange Rates retrospectively to goodwill resulting from business combinations that occurred
before the transition to IFRS. Consequently, goodwill remains in the functional currency of the
acquiring entity.
Actuarial gains and losses on pension plans
SCOR has decided to adopt the option provided for in IFRS 1, whereby unrecognized actuarial gains
and losses are recorded against consolidated shareholders equity at 1 January 2004.
Unrecognized actuarial gains and losses (SORIES) after 1 January 2004 are reflected in
shareholders equity.
Translation adjustments
With regard to the conversion into euros of subsidiary accounts having a foreign functional
currency, SCOR transferred Translation adjustments at 1 January 2004 into consolidated reserves.
The new IFRS value of translation adjustments at 1 January 2004 is therefore reduced to zero. In
the event of the subsequent disposal of these subsidiaries, the income or
36
loss from the disposal will not include the recovery of exchange rate difference prior to 1 January, but will include
translation adjustments recorded after 1 January 2004.
Assessment of certain intangible / tangible assets at fair value
SCOR opted not to apply the option offered by IFRS 1 that allows for the assessment at 1 January
2004 of certain intangible and tangible assets at their fair value on that date.
Share-based compensation
SCOR opted to apply the provisions of IFRS 2 solely to equity-based compensation granted after 7
November 2002, for which the rights acquisition date falls after 31 December 2003.
IFRS consolidation principles
Methods of consolidation
All the companies in which SCOR has a controlling interest, which include companies in which it has
the power to direct financial and operational policy in order to obtain benefits from their
operations, are fully consolidated.
Subsidiaries are consolidated as of the moment the Group takes control of them until the date on
which this control is transferred outside the Group. Where control of a subsidiary is lost, the
consolidated financial statements for the year include profit and loss for the period during which
SCOR held control.
The Groups investment in an affiliated company is recorded in the accounts using the equity
method. An affiliated company is an entity in which the Group exercises significant influence but
which is neither a subsidiary of the Group nor a joint venture.
The Group does not have any equity interest in joint ventures.
The Group controls in substance a separate legal structure (ad hoc entity) that it consolidates
in the absence of any capital links. The following assessment criteria were used to determine the
existence of control:
|
|
The entitys business is conducted exclusively on behalf of the Group, so that the Group may enjoy the benefits; |
|
|
|
The Group holds the decision-making and management power to obtain the maximum benefits relating to the entitys
operational activity; this power was delegated through the implementation of a self-management system; |
|
|
|
The Group may benefit from the majority of the entitys advantages; |
|
|
|
The Group retains the majority of the risks relating to the entity. |
The Group
also fully consolidates the mutual funds that it holds as part of its
business. These entities could not be consolidated under French
accounting standards.
37
Harmonisation of accounting principles
The financial statements of the subsidiaries are prepared for the same accounting period as that of
the parent company. Consolidation adjustments may be made in order to harmonise all the Groups
accounting methods and principles.
All intra-group balances and transactions including internal results resulting from intra-company
transactions are fully eliminated.
Translation methods
The Groups consolidated financial statements are presented in euros (EUR) and all values are
rounded off to millions of euros except where expressly stated otherwise.
Translating the financial statements of a foreign entity
Where the functional currency of Group entities is not the same as the reporting currency used to
present the Groups consolidated financial statements, the balance sheet is translated using the
closing date exchange rate and the income statement is converted using the average exchange rate
for the period. Exchange rates differences are posted directly as equity under translation
adjustments.
Translation of transactions denominated in foreign currencies
Transactions denominated in foreign currencies (currencies other than the functional currency) are
converted into the functional currency at the rate of exchange in force on the date of the
transaction (for practical purposes, an average rate is used).
At each closing date, the entity must convert the foreign-currency items on its balance sheet into
the functional currency, using the following procedures:
- |
|
monetary items (specifically bond investments, accounts receivable
and payable, technical insurance assets and liabilities) are
converted at the closing date exchange rate and the resulting
gains and losses are recorded in the income statement, |
|
- |
|
non-monetary items are converted: |
|
|
|
using the exchange rate on the transaction date if they are
assessed at historical cost (particularly real estate
investments) and, |
|
|
|
|
using the exchange rate at the date of the fair value
assessment if they are assessed at fair value (particularly
equity investments). |
- |
|
when a gain or loss on a non-monetary item is recorded directly in
shareholders equity (shares available for sale, for example), the
exchange adjustment resulting from the conversion of this item is
also directly recorded in shareholders equity. Conversely, when
a gain or loss on a non-monetary item is recorded in profit and
loss (shares at fair value by income; for example), the exchange
adjustment resulting from the conversion of this item is also
recorded on the income statement. |
|
- |
|
the gains and losses resulting from the conversion of hedging on
foreign net investments are recorded in shareholders equity until
the withdrawal of the net investments, at which time they are
recorded on the income statement. |
38
Goodwill and business combinations
Goodwill represents the excess of an acquisition cost over the fair value of the Groups share of
the acquired companys net assets at the date of acquisition. The goodwill on fully consolidated
subsidiaries is included under intangible assets. Goodwill on companies accounted for by the equity
method is included in the value of securities accounted for by the equity method.
Goodwill is recorded at historical cost, less any possible accumulated loss in value.
In order to establish possible losses in value, goodwill is allocated to each cash-generating unit
(CGU). A CGU is defined as an entity with separate identifiable cash flows. Each CGU represents the
Groups investment in each country in which it is active according to the primary segment
information, either non-life reinsurance or life reinsurance.
Each CGU to which goodwill is allocated should correspond as closely as possible to the level at
which the group is monitoring the rate of return on its investment. A CGU should not be any larger
than a primary or secondary level segment as defined for the needs of segment reporting set forth
under IAS 14.
In order to assess any loss in value, a goodwill impairment test is conducted:
- |
|
each year on the same date for each cash-generating unit, but not necessarily on the
closing date; |
|
- |
|
more frequently if an unfavourable event occurs between the two annual tests; |
|
- |
|
mandatorily before the completion of entity acquisition. |
A loss in value is recorded where the net book value of the CGU, to which goodwill has been
allocated, is higher than its recoverable value. The recoverable value is the higher amount
between: (1) the fair value net of sales costs and (2) the value in use (future discounted cash
flow) of this unit.
If the assets of the CGU Group or the unit included in the CGU group to which goodwill has been
allocated are tested for impairment on the same date as the CGU that includes the goodwill (or if
there is a loss in value index for one of the assets), this test should be conducted before the
goodwill impairment test.
Accounting principles
The
financial information has been prepared in accordance with the
historical cost agreement, with the
exception of certain categories of assets and liabilities. The relevant categories are mentioned in
the following notes. The consolidated IFRS information is presented in euros and all values are
rounded off to the nearest million unless otherwise indicated.
Use of estimates
In order to prepare the financial information in accordance with generally accepted accounting
principles, certain assumptions were made. Assumptions are made that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the
financial statements and the amounts reported as income and loss for the year.
39
Management reviews these estimates and assessments constantly, based on its past experience and on
various other factors it deems reasonable, thereby reaching its assessments on the carrying value
of the assets and liabilities. The actual results could differ substantially from these estimates
under different assumptions or conditions that may arise at a later date.
Real estate assets
Classification of buildings:
All buildings currently held by the Group are investment properties. In certain cases, buildings
may be partially occupied by entities of the Group.
Accounting method
The buildings are recorded at historical amortized cost. Their value is broken down as follows:
- |
|
land, not amortized; |
|
- |
|
four technical components: |
|
* |
|
structure, or carcass, depreciated over a term of
30 to 80 years according to the type of construction; |
|
|
* |
|
wind and water tightness, depreciated over a
period of 30 years; |
|
|
* |
|
technical installations, depreciated over a
term of 20 years; |
|
|
* |
|
decor fixtures and improvements,
depreciated over a term of 10 to 15 years according to type. |
The costs, rights and acquisition (or development) fees are integrated in the value of the
building.
The relative weight of each technical component and the length of depreciation are set according to
a schedule of components showing eight types of construction. This schedule was prepared based on
the Groups own experience and on schedules prepared by professional authorities.
Appraisal
Each building is subject to an in-depth analysis of its market value or fair value by an
independent appraiser every 5 years at year-end. Its market value is reassessed by the same
appraiser at the end of each of the 4 subsequent years depending on the changes that have occurred
to its rental status, works completed and developments in the local real estate market.
If the market value of a building appears lower than its net book value, a decrease in value is
recorded as a loss equal to the difference between its utility value and the net book value. With
regard to investment properties, their utility value is considered a long-term investment based
primarily on the sum of estimated future cash flows that are discounted on the basis of current
market assumptions. SCOR has not retained any residual value.
Finance lease
Investment properties financed by financial rental agreements are recorded on the balance sheet as
assets based on the current value of rents and the option to buy. Once they have been
40
recorded on the balance sheet, they are treated like other investment properties at amortized
historic cost.
On the liabilities side, a corresponding debt is recorded under financial liabilities. It is
amortized in accordance with the effective interest rate method.
Leasing agreements
In December 2003, the SCOR Group sold its headquarters building. A net capital gain of EUR 44
million was realized under local standards.
The Group will remain a tenant of this building until December 2012. The owner of the building has
a bank guarantee corresponding to SCORs rating. SCOR has pledged an asset amount of the same value
to the bank that issued this guarantee.
In application of IAS 17, this capital gain was maintained in the IFRS accounts.
Rental income
Rental income from investment properties is recorded on a straight-line basis over the term of the
current rental agreements.
Financial investments
The Group classifies its financial assets in the following categories: available-for-sale financial
assets, fair market assets by income, loans and other accounts receivable and derivative
instruments. There are currently no assets classified as assets held to maturity.
The sale and purchase of assets is entered in the accounts on the settlement date. Once it has been
posted, an asset is assessed according to its asset category, determined according to the methods
set forth below.
Financial assets are taken off the balance sheet when the contractual rights to the cash flow of
the financial asset expire or are transferred, and when the Group has substantially transferred the
risks and advantages inherent to ownership of the financial asset.
At each closing date, the Group assesses whether there is an objective indication of loss in value.
The amount of the loss in value is posted in the accounts by asset category, in accordance with the
terms and conditions set forth below.
For equity instruments listed on an active market, a drop in price of more than 20% or a consistent
decline over a period of more than six months constitutes an objective indication of loss in value.
For unlisted equity instruments, fair value is determined according to commonly used valuation
techniques. For debt instruments and loans and accounts receivable, an objective indicator of a
loss in value relates to a proven credit risk.
Available-for-sale financial assets
Available-for-sale assets include non-derivative assets that are classified as either available for
sale or those that are allocated to any other category.
Available-for-sale financial assets are posted at their fair value. Unrealized profits and losses
resulting from variations in the fair value of a non-hedged asset are recorded directly in
shareholders equity, with the exception of profits and losses from foreign exchange gains and
losses on a monetary financial asset held for sale which are recorded on the income statement
41
for the share of exchange profits and losses applied at amortized cost, and in shareholders equity
for the portion of profits and losses related to fair value. Foreign exchange profits and losses on
the fair value of non-monetary financial available-for-sale assets are recorded under shareholders
equity.
When there is an objective indication of loss in value, the amount of the accumulated loss posted
directly to shareholders equity is recorded on the income statement. Losses in value may only be
carried forward on debt instruments when the fair value increases during a subsequent financial
year due to an event that occurs after the loss in value has been posted.
When the asset is sold, all the accumulated equity gains and losses are included in the capital
gains and losses from the sale of investments on the income statement, less the amounts previously
posted to income.
Interest on debt instruments is calculated in accordance with the interest method in effect, which
integrates the amortization of premiums/discounts and is recorded on the income statement.
Dividends on equity instruments are recorded on the income statement when the Groups right to
receive payment for them has been established.
Financial assets at fair value by income
This category includes classes of assets, that meet the criteria of the fair value option as
introduced by the amendment to the international accounting standard IAS 39, especially hybrid
derivatives instruments including a non-derivative host contract and an embedded derivative,
derivative instruments except hedging derivatives, financial assets held for trading and groups of
assets for which performance is evaluated on a fair value basis.
The main financial assets evaluated at fair value by income are securities held in major mutual
funds, bonds convertible into shares, derivatives, investments representing Unit-linked policies
and certain shares.
Profits and losses from changes in the fair value of financial assets classified under this
category are reflected on the income statement in the period in which they occur.
Loans and accounts receivable
This category includes non-derivative financial assets where payment is fixed or fixable and which
are not listed on an active market, with the exception of accounts receivable from reinsurance
transactions.
These assets are recognized at amortized cost using the effective interest rate method where this
method has a significant impact compared to the nominal contractual method. Loans and short-term
accounts receivable are recorded at cost.
Cash and cash equivalents
The heading Cash and cash equivalent includes cash, negative bank balances and short term loans
(cash mutual funds).
42
Treasury
stocks
Treasury
stocks are deducted from shareholders equity, regardless of the purpose for which they
are held, and the related income or loss is eliminated from the consolidated income statement.
Financial liabilities
Financial liabilities, with the exception of liabilities resulting from reinsurance transactions,
are classified into financial debts, financial liability instruments and other liabilities.
Subordinated financial debts or debt securities
These items combine the various subordinated or unsubordinated bonds issued by the Group.
These debts are posted at amortized cost using the effective interest rate method.
Borrowings that include a derivative instrument have been stripped. The portion that relates to the
equity component, determined on the date of issue, is reflected in shareholders equity. It is not
subsequently reassessed.
Interest
on financial debts are posted under charges.
Financial debts owed to entities in the banking sector
This item combines mortgage loans and medium-term notes. These debts are recognized at amortized
cost using the effective interest rate method where this method has a significant impact compared
to the nominal contractual rate method.
Interest on financial debts is posted under charges.
Derivative and hedging instruments
Derivative instruments are recorded at fair value from inception and are assessed at fair value at
each account closure.
The accounting method varies according to whether the derivative instrument is designated as a
hedging instrument or not, as described in the note below Hedging Instruments.
When the Group has not designated the derivative as a hedging instrument, profits and losses
resulting from the variation of the fair value of the instrument are recorded under income in the
period in which they occur. The Group uses the following derivative instruments to reduce its
exposure to various risks: interest rate swaps, futures and foreign currency forward contracts,
caps and floors, stock option puts and calls.
Embedded derivative instruments
An embedded derivative is a component of a hybrid instrument which includes a non-derivative host
contract, which causes part of the hybrid instruments cash flow to vary in the same way as that of
a freestanding derivative.
The embedded derivative is separate from the host contract and is posted as a derivative where its
economic features and risks are not closely linked to the economic features of the host contract,
where the embedded instrument has the same conditions as a separate derivative instrument, and
where the embedded instrument is not assessed at fair value through the income statement.
43
Where an embedded derivative has been separated from its host contract, it is posted in accordance
with the provisions relating to the posting of derivative financial instruments.
Where the embedded derivative represents a significant part of the instrument and cannot be
separated from the host contract, the hybrid instrument is treated as an instrument held for
trading. Profits and losses resulting from variations in the fair value of the hybrid are posted in
profit and loss in the period during which they occur.
Hedging instruments
A hedging instrument is a designated derivative instrument or, in the case of a single foreign
currency hedge, a designated non-derivative asset or liability where the fair value or cash flow
offsets variations in the fair value or cash flow of the hedged item.
The hedged
item may be an asset, a liability, a firm underwriting, a highly
profitable scheduled
transaction or a net investment in a foreign business that exposes the Group to fair market
valuation risk or future cash flow risk, and which is designated as being hedged.
The performance of hedges is monitored periodically in order to ensure, with regard to variations
in the fair value or cash flow of the item, the degree of compensation attributable to hedged risk
through variations in fair value or cash flow of the hedged instrument.
Hedges for net investments in a foreign business are recorded as follows:
- |
|
the portion of profit or loss on the hedging instrument considered as the effective
portion of the hedge is recorded directly in shareholders equity; |
|
- |
|
the ineffective portion of the hedge is recorded on the income statement. |
The
primary hedging instruments consist of forward foreign currency
forward purchases and sales.
Accounting principles and methods specific to reinsurance transactions
Classification and accounting treatment of reinsurance treaties
The reinsurance treaties accepted and retroceded by the Group are subject to different IFRS
accounting rules depending on whether they fall under IFRS4 or IAS39.
Reinsurance acceptance and retrocession transactions that involve a significant insurance risk
transfer are posted in the accounts in accordance with IFRS4, in other words according to the
accounting principles in existence prior to the implementation of IFRS standards and used until 31
December 2004 to prepare SCORs consolidated accounts in conformity with CRC 2000-05, with the
exception of the equalization reserves described below.
Acceptance and retrocession transactions that do not transfer a significant risk are posted in the
accounts in accordance with IAS39, which means that while premiums collected are no longer recognized as
premium income, and technical reserves and deferred acquisition expenses that are recorded as
assets or liabilities on the balance sheet are reclassified as financial assets or liabilities by
assimilation to a deposit as financial contract liabilities and financial contract assets on
the balance sheet. These deposits are assessed on the basis of financial flows alone and no longer
on the basis of estimated maximum fluctuations as set forth in the accounting principles applicable
to insurance transactions.
Premium income from these transactions is equal to the deductions made by SCOR. It is recorded
under other operating income on the income statement.
44
French accounting principles applicable to contracts classified as insurance contracts under IFRS 4
Accounting for ceding companies accounts
SCOR Group reinsurance companies record accounts transmitted by ceding companies upon receipt. At
year end, estimates are made for those accounts not yet received from ceding companies. Under this
method, the situation recorded in the financial statements reflects as closely as possible the real
reinsurance commitments made by the Group. This method impacts the majority of contracts
underwritten during the year, and even the prior year.
Recording of reinsurance estimates
Non-Life premiums recorded in the year reflect the estimated premium expected at the time of
writing of the policy. It is regularly reviewed during the year to adjust for possible adjustment
in premiums paid under the policy. An unearned premium reserve is calculated, either pro rata
temporis contract by contract, or using a statistical method when this yields a result close to
that obtained via the contract-by-contract method.
The difference between the final premiums received, net of commissions, and premiums reported by
ceding companies, is recorded under accounts receivable or liabilities arising from accepted
reinsurance transactions. The difference between expected final loss experience based on earned
premiums thus calculated and losses reported by ceding companies is recognized in unpaid claims
reserves under liabilities.
In Life reinsurance for so-called insurance policies, given the type of business written,
valuations are obtained by estimating ceding companies missing accounts in addition to information
actually received and booked. For the sake of consistency with the Non-Life sector, estimated
claims are booked under claims reserves.
Claims reserves
Claims reserves must be sufficient to cover all of the Groups liabilities.
In Non-Life reinsurance, SCOR is required to maintain its reserves at a sufficient level to cover
the estimated amount of its direct commitments and adjustment expenses for reported and unreported
claims, at the end of each fiscal year (net of estimates of recovery and subrogation). These
reserves, which pertain to all claims, whether reported or not yet reported, are calculated on the
basis of their ultimate cost undiscounted, except for workers compensation claims in the United
States, corresponding to long tail risks with predictable loss development, which are
discounted in the U.S. and in the Bermudas, as allowed in statutory accounts of these entities. Claims expense is estimated at the
policys expiration in the light of statistical experience of similar policies. Claims reserves
including estimated claims paid are calculated in light of expected earnings and supplement the
information communicated by assigning companies.
In Life reinsurance, estimates based on statistical experience and information supplied by the
underwriters are added to mathematical reserves recorded by the ceding companies.
Acquisition costs of reinsurance transactions
In reinsurance, the costs associated with the acquisition of new contracts, chiefly comprising
commissions, are recorded as assets on the balance sheet, to the extent that contracts are
profitable. They are written down over the residual life of Non-Life contracts, at the same rate
that estimated future margins are recorded on Life insurance contracts.
45
Sufficiency test for liabilities
Liabilities relating to contracts are subjected each year to a sufficiency test (IFRS 4).
IFRS accounting principles applied to IFRS4 contracts and different from French GAAP
Equalisation reserves
IFRS accounting principles do not provide for the possibility of establishing reserves for risks on
future contracts. When such reserves do exist, they are eliminated from SCORs consolidated
accounts under IFRS standards.
Shadow accounting
According to IFRS accounting principles (see note on financial investments), financial assets are
valued at fair value. This means that recognized but unrealized capital gains or losses on
portfolio securities are recorded in SCORs accounts, either in the income statement or as an
increase or decrease to shareholders equity, depending on the asset classification.
SCOR has elected to apply shadow accounting under the terms of IFRS 4. Consequently, recognized but
unrealized capital gains and losses on investments affect the valuation of technical assets and
liabilities in the same way as realized gains and losses. The corresponding adjustment to insurance
liabilities (or deferred acquisition costs or intangible assets) is recorded in shareholders
equity once the unrealized capital gains or losses are directly recorded in equity. Otherwise, it
is recorded in the income statement according to the same scheme use for realized
capital gains and losses. The primary technical items affected by these adjustments are:
- |
|
deferred acquisition costs and contract portfolios, where
amortization occurs according to the technical and financial
profits from contracts (shadow DAC and shadow VOBA), |
|
- |
|
technical reserves, where the discounted rate used depends
directly on the performance of the assets (shadow PM). |
Embedded derivatives
IFRS 4 provides for the separation of embedded derivatives in insurance contracts, particularly
when these hybrid contracts are not assessed at fair value by income and when the features of the
embedded derivatives are not closely linked with the features and risks of the host contract, and
when the embedded derivative corresponds to the definition of a derivative instrument. Embedded
derivatives corresponding to the definition of an insurance contract are not separated. SCOR has
identified no embedded derivatives in its contracts.
Pension liabilities and similar benefits
Pension liabilities
The SCOR Group is involved in creating pensions for its staff, in accordance with the laws and
practices of each country. Group staff in certain countries receives additional pension payments,
paid as an annuity or in capital on retirement. The main countries concerned are France, the United
States and Germany.
The benefits granted to Group employees are either in the form of defined contributions or defined
benefit plans. Defined contribution plans are those where an employer pays fixed
46
contributions into a separate entity, with no legal or constructive obligation to
pay further contributions. As a result, only contributions paid or due as part of the financial
year appear in the Group accounts. Defined benefit plans are those where a sum is paid to the
employee upon retirement, which usually depends on one or several factors such as age, years of
service and salary.
Obligations recognized on the balance sheet as defined benefit plans are recorded at the current
value of the defined benefit obligation at the date of closure, less the market value of any plan
assets, where appropriate, both having been adjusted by actuarial gains and losses and
unacknowledged past services. The current value of the obligation is calculated annually by
independent actuaries using the projected unit credit method. It is established by discounting the
future expected benefits on the basis of Tier 1 bond market rates in the same currency as the
benefits to be paid, and for a similar duration to the underlying obligation.
Actuarial gains and losses arising from adjustments linked to experience and the effects of changes
in actuarial assumptions are reflected in shareholders equity.
Past service costs generated at the adoption or modification of a defined benefit plan are
recognized as an expense on a straight-line basis, over the average period until the benefits
become vested. When benefit rights are acquired upon the adoption of a plan or its modification,
past service cost is immediately recognized as an expense.
Other long-term benefits
In some countries, the SCOR Group rewards employees for length of service by granting them a lump
sum after certain periods of service. This occurs primarily in France, where the current value of
the obligation is calculated annually by an independent actuary using the projected unit credit
method. The obligation is recognized on the balance sheet.
Termination benefits
Employees are entitled to termination benefits when the Group makes one or more employees
redundant, or encourages voluntary redundancies. The Group posts these payments into the accounts
when it is demonstrably committed by means of a detailed formal plan for termination, which it
could not realistically retract. Benefits payable more than twelve months after the closing date
are discounted.
Share-based payment and share options
The SCOR Group grants its employees stock option plans. The fair value of the services received in
exchange for the granting of options is recognized as an expense. The total amount that is
recognized over the vesting period is established by reference to the fair value of options
granted, excluding conditions of attribution that are not linked to market conditions (ROE, for
example). These conditions are taken into account when determining the probable number of options
to be acquired by the beneficiaries. At each closing date, the company reviews the estimated number
of options to be acquired. Any impact is then posted in the income statement against shareholders
equity for the remaining vesting period.
The Group also allocated shares to all its employees in 2004 and 2005. This allocation is reflected
by posting of personnel expenses against an increase in shareholders equity over the vesting
period.
The dilutive effect of outstanding options is reflected in the calculation of the diluted earnings
per share.
47
Taxes
Deferred tax assets and liabilities are recognized using the balance sheet liability method of tax
allocation for all temporary differences on the closing date between the tax base of assets and
liabilities and their carrying value on the balance sheet.
Deferred tax assets are recorded when temporary tax differences occur that are associated with
investments in subsidiaries and affiliated companies, unless the date on which this temporary
difference reverses is controllable and if it is probable that the temporary difference will not be
reversed in the foreseeable future.
Deferred tax on the restatement of capitalization reserves is recorded without including the
probability of capital losses from asset disposals of securities subject to taxes from these
reserves.
Deferred tax liabilities are not recorded in cases of temporary differences associated with
investments in subsidiaries and affiliated companies unless it is probable that the temporary
difference will be reversed in the foreseeable future and if it is likely that there will be a
taxable profit to which the temporary difference can be imputed. The book value of deferred tax
assets is reviewed at each closing date and reduced when it is no
longer possible that a sufficient
taxable benefit will be available to enable all or part of these deferred tax assets to be
utilized.
Deferred tax assets and liabilities are assessed at the tax rate applicable in the fiscal year in
which the asset will be sold or the liability settled, based on the tax rates (and tax regulations)
that have been adopted or substantially adopted at the closing date.
Tax rates relating to items recorded directly as shareholders equity are recorded as equity and
not in the income statement.
Principles for presentation of financial statements
Allocation of expenses by function
In conformity with the option offered by IAS 1, the Group opted to present its expenses by function
on the income statement. This presentation provides information that is more relevant to readers
than expenses by nature, but costs are allocated to different functions based on applied costs and
are thus subject to decisions of judgment.
This method is identical to the method for presenting overhead expenses that was used for SCORs
consolidated accounts under French GAAP. Operating expenses are divided into five categories:
acquisition costs, claims settlement expenses, administrative expenses, investment portfolio
management expenses, and other underwriting expenses. These expenses are allocated to the
categories set out above, company by company.
Segment information
The Groups business is divided into two distinct sectors: Non-Life insurance and Life insurance.
Previously, SCORs segment information was divided into three areas: Non-Life Reinsurance,
Life/Accident & Health and CRP. The legal structure has recognized these two areas since 2003. Each
sector offers different products and services, which are marketed via separate channels. Given
their specific nature, these sectors constitute the primary level of segment information.
48
Management has evaluated the performance of these segments and allocates resources to them in
accordance with various performance indicators. The sum from inter-segment transactions, related to
gross written premiums, is not significant.
3.10.3.6 Note 2 Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June, 2006 |
|
At 30 December, 2005 |
In EUR millions |
|
Net book value |
|
Fair value |
|
Net book value |
|
Fair value |
|
|
|
|
|
Real Estate Investments |
|
|
288 |
|
|
|
366 |
|
|
|
317 |
|
|
|
384 |
|
|
|
|
|
|
Bonds |
|
|
4,865 |
|
|
|
4,865 |
|
|
|
5,233 |
|
|
|
5,233 |
|
|
|
|
|
|
Equities |
|
|
744 |
|
|
|
744 |
|
|
|
730 |
|
|
|
730 |
|
|
|
|
|
|
AFS |
|
|
5,609 |
|
|
|
5,609 |
|
|
|
5,963 |
|
|
|
5,963 |
|
|
|
|
|
|
Bonds |
|
|
122 |
|
|
|
122 |
|
|
|
166 |
|
|
|
166 |
|
|
|
|
|
|
Equities |
|
|
99 |
|
|
|
99 |
|
|
|
229 |
|
|
|
229 |
|
|
|
|
|
|
Fair value by income |
|
|
221 |
|
|
|
221 |
|
|
|
395 |
|
|
|
395 |
|
|
|
|
|
|
Loans and deposits |
|
|
21 |
|
|
|
21 |
|
|
|
94 |
|
|
|
94 |
|
|
|
|
|
|
Receivables for deposited cash |
|
|
1,284 |
|
|
|
1,284 |
|
|
|
1,278 |
|
|
|
1,278 |
|
|
|
|
|
|
Loans and receivables |
|
|
1,305 |
|
|
|
1,305 |
|
|
|
1,372 |
|
|
|
1,372 |
|
|
|
|
|
|
Derivatives Instruments Fair Value by
income |
|
|
43 |
|
|
|
43 |
|
|
|
35 |
|
|
|
35 |
|
|
|
|
|
|
Insurance Activity Investments |
|
|
7,466 |
|
|
|
7,544 |
|
|
|
8,082 |
|
|
|
8,148 |
|
|
|
|
|
|
Derivatives Instruments Hedging
(liabilities) |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
Cash and cash equivalent |
|
|
1,736 |
|
|
|
1,736 |
|
|
|
1,667 |
|
|
|
1,667 |
|
|
|
|
|
|
3.10.4 Statutory auditors report
This is a free translation into English of the statutory auditors review report issued in French
and is provided solely for the convenience of English speaking readers. This report should be read
in conjunction with, and construed in accordance with, French law and professional auditing
standards applicable in France.
To the Shareholders
In our capacity of statutory auditors and in accordance with the requirements of Article L. 232-7
of the French Commercial Law (the Code de Commerce), we hereby report to you on:
- |
|
the review of the accompanying half-year consolidated financial statements of SCOR Group, for the period 1 January to
30 June 2006, |
|
- |
|
the verification of information contained in the half-year management report. |
These half-year consolidated financial statements are the responsibility of the Board of Directors.
Our role is to express a conclusion on these financial statements based on our review.
We conducted our review in accordance with professional standards applicable in France. A review of
interim financial information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with professional standards
applicable in France and consequently does not enable us to obtain
49
assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the
accompanying half-year consolidated financial statements are not prepared, in all material respects
and as described in the notes to the financial statements, in accordance with the 2006 interim
financial statements presentation and disclosure recommendations such as issued by the AMF as well
as with the IFRS accounting and valuation rules such as adopted by the European Union.
Without qualifying the conclusion expressed above, we draw attention to Paragraph 4 of explanatory
Note 1 which sets out the change in accounting principle due to the issuance of the fair value
option amendment of standard IAS 39 Financial Instruments: Recognition and Measurement,
beginning 1st January 2006.
In accordance with professional standards applicable in France, we have also verified the
information given in the interim half-year financial report commenting the half-year
consolidated financial statements subject to our review.
We have no matters to report as to its fair presentation and consistency with the half-year
consolidated financial statements.
Paris La Défense, 29 August 2006
The Statutory Auditors
|
|
|
MAZARS &
|
|
ERNST & YOUNG |
GUERARD
|
|
Audit |
|
|
|
Lionel Gotlib
|
|
Pierre Planchon |
50
3.11. |
|
THE GROUP PLANS TO ACQUIRE REVIOS TO CREATE SCOR GLOBAL LIFE, A TOP-TIER LIFE REINSURER |
The SCOR Board meeting of 4 July 2006, chaired by
Denis Kessler, approved the execution of an
acquisition agreement between SCOR and GLOBALE Rückversicherungs-Aktiengesellschaft (GLOBALE)
relating to the contemplated acquisition of 100% of the shares of the company Revios Rückversicherung AG
(Revios), a company organized under German law. Under the
terms of an amendment to the acquisition agreement dated 5 September 2006, it was decided that Revios would be acquired by SCOR
VIE, a wholly-owned SCOR subsidiary. The completion of this acquisition remains subject to the
fulfilment of certain conditions precedent that are customary for this type of transaction as well
as the authorisation of the competent insurance or reinsurance
company regulators. This acquisition will enable the Group to create a
top- tier worldwide Life reinsurer.
The
contemplated combination of Revios and SCOR VIE will create SCOR Global Life, which should reach the
position of
fourth26
largest Life reinsurer in the world with gross written premiums of
approximately EUR 2,267 million in 2005 in Life reinsurance (SCOR: EUR 1,024 million;
Revios: EUR
1,243 million)27.
This acquisition would allow the creation of a top-tier platform offering
worldwide coverage. In Europe in particular, SCOR Global Life would be one of the top five Life
reinsurers on all the key markets.
3.11.1 |
|
Revios: a high-performance Life reinsurer |
Based in Cologne, Revios is the former Life reinsurance unit of the Gerling Global Re group, which
has successfully developed autonomously since 2002. Revios has since become the leading European
reinsurer specializing in Life reinsurance, with offices in 17 countries. In 2005 Revios underwrote
a premium volume of EUR 1,243.1 million in 42 countries
throughout the world28.
Revios has recognised specialist expertise in high value-added products and has acquired in-depth
knowledge of the reinsurance markets.
With their solid market reputation, Revios management team and 277 employees share a similar
market approach with SCOR VIE. This shared vision is based on direct, long-term relationships with
clients, products and services adapted to the specific requirements of cedants and an emphasis on
research and development in actuarial science.
3.11.2 |
|
A combination that is perfectly consistent with SCORs strategy |
This
contemplated combination is fully in line with the Group strategy in place since 2002 and in particular
with the SCOR Moving Forward Plan published in September 2004. Life reinsurance is a central element in
the Groups strategy, which is to maintain a balance between Life reinsurance and Property &
Casualty reinsurance. This business mix enables the Group to lower its risk profile thanks to the
diversity of its portfolio, to reduce the volatility of its results, and to optimise the use of its
capital depending on the development of the respective markets.
|
|
|
26 |
|
Based on information published by Standard &
Poors in Global Reinsurance Highlights 2005. |
|
27 |
|
Source: Revios 2005 consolidated audited
financial statements, prepared in accordance with IFRS. |
|
28 |
|
Source: Revios 2005 consolidated audited
financial statements, prepared in accordance with IFRS. |
51
With this transaction, two structures complementing each other through their offices
throughout the world and their service offerings, would join forces to create the fourth largest
Life reinsurer in the world. This contemplated strategic combination will enable the Group to reinforce the
contribution made by Life reinsurance to its results in a consolidating market.
3.11.3 |
|
SCOR Global Life is set to become a top-tier Life reinsurer |
|
(a) |
|
SCOR Global Life will have a critical mass on the major Life reinsurance markets,
particularly in almost all European countries. |
|
|
|
SCOR Global Life will combine the businesses of Revios and SCOR VIE. SCOR Global Life
will thereby have a top-tier Life reinsurance platform with increased geographic
diversity and an enhanced client base. Total premium income for SCOR Global Life in 2005
would have amounted to EUR 2,267 million, representing an
estimated worldwide market share of approximately 8%. |
|
|
|
In France, SCOR Global Life will strengthen its position as
market leader. SCOR Global
Life will be the third largest Life reinsurer in Germany, second in Spain and Italy, and
amongst the top five in Northern Europe, the United Kingdom and Ireland. |
|
|
|
In the United States and Canada, SCOR Global Lifes market share in Life reinsurance will
reach approximately 5%, ensuring critical mass and credibility on the
main Life
reinsurance markets in the world. |
|
|
|
In Asia, SCOR Global Life will be one of the top three players on the key markets (i.e. Japan
and Korea). |
|
|
|
SCOR Global Life will aim to develop its portfolio in Latin America, in other Asian
countries and also in the CIS and the Middle East. |
|
(b) |
|
An efficient organisational structure with clear corporate governance rules |
|
|
|
SCOR Global Life, SCOR Global P&C and SCOR will adopt the Societas Europaea status.
|
|
|
|
Following the model set by SCOR Global P&C, SCOR Global Life will be an operational
entity. As part of the strategy set by the parent company, SCOR Global Life will be
responsible for all Life reinsurance operations. SCOR Global Life will have the human and
financial resources to ensure its development in a competitive market. |
|
|
|
SCOR Global Life will be structured with a view to preserving each entitys fields of
excellence. SCOR Global Life should be structured around geographic profit centres based
in Cologne, in Paris and in the United States, and around technical, cross-sector
functions such as underwriting management, actuarial, finance management and research
centres. |
|
|
|
A liaison committee, comprising all the executive committee members of SCOR VIE and
Revios, will manage SCOR Global Lifes operations until the transaction has been
definitively consummated, and will define its organizational structure in detail. This liaison committee
will monitor the work of the integration committees created in order to coordinate the
combination of the two entities SCOR VIE and Revios. These integration committees will focus on the
following areas: underwriting policy, organising the commercial
network, information
systems, accounting and finance systems and human resources. Two committees (North
America and Asia) will deal with integration aspects specific to these regions. |
52
|
|
Once the transaction has been completed, the governing bodies of SCOR
Global Life will be established (i.e. board of directors, executive committee and key
managers). |
|
(c) |
|
Synergies |
|
|
|
The contemplated combination of SCOR VIE and Revios is based first and foremost on a shared strategic
vision, on geographic complementarities, on convergent business plans and on a shared
underwriting philosophy. As a result, the proposed merger will enable the creation of
profit and development synergies. When the complementary nature of the products and zones
of development are taken into account, the cost synergies are relatively limited. The
complementarities of the two groups and the new size of SCOR Global Life should, in
principle, generate additional income and profits, notably through an increased range of
products and services, the sharing of expertise and technical
underwriting specifications (e.g., long-term care and critical illness), easier access to business financing and
increased growth potential on new markets. |
|
|
|
Cost synergies will be generated in particular through team consolidation in those
countries where SCOR VIE and Revios both have offices, the combination of IT systems, and
optimised retrocession costs. The synergies identified so far are estimated at EUR 6
million in 2007 and EUR 12 million from 2008. In 2006, integration costs should be
approximately EUR 15 million. |
|
|
|
Revios integration within the Group will lower the Groups cost ratio by over 1 percentage
point. SCOR believes that these initial evaluations are confirmed by the work being
conducted in the integration committees. |
3.11.4 |
|
A financially attractive transaction |
The total
purchase price for the contemplated acquisition of 100% of the equity capital of Revios is EUR 605
million, representing 1.02x Revios Embedded Value in 2004. SCOR VIE will also be reimbursing EUR
50 million of Revios outstanding subordinated debt to GLOBALE and will pay the interim interest on
the acquisition price and Revios subordinated debt.
SCOR will finance this contemplated acquisition through:
- |
|
a subordinated debt issue of EUR 350 million, which was completed 28 July 2006, and |
|
- |
|
an upcoming share capital increase in the amount of EUR 300 to 350 million. |
This financing structure will in principle ensure:
- |
|
an accretive impact on Earnings Per Share from Year One (2007), |
|
- |
|
an estimated positive impact on SCORs Return On Equity from Year One (2007), |
|
- |
|
a reinforced level of financial strength and solvency. |
This transaction should be finalised in the fourth quarter of 2006, subject, in particular, to
receiving all of the required authorisations from the regulatory authorities.
On 6 September 2006, the European Commission decided not to oppose the proposed acquisition of
Revios by the Group. Indeed, the Commission estimated that the proposed merger is in accordance
with the rules of the single market and the European Economic Area Agreement.
53
As of the
date of this Update Document, all authorizations of the competition
authorities to which the planned merger was submitted have been
obtained, and five regulatory approvals from insurance regulators (or their equivalent) out of seven necessary
approvals have been obtained.
Key figures
|
|
|
|
|
|
|
|
|
|
|
SCOR29 |
|
REVIOS30 |
in EUR millions |
|
2005 |
|
2005 |
|
Gross written premiums |
|
|
2,407 |
|
|
|
1,243.1 |
|
Operating income |
|
|
242 |
|
|
|
83.3 |
|
Net income |
|
|
131 |
|
|
|
53.5 |
|
Embedded Value |
|
|
693 |
31 |
|
|
592 |
32 |
Liabilities relating to contracts |
|
|
9,741 |
|
|
|
4,338.8 |
|
Investments |
|
|
9,635 |
|
|
|
4,279 |
|
|
|
|
|
|
|
|
|
|
|
Employees (at 30 June 2006) |
|
|
891 |
|
|
|
277 |
|
Offices |
|
|
24 |
|
|
|
17 |
|
|
3.12. |
|
SUCCESSFUL COMPLETION OF A EUR 350 MILLION SUBORDINATED DEBT ISSUE AS PART OF THE REVIOS
ACQUISITION |
The EUR
350 million deeply subordinated debt issue launched on 18 July 2006 by SCOR, as part of the
financing of the Revios acquisition, was a great success and was completed on 28 July 2006.
This issue of deeply subordinated perpetual bonds (Tier 1) was more than two times oversubscribed
by 70 institutional investors from 12 different countries. The book-building was completed in less
than four hours.
The
interest rate on the notes is 6.154%, representing 190 basis points above the reference rate (MID
SWAP).
The strong market demand that has enabled SCOR to achieve these conditions bears witness to the
quality of the Groups credit risk, as well as to the confidence of investors in the Groups
long-term strategic positioning.
|
|
|
29 |
|
Source: SCOR: 2005 consolidated and audited financial
statements, prepared
in accordance with IFRS. |
|
30 |
|
Source: Revios: 2005 consolidated and audited financial
statements,
prepared in accordance with IFRS. |
|
31 |
|
European Embedded Value of SCOR Vie at 31
December 2005. |
|
32 |
|
Embedded Value of Revios at 31 December 2004
as published by Revios. |
54
With this transaction, SCOR has completed the first stage of the financing plan determined as part
of the contemplated Revios acquisition, which was announced on 5 July 2006. The financing of the remaining
purchase price will be achieved through a capital increase.
3.13. |
|
INFORMATION ON SHARE CAPITAL |
3.13.1 |
|
Distribution of share capital |
Based on the most recent (February 2006) study on identifiable bearer securities presented in the
Reference Document and updated to include SCOR treasury shares as of 30 June 2006, the distribution of
SCOR ordinary shares is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of voting |
Shareholder |
|
Number of shares |
|
% of capital |
|
rights(1) |
|
Groupama / Gan Groupe |
|
|
155,246,370 |
(2) |
|
|
16.03 |
% |
|
|
16.35 |
% |
Silchester |
|
|
76,771,648 |
(3) |
|
|
7.92 |
% |
|
|
8.08 |
% |
Marathon AM |
|
|
56,566,688 |
(3) |
|
|
5.84 |
% |
|
|
5.96 |
% |
Groupe MAAF-MMA |
|
|
33,725,874 |
(4) |
|
|
3.48 |
% |
|
|
3.55 |
% |
MACIF |
|
|
29,908,937 |
(5) |
|
|
3.09 |
% |
|
|
3.15 |
% |
Generali |
|
|
15,100,507 |
(6) |
|
|
1.56 |
% |
|
|
1.59 |
% |
MATMUT |
|
|
14,130,983 |
(7) |
|
|
1.46 |
% |
|
|
1.49 |
% |
Employees |
|
|
3,350,517 |
(8) |
|
|
0.35 |
% |
|
|
0.35 |
% |
Treasury stocks |
|
|
19,110,915 |
|
|
|
1.97 |
% |
|
|
|
|
Other |
|
|
564,856,631 |
|
|
|
58.30 |
% |
|
|
59.48 |
% |
Total |
|
|
968,769,070 |
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
(1) |
|
The percentage of voting rights is determined based on the
number of shares at closure, after deducting the Companys treasury
stock |
|
(2) |
|
Source: Groupama this figure includes 139,439,071 shares held directly and 15,807,299 shares
held through subsidiaries and Caisses Régionales |
|
(3) |
|
Source: Silchester, Marathon these companies are
shareholders through the funds and mutual funds |
|
(4) |
|
Source: MAAF-MMA |
|
(5) |
|
Source: MACIF |
|
(6) |
|
Source: Generali |
|
(7) |
|
Source: Matmut |
|
(8) |
|
This figure includes 1,695,417 shares held directly and 1,655,100 shares held through a
SCOR mutual fund |
3.13.2 |
|
Share repurchase programme |
On 16 May 2006, in its fifth resolution, the Combined General Meeting of Shareholders authorized
the Company to purchase and sell its own shares in compliance with Articles L. 225-209 et seq. of
the French Commercial Code, as well as the applicable provisions of European Regulation 2273/2003
of 22 December 2003 and the General Regulations of AMF.
55
The objectives of this repurchase program are as follows:
stimulating the secondary market or share liquidity, through an investment service provider under a liquidity agreement consistent with a code of conduct recognized by the AMF;
implementing any Company stock-option plan in compliance with Articles L. 225-177 et seq. of the French Commercial Code;
granting free shares to employees and/or corporate officers;
granting shares to employees and, if applicable, corporate officers, under profit-sharing and
savings plans, as permitted by law, in particular Articles L. 443-1 et seq. of the French Labor
Code;
purchasing shares to hold and for subsequent delivery for exchange or consideration relating to
potential transactions for external acquisitions;
delivering shares in consideration for the exercise of rights attached to securities giving
access to share capital;
cancelling shares so repurchased, as permitted by law and subject to the adoption of
the ninth resolution by the Combined General Meeting of Shareholders of 16 May 2006.
The maximum number of shares that may be repurchased in connection with this authorization is set
at 10% of the share capital, with the understanding that (i) the number of shares purchased by the
Company for the purpose of conservation and subsequent delivery as consideration or in exchange for
a merger, demerger or contribution shall not exceed 5% of its share capital, as provided by Article
L. 225-209 (6) of the French Commercial Code, and (ii) the foregoing limit shall apply to a number
of shares which may, if applicable, be adjusted to take into account transactions affecting share
capital subsequent to the Combined General Meeting of Shareholders of
16 May 2006, but purchases
by the Company shall under no circumstances cause it to hold, either directly or indirectly, more
than 10% of its share capital and the aggregate amount which the Company may use to repurchase its
own shares shall comply with Article L. 225-210 of the French Commercial Code.
This authorization is granted for a period that will expire at the next Annual General Meeting of
Shareholders held to approve the accounts without, however, exceeding a maximum time limit of
eighteen months as of the date of the Combined General Meeting of
Shareholders of 16 May 2006. It
supersedes the authorization granted by the Combined General Meeting
of Shareholders of 31 May 2005 in its eleventh resolution.
The description of the share repurchase program submitted to the Combined General Meeting of
Shareholders was published by the Company on 5 May 2006.
During the
first half of 2006, SCOR repurchased EUR 18 million worth of its own shares intended to
cover the employee stock-award plans. SCOR now holds 19,110,915 of its own shares versus 9,110,915
at 31 December 2005. At 30 June 2006, the nominal value of these shares amounted to
EUR 15,053,615 while their book value totaled EUR 33,457,072.
56
On 16 May 2006, the Combined General Meeting of Shareholders resolved to perform a 10-for-1
reverse split of the shares comprising SCORs share capital. The conversion period for exchanging
old shares for new ones will start 15 days after publication of the reverse split notice in the
Bulletin des annonces légales obligatoires. The Combined General Meeting of
Shareholders granted the Board of Directors all powers to implement the reverse split of
the Company shares including setting the publication date for the above-mentioned notice and
initiating the reverse split transaction. To date, the Board of Directors has not set a
publication date for the reverse split notice.
3.13.4 |
|
Authorized Capital Free Share and Stock-Option Awards in 2006 |
3.13.4.1 |
|
Authorized Capital |
On 16 May 2006, in its sixteenth resolution, the Combined General Meeting of Shareholders
established, in compliance with Article L. 225-129-2 of the French Commercial Code, the aggregate
ceiling for the capital increase which, immediately or at a future date, could result from all
issues of shares or securities granting access to the capital, as per the delegations of authority
provided in the eighth, tenth, eleventh, twelfth, and thirteenth resolutions of the Combined
General Meeting of Shareholders of 16 May 2006, at a maximum nominal amount of EUR 267,029,360.97,
i.e. a maximum number of 339,000,000 shares, with a par value of EUR 0.78769723 each, excluding the
additional ordinary shares to be issued, if applicable, pursuant to adjustments carried out in
compliance with the law and applicable contractual stipulations, to protect the rights of holders
of securities granting access to the Companys capital, with the understanding that within the
limit of this aggregate ceiling:
any issue of ordinary shares preserving the shareholders preferential subscription right, as
per the eighth resolution of the Combined General
Meeting of Shareholders of 16 May 2006, may not result in the issue
of a number of shares (of a nominal value of EUR 0.78769723 each)
greater than 300,000,000 shares, i.e., an increase of the share capital amounting to a maximum
nominal amount of EUR 236,309,169;
any
issue of ordinary shares without preferential subscription right
for the benefit of categories of persons pursuant to Article L. 225-138 of the French Commercial
Code, as per the tenth resolution of the Combined General Meeting of Shareholders
of 16 May 2006, may not result in the issue of a number of shares (of
a nominal value of
EUR 0.78769723 each) greater than 5,000,000 shares, i.e., an increase of the share capital
amounting to a maximum nominal amount of EUR 3,938,486.15;
the
stock subscription and purchase options granted pursuant to the eleventh resolution of the Combined General Meeting of
Shareholders of 16 May 2006, may not grant rights to a total number of shares of the Company
greater than 14,500,000, i.e., an increase of the share capital amounting to a maximum nominal
amount of EUR 11,421,609.835;
the total number of free shares awarded to employees of the Company pursuant to the twelfth
resolution of the Combined General Meeting of Shareholders of
16 May 2006, may not be greater than
14,500,000, i.e., an increase of the share capital amounting to a maximum nominal amount of
EUR 11,421,609.835;
the capital increase(s) that may be carried out by the Board of Directors, pursuant to the
thirteenth resolution of the Combined General Meeting of Shareholders
of 16 May 2006 (through the
issue of shares whose subscription shall be reserved for employees of the Company and the French
and foreign companies related thereto within the meaning of Article
57
L. 225-180 of the French
Commercial Code, who participate in a company savings plan (plan dépargne dentreprise) and/or
any mutual fund through which the new shares thus issued would be
subscribed), may not grant the
right to a total number of shares greater than 5,000,000, i.e., an increase of the share capital
amounting to a maximum nominal amount of EUR 3,938,486.15;
Noting that the amounts set forth above (i) do not take into account the nominal amount of the
share capital to be issued, as necessary, under adjustments made in compliance with the law and
applicable contractual stipulations, to protect the rights of holders of securities granting access
to the Companys capital, and (ii) shall be adjusted in order to reflect the reverse split of the
Companys shares that will be carried out in compliance with the decision made by the
Combined General Meeting of Shareholders of 16 May 2006,
pursuant to its seventeenth resolution.
3.13.4.2 |
|
Free Share Awards in 2006 |
On 16 May 2006, in its twelfth resolution, the Combined General Meeting of Shareholders authorized
the Board of Directors to award, on one or several occasions, to salaried employees and executive
officers (or certain salaried employees and executive officers), as defined by law, who are
employed by the Company and the companies or groups related thereto within the meaning of Article
L. 225-197-2 of the French Commercial Code, free shares that either exist or are to be issued, and
resolved that the Board of Directors would determine the identity of the beneficiaries of the
awarded shares as well as the conditions and criteria for awarding the shares. In addition, the
Combined General Meeting of Shareholders resolved that (i) the total number of free shares awarded
pursuant to this authorization may not be greater than 14,500,000 shares, (ii) the awarding of
shares to their beneficiaries shall be final only at the end of a minimum vesting period of two
years, (iii) the beneficiaries will be subject, as applicable, to an obligation to retain the
shares, as per the conditions provided in the applicable regulations, and that (iv) the Board of
Directors shall have the right to increase the terms of the vesting period and of the lock-up
obligation.
The Combined General Meeting of Shareholders also authorized the Board of Directors to carry out
one or more capital increases by capitalizing profits, reserves or premiums in order to issue the
free shares under the conditions stipulated herein (noting that the nominal amount of any capital
increase carried out pursuant to this delegation of authority shall be deducted from the aggregate
ceiling set forth in the fourteenth resolution of the Combined General Meeting of Shareholders of
16 May 2006) and officially noted that this authorization requires, by law, that the shareholders
renounce the portion of the profits, reserves and premiums which, if applicable, would be used to
issue the new shares.
The Combined General Meeting of Shareholders grants all rights to the Board of Directors, within
the limits set forth above, to implement this authorization and in particular to:
determine if the free shares to be awarded shall be shares to be issued in the future or
existing shares;
if
applicable, increase the share capital by capitalizing reserves,
profits or premiums in
order to issue the free shares;
set, within legal conditions and limits, the dates on which the shares shall be awarded;
determine the identity of the beneficiaries, the number of ordinary shares awarded to each of
them, the terms for granting ordinary shares, and in particular the vesting and holdings periods
for the ordinary shares thus awarded;
58
if applicable, and in order to preserve the rights of the beneficiaries, make adjustments to the
number of free shares awarded based on proposed transactions carried out on the Companys capital;
and
more generally, with the right to sub-delegate under conditions provided for by law, enter into
any agreements, draft any documents, recognize capital increases
following final awards,
amend the Bylaws accordingly as applicable, request the listing of the new shares on the Eurolist
by Euronext Paris S.A. market or any other regulated market, carry out any formalities or any
declarations with any agencies and, more generally, to do whatever would be otherwise necessary.
Each year, the Board of Directors shall inform the Ordinary General Meeting of Shareholders of the
transactions and awards carried out pursuant to this resolution in accordance with Article L.
225-197-4 of the French Commercial Code.
This authorization is granted for a period of eighteen months as of the date of the Combined
General Meeting of Shareholders of 16 May 2006, and superseded the authorization granted by the
Combined General Meeting of Shareholders of 31 May 2005 in its nineteenth resolution.
On 5 July 2006, the Board of Directors, pursuant to the delegation of authority conferred by the
twelfth resolution of the Combined General Meeting of Shareholders of
16 May 2006, and on the
recommendation of the Compensation and Nominations Committee, established a plan for the awarding
of free shares to certain corporate officers and employees of SCOR and its subsidiaries in France
and abroad, in accordance with Articles L. 225-197-1 et seq. of the French
Commercial Code. This plan consists of awarding Company treasury shares and therefore does not
result in any capital increase.
The shares are transferred to the beneficiaries with full ownership at the end of a two-year
vesting period, as calculated from the date of the award, i.e. 5 July 2008, subject to the
beneficiarys continued employment by the Group on 20 June 2008.
The table below presents the number of free shares awarded to each corporate officer on 5 July 2006:
|
|
|
|
|
Denis Kessler |
|
|
550,000 |
|
Patrick Thourot |
|
|
250,000 |
|
The
directors were not awarded any free stock, except for Denis Kessler in his capacity as Chairman and Chief Executive Officer.
3.13.4.3 Stock subscription or purchase option awards in 2006
On 16 May 2006, in its eleventh resolution, the Combined General Meeting of Shareholders
authorized the Board of Directors, within the scope of the provisions of Articles L. 225-177 to
59
L. 225-185 of the French Commercial Code, to grant, on one or several occasions, for the benefit of
salaried employees and corporate officers (or certain salaried employees or corporate officers), who
are employed by the Company and the companies or entities related thereto under the terms of
Article L. 225-180 of the French Commercial Code, options granting the right to subscribe to new
Company shares to be issued by way of capital increase, as well as options granting the right to
purchase shares of the Company resulting from share repurchases carried out by the Company under the
conditions provided by law.
The
Combined General Meeting of Shareholders of 16 May 2006 also resolved that the options to
subscribe and/or purchase shares granted pursuant to this authorization may not grant the right to
a total number of Company shares greater than 14,500,000 shares, and that
the nominal amount of potential capital increases carried out pursuant to the issue of these shares
shall be deducted from the aggregate ceiling set in the fourteenth resolution of the Combined
General Meeting of Shareholders of 16 May 2006.
Finally,
the Combined General Meeting of Shareholders of 16 May 2006 resolved that the payment price at
the time of exercise of the options to subscribe and/or purchase shares shall be set by the Board
of Directors, under conditions set forth by law, on the day the options will be granted. If the
Company carries out one of the transactions provided by Article L. 225-181 of the French Commercial
Code, the Board of Directors shall, in compliance with the regulations then in
effect, adjust the number and the price of the shares that may be obtained by the exercise of the
options granted to the beneficiaries to take into account the effect of this transaction. It also
noted that this authorization requires the express waiver by the shareholders benefiting from the
stock options of their preferential subscription right to the shares to be issued from time to time
as the subscription options are exercised. The capital increase resulting from the exercise of the
stock options will be completed simply by the declaration of the exercise of the option accompanied
by the subscription bulletins and payments that may be made in cash or by offsetting debts with the
Company.
The
Combined General Meeting of Shareholders of 16 May 2006 conferred all powers to the Board of
Directors to implement this authorization and in particular to:
determine the list of beneficiaries of options and the number of options allocated to each of
them; and
establish the terms and conditions of the options, and in particular:
to establish, within legal conditions and limits, the dates on which the options shall be
granted;
the term of validity of the options, with the understanding that the options must be
exercised within a maximum time limit of ten years;
the date(s) or exercise period(s) of the options, with the understanding that the Board of
Directors may (a) advance the dates or exercise periods for the options, (b) maintain the
exercisable nature of the options or (c) modify the dates or periods during which the shares
obtained by the exercise of the options may not be assigned or placed in bearer form;
potential clauses prohibiting the immediate sale of all or part of the shares resulting from
the exercise of options, provided that the required time period for retaining the shares does
not exceed three years as of the exercise of the option;
if applicable, to limit, suspend, restrict or prohibit the exercise of the options or the
assignment or putting into bearer form of the shares obtained by the exercise of the
60
options,
for certain periods or as of certain events; the Boards decision in this regard may cover all
or part of the options or shares or concern all or part of the beneficiaries;
to determine the interest payment date, which may be retroactive, for the new shares
resulting from the exercise of the stock subscription options.
The
Combined General Meeting of Shareholders of 16 May 2006, resolved that the Board of Directors
shall have all powers, with the right to subdelegate under the conditions provided by law, to
recognize capital increases up to the amount of the shares that shall be effectively subscribed by
the exercise of the stock options, to amend the Bylaws accordingly, and by its sole decision and at
its discretion, to charge the capital increase costs against the
amount of premiums related to such transactions, deduct the necessary amounts for the transfer to
the legal reserve, carry out all necessary formalities for the listing of the shares thus issued,
make any necessary declarations to all bodies and do whatever would otherwise be necessary.
Each year, the Board of Directors shall inform the Ordinary General Meeting of Shareholders of the
transactions carried out pursuant to this authorization.
This authorization is granted for a period of eighteen months as of the date of the Combined
General Meeting of Shareholders of 16 May 2006, and supersedes the authorization granted by the
Combined General Meeting of Shareholders of 31 May 2005 in its eighteenth resolution.
On 29 August 2006, the Board of Directors, pursuant to the delegation of authority conferred by
the eleventh resolution of the Combined General Meeting of
Shareholders of 16 May 2006, and on the
recommendation of the Compensation and Nominations Committee, established a stock option plan for
certain corporate officers and employees of SCOR and its subsidiaries in France and abroad, as per
the legal provisions set out in Articles L. 225-197 et seq. of the French Commercial Code.
The total
number of 7,465,000 options may be exercised on one or several occasions from
15 September 2010, through 15 May 2016, and
will give the right to one share per option. As of that date, the unexercised stock options will
become null and void as of right.
Since the
decision of the Board of Directors was taken during a blackout period
relating to the
publication of SCORs consolidated half-yearly financial
statements on 30 August 2006, the Board
of Directors delegated all powers to the Chairman and Chief Executive
Officer to (i) fix the option price and (ii) determine the
final award of the option on the day of the decision of the Chairman and Chief Executive
Officer. On 14 September 2006, the Chairman and Chief Executive
Officer, making use of this delegation, set the option price at EUR 1,914 and
acknowledged the final award of the options.
The
following table presents the number of stock options attributed to
each corporate officer on 29 August 2006:
61
|
|
|
|
|
Denis Kessler |
|
|
550,000 |
|
Patrick Thourot |
|
|
250,000 |
|
The
Directors were not awarded any stock subscription option except for Denis Kessler in his capacity as Chairman and Chief Executive Officer.
3.13.4.4 |
|
Capital increases reserved for members of a company saving plan (PEE) in 2006 |
On 16 May 2006, the Combined General Meeting of Shareholders in its thirteenth resolution, voting
with the quorum and majority conditions required for extraordinary shareholders meetings, in
compliance with the provisions of Articles L. 225-129, L. 225-129-2, L. 225-129-6, L. 225-138 and
L. 225-138-1 of the French Commercial Code, and with Articles L. 443-1 et seq. of the French Labor
Code:
delegated to the Board of Directors the authority to increase the share capital, on one or
several occasions, in the proportions and at the times it will deem appropriate, by the issue of
shares to be paid up in cash and whose subscription shall be reserved for the employees of the
Company and the French and foreign companies related thereto under Article L. 225-180 of the French
Commercial Code, who participate in a company savings plan and/or any mutual fund through which the
new shares thus issued would be subscribed;
resolved that the possible capital increase(s) authorized by the Board of Directors under this
authorization and carried out immediately or at a future date, may not grant right to a total
number of shares greater than 5,000,000, excluding additional shares to be issued, if applicable,
as a result of adjustments carried out pursuant to the law and to applicable contractual
stipulations, to protect the rights of holders of securities granting access to the Companys
capital, with the understanding that the nominal amount of any capital increase carried out
pursuant to this delegation of authority shall be deducted from the aggregate ceiling set out in
the fourteenth resolution of the Combined General Meeting of
Shareholders of 16 May 2006;
resolved that the issue price of the new shares may not be greater than the average of the
opening market prices during the twenty trading sessions preceding the date of the Board of
Directors decision setting the subscription opening date, or lower than this average less the
maximum discount allowed by law on the date of the Board of Directors decision;
resolved to cancel, in favor of employees who participate in a company savings plan, the
shareholders preferential subscription right to the new shares issued pursuant to this delegation
of authority and to waive any right to shares or other securities which may be awarded on the basis
of this resolution.
The General Meeting of Shareholders granted all powers to the Board of Directors, with the right to
sub-delegate such powers in compliance with the law, to determine, in accordance with the
established conditions, the terms of the issue(s) carried out pursuant to this delegation of
authority and in particular:
62
to set the terms and conditions for participating in the savings plan and establish or amend the
regulations of this plan;
to draft the list of companies whose employees or former employees could benefit from the issue;
to decide whether the subscriptions may be carried out through group organizations or directly
by the beneficiaries;
to set the conditions, in particular concerning seniority, that the employees must fulfill in
order to subscribe, either individually or though a mutual fund, to the shares issued pursuant to this
delegation of authority;
to set the amounts of such issues and determine the price, dates, time limits, terms and
conditions of subscription, payment and delivery of the shares issued pursuant to this delegation
of authority, as well as the interest payment date, which may be retroactive;
to determine, as applicable, the amount of the sums to be incorporated into the capital within
the limit set forth above, the line item(s) under shareholders, equity to which such amounts shall
be charged as well as the conditions for awarding the shares;
to recognize or have recognized the realization of the capital increase up to the amount of
shares are effectively subscribed;
if applicable, to charge the expenses, duties and fees incurred by such issues against the issue
premium in capital and to deduct from the issue premium, if applicable, the amounts required to
establish the legal reserve; and
in general, to carry out any act and formality, take any decision and enter into any useful or
necessary agreement (i) to successfully complete the issues carried out pursuant to this delegation
of authority and, in particular, for the issue, subscription, delivery, interest payment, listing
and financial service of the new shares, as well as the exercise of the related rights, and (ii) to
acknowledge the final completion of the capital increase(s) pursuant to this delegation of
authority and to amend the Bylaws accordingly.
The shareholders meeting officially noted that this delegation may be used for a public offering
or exchange of the shares of the Company in accordance with the provisions of Article L. 225-129-3
of the French Commercial Code.
This delegation is granted for a period of eighteen months as of the date of the Combined General
Meeting of Shareholders of 16 May 2006, and supersedes the authorization granted by the Combined
General Meeting of Shareholders of 31 May 2005 in its twentieth resolution.
As of the date of this Update Document, this delegation of authority has not been used.
3.14. |
|
EMPLOYMENT PROTECTION PLAN |
The
employment protection plan that was put into place from September/October 2005 to 31 December 2005 will
cease on 1 October 2006, with the departure of a total of 101
employees, only 16 of whom were
involved with SCOR Life.
At 31 August 2006, the Group employed 885 persons.
63
3.15. |
|
HIGHFIELDS CAPITAL CASE AGAINST SCOR IS DISMISSED |
The United States District Court for the District of Massachusetts ordered on 16 August 2006 that
the case brought by the Highfields investment funds against SCOR be dismissed without prejudice due
to the Highfields investment funds failure to establish the Courts subject matter jurisdiction.
SCOR has been informed by the Highfields investment funds that they have filed a new complaint in
the Suffolk County Superior Court of Massachusetts, but this
complaint has not yet been delivered
to SCOR.
SCOR has always considered and continues to consider that the Highfields investment funds made a
successful, highly profitable investment in IRP, and SCOR believes the Highfields investment funds
have no legitimate basis for complaint. SCOR intends to defend against any newly commenced
action, to preserve its options to seek redress, and to pursue the Highfields investment funds for
damages and expenses incurred in defending itself against what it believes is unfounded litigation
by the Highfields investment funds.
3.16. |
|
AM BEST RAISES THE SCOR GROUP RATING TO A-, STABLE OUTLOOK |
SCOR is pleased with the decision made on 8 September 2006 by AM BEST to raise the rating of the
Group and its subsidiaries from B++, positive outlook to A-, stable outlook. The rating of
Revios, which had been placed under review with negative implications following the announcement of
its combination with SCOR, has been affirmed A-, stable outlook.
The return
of SCOR to an A level rating, qualifies by AM Best as excellent, completes the
Moving Forward plan and confirms the solidity of its financial base and its high degree of
solvency.
This improvement in the SCOR Group rating to A-, stable outlook by AM Best will notably spur the
US underwriting of SCOR Global Life, the Life reinsurance subsidiary of SCOR which will result from
the combination of SCOR VIE and Revios.
This upgrading will favour the implementation of the rigorous and focused underwriting plan which
SCOR Global P&C intends to follow in Property and Casualty reinsurance in the United States. The
objective of SCOR Global P&C in the United States is to grow its business with the same approach as
that used in the other markets where the Group operates. Within the framework of the strict
underwriting criteria put in place since 2003, SCOR Global P&C aims to regain treaty shares in
market segments which the Group knows well. SCOR will not write those lines of business which the
Group discontinued underwriting in 2002.
In the rest of the Americas (i.e. Canada and Latin America), the upgrading of the SCOR Groups
rating to A-, stable outlook by AM Best will be beneficial to the pursuit of growth in the
Groups business. In particular, SCOR is strengthening its underwriting teams in the Latin American
and the Caribbean zones, capitalizing on its longstanding and extensive presence in these markets.
Based in Miami, Messrs. J. Grieve, H. Barbanell, L. de Segonzac and R. Blanco, previously with
another top tier reinsurer, joined the SCOR underwriters operating currently in the markets of the
Caribbean and Latin America in September 2006.
In order to promote the re-energizing of its business in the Americas, SCOR will modify the
structure of its American Non-Life business. This modification, which will be carried out in coming
months, is twofold: first, SCOR Reinsurance Company is acquiring General Security Indemnity Company of
Arizona , an US surplus lines operation, from General
64
Security National Insurance Company
(GSNIC); second, SCOR is acquiring GSNIC, an entity entirely dedicated to run-off, from SCOR
Reinsurance Company. In the context of this reorganization, SCOR is contributing USD 80 million to
SCOR Reinsurance Company. These transactions are subject to the necessary regulatory approvals.
Conditions are now met for the SCOR Group to benefit from the opportunities offered by the US Life
and Non Life reinsurance markets.
4. |
|
CROSS REFERENCE TABLE TO APPENDIX I OF EUROPEAN REGULATION
(EC) No. 809/2004 |
The cross
reference table below refers to the principal items requested by
Appendix I of the European Regulation (EC) No. 809/2004 implementing directive No. 2003/71/CE of the European Parliament and the
Council concerning information contained in prospectuses. The information referred to in the
Update Document column below updates, as the case may be, the corresponding information in the Reference
Document. The page numbers in the Reference Document column refer to the SCOR Reference Document furnished to the SEC under cover of 6-K on
11 April 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference |
|
|
|
|
|
|
|
|
Document |
|
|
|
|
|
|
|
|
(Document de |
|
|
Appendix
I of EC Regulation No. 809/2004 of 29 April 2004 |
|
Référence) |
|
Update Document |
1. |
|
PERSONS RESPONSIBLE |
|
|
|
|
1.1 |
|
Persons responsible for the information. |
|
p. 180 |
|
p. 3 |
1.2 |
|
Declaration by those responsible. |
|
p. 180 |
|
p. 3 |
2. |
|
STATUTORY AUDITORS |
|
|
|
|
2.1 |
|
Names and addresses of the auditors for the period covered by the historical
financial information (together with their membership in a professional body). |
|
p. 180 to 181 |
|
p. 5 |
2.2 |
|
Change of statutory auditors during the period covered by the historical
financial information. |
|
Not applicable |
|
Not applicable |
3. |
|
SELECTED FINANCIAL INFORMATION |
|
|
|
|
3.1 |
|
Selected historical financial information presented for each financial year for
the period covered by the historical financial information. |
|
p. 8 to 10 |
|
p. 21 |
3.2 |
|
Financial information presented for interim periods and comparative data from the
same period in the prior financial year. |
|
Not applicable |
|
p. 21 |
4. |
|
RISK FACTORS |
|
pp. 59 to 61 and |
|
|
|
|
|
|
|
|
pp. 115 to 125 |
|
See
RD32 |
5. |
|
INFORMATION ABOUT THE ISSUER |
|
|
|
|
5.1 |
|
History and Development of the Company |
|
|
|
|
|
|
5.1.1 |
|
Legal and commercial name; |
|
p. 97 |
|
See RD |
|
|
5.1.2 |
|
Place of registration and registration number; |
|
p. 98 |
|
See RD |
|
|
5.1.3 |
|
Date of incorporation and length of life of the issuer, |
|
|
|
|
|
|
|
|
except where indefinite; |
|
p. 98 |
|
See RD |
|
|
|
32 |
|
See Reference Document |
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reference |
|
|
|
|
|
|
|
|
Document |
|
|
|
|
|
|
|
|
(Document de |
|
|
Appendix I of EC Regulation No. 809/2004 of 29 April, 2004 |
|
Référence) |
|
Update Document |
|
|
5.1.4 |
|
Domicile and legal form of the issuer, legislation under which |
|
|
|
|
|
|
|
|
the issuer operates, country of incorporation, address and |
|
|
|
|
|
|
|
|
telephone number of its registered office; |
|
pp. 97 and 98 |
|
See RD |
|
|
5.1.5 |
|
Important events in the development of the Companys business. |
|
pp. 18 and 72 |
|
p. 10; p. 32; p. 35; |
|
|
|
|
|
|
pp. 109 to 110 |
|
p. 51; p. 64 |
5.2 |
|
Investments |
|
|
|
|
|
|
5.2.1 |
|
Principal investments for each financial year for the period covered by |
|
|
|
|
|
|
|
|
the historical financial information; |
|
pp. 128 and 129 |
|
See RD |
|
|
5.2.2 |
|
Principal investments that are in progress; |
|
pp. 128 and 129 |
|
p. 24; p. 34 |
|
|
5.2.3 |
|
Principal future investments on which its management bodies have already |
|
|
|
|
|
|
|
|
made firm commitments. |
|
Not applicable |
|
pp. 51 to 53 |
6. |
|
BUSINESS OVERVIEW |
|
|
|
|
6.1 |
|
Principal activities |
|
|
|
|
|
|
6.1.1 |
|
Nature of the issuers operations and its principal activities, stating |
|
|
|
|
|
|
|
|
the main categories of products sold and/or services performed for each |
|
|
|
|
|
|
|
|
financial year for the period covered by the historical financial information; |
|
p. 110 to 114 |
|
See RD |
|
|
6.1.2 |
|
New products and/or services,
and the status of the development of the |
|
|
|
|
|
|
|
|
new products or services. |
|
Not applicable |
|
Not applicable |
6.2 |
|
Principal markets. |
|
pp. 112 to 114 |
|
p. 23; pp. 28-29 |
6.3 |
|
Exceptional factors that have influenced the principal activities and markets. |
|
pp. 8 to 9 |
|
pp. 21 and 22 |
6.4 |
|
Extent of the issuers dependence on patents or licenses, industrial, commercial |
|
pp. 59 to 60 and |
|
|
|
|
or financial contracts or new manufacturing processes. |
|
pp. 115 to 123 |
|
See RD |
6.5 |
|
Basis for any statements made by the issuer regarding its competitive position. |
|
p. 114 |
|
pp. 51 and 52 |
7. |
|
ORGANIZATIONAL STRUCTURE |
|
|
|
|
7.1 |
|
Brief description of the group and SCORs position within the group. |
|
p. 5 and p. 130 |
|
p. 10 to 13 |
7.2 |
|
List of the issuers significant subsidiaries, including name, country of |
|
|
|
|
|
|
incorporation or residence, proportion of ownership interest and proportion of voting |
|
|
|
|
|
|
power held. |
|
p. 52; p. 84 |
|
p. 11 |
8. |
|
PROPERTY, PLANTS AND EQUIPMENT |
|
|
|
|
8.1 |
|
Existing or planned material tangible fixed assets, including leased properties,
and any major encumbrances thereon. |
|
Not applicable |
|
Not applicable |
8.2 |
|
Environmental issues that may affect the issuers utilization of the tangible
fixed assets. |
|
Not applicable |
|
Not applicable |
9. |
|
OPERATING AND FINANCIAL REVIEW |
|
|
|
|
9.1 |
|
Financial Condition |
|
pp. 8 to 10; p. 18; |
|
pp. 14 to 20; p. 21; |
|
|
|
|
|
|
p. 72 |
|
pp. 32 to 34 |
9.2 |
|
Operating Results |
|
pp. 6 to 13 and pp. 73 to 77 |
|
|
|
|
|
|
|
|
|
|
p. 23 to 33 |
10. |
|
CAPITAL RESOURCES |
|
|
|
|
10.1 |
|
Information concerning the issuers capital resources (both short and long term) |
|
p. 15; p. 87; |
|
|
|
|
|
|
|
|
pp. 102 to 107 |
|
p. 29 |
10.2 |
|
Sources and amounts of the issuers cash flows |
|
p. 14; p. 17 and p. 59 |
|
p. 31 |
10.3 |
|
Information on the borrowing requirements and funding structure of the issuer |
|
pp. 48 to 49 and |
|
|
|
|
|
|
|
|
pp. 102 to 104 |
|
p. 54 |
10.4 |
|
Information regarding any restrictions on the use of capital resources |
|
Not applicable |
|
Not applicable |
10.5 |
|
Information regarding the anticipated sources of funds needed to fulfill
commitments referred to in items 5.2.3 and 8.1. |
|
Not applicable |
|
p. 35; p. 53; p. 54 |
66
|
|
|
|
|
|
|
|
|
|
|
Reference |
|
|
|
|
|
|
Document |
|
|
|
|
|
|
(Document de |
|
|
Appendix I of EC Regulation No. 809/2004 of 29 April, 2004 |
|
Référence) |
|
Update Document |
11.
|
|
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
|
|
Not applicable
|
|
Not applicable |
12.
|
|
TREND INFORMATION |
|
|
|
|
12.1
|
|
Most significant trends in production, sales and inventory and costs and
selling prices since the end of the last financial year
|
|
Not applicable
|
|
pp. 5 to 9 |
12.2
|
|
Known trends, uncertainties, demands, commitments or events that are reasonably
likely to have a material effect on the issuers prospects for at least the current
financial year.
|
|
Not applicable
|
|
pp. 51 to 53; p. 63 to 65 |
13.
|
|
PROFIT FORECASTS OR ESTIMATES
|
|
Not applicable
|
|
Not applicable |
14.
|
|
ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND SENIOR MANAGEMENT |
|
|
|
|
14.1
|
|
Information on the members of the
board and senior management.
|
|
pp. 133 to 146
|
|
See RD |
14.2
|
|
Administrative, Management, and Supervisory bodies and Senior Management
conflicts of interests.
|
|
p. 146 and p. 158
|
|
See RD |
15.
|
|
REMUNERATION AND BENEFITS |
|
|
|
|
15.1
|
|
Amount of remuneration paid and benefits in kind granted to board members and senior management
for the 2005 financial year.
|
|
pp. 146 to 156
|
|
See RD |
15.2
|
|
Total amounts set aside or accrued to provide pension, retirement or similar
benefits for the 2005 financial year.
|
|
p. 52; p. 87 and pp.
146 to 151
|
|
See RD |
16.
|
|
BOARD PRACTICES |
|
|
|
|
16.1
|
|
Date of expiration of the current terms of office
|
|
pp. 133 to 142 and pp.
143 to 145
|
|
See RD |
16.2
|
|
Information about members of the
administrative and management bodies service
contracts with the issuer or any of its subsidiaries
|
|
p. 146
|
|
See RD |
16.3
|
|
Information about the issuers audit committee and remuneration committee
|
|
pp. 159 to 160
|
|
See RD |
16.4
|
|
Principles of Corporate governance.
|
|
p. 146 and pp.
157 to 170
|
|
See RD |
17.
|
|
EMPLOYEES |
|
|
|
|
17.1
|
|
Number of employees
|
|
p. 115 |
|
|
17.2
|
|
Information as to their share ownership and any options over such shares by the
members of the administrative, management bodies in the issuer as of the most recent
practicable date.
|
|
pp. 56 to 58 pp.
151 to 156
|
|
p. 55 to 62 |
17.3
|
|
Arrangements involving the employees in the capital of the issuer.
|
|
pp. 56 to 58; pp.
89 to 90; p. 107
|
|
p. 58 to 63 |
18.
|
|
MAJOR SHAREHOLDERS |
|
|
|
|
18.1
|
|
Shareholders with over 5% of the issuers capital or voting rights
|
|
pp. 106 to 107
|
|
p. 55 |
18.2
|
|
Negative statement on the absence of differences among the voting rights of
different shareholders.
|
|
p. 107
|
|
See RD |
18.3
|
|
Direct or indirect control by a shareholder
|
|
Not applicable
|
|
Not applicable |
18.4
|
|
Describe any arrangement, known to the issuer, the operation of which may at a
subsequent date result in a change in control of the issuer.
|
|
Not applicable
|
|
Not applicable |
19.
|
|
RELATED PARTY TRANSACTIONS
|
|
p. 43; p. 52; pp. 65
to 69; p. 84; p. 86;
pp. 171 to 175
|
|
Not applicable |
20.
|
|
FINANCIAL INFORMATION CONCERNING THE ISSUERS ASSETS AND LIABILITIES, FINANCIAL
POSITION AND PROFITS AND LOSSES |
|
|
|
|
67
|
|
|
|
|
|
|
Reference |
|
|
|
|
Document |
|
|
|
|
(Document de |
|
|
Appendix
I of EC Regulation No. 809/2004 of 29 April, 2004 |
|
Référence) |
|
Update Document |
20.1 Historical Financial Information
|
|
pp. 72 to 96
|
|
See RD |
a) balance sheet;
|
|
pp. 73 to 74
|
|
See RD |
b) income statement;
|
|
pp. 75 to 77
|
|
See RD |
c) statement of changes in equity;
|
|
p. 87
|
|
See RD |
d) accounting principles and explanatory notes;
|
|
p. 72; pp. 79 to 94
|
|
See RD |
e) corresponding audit report.
|
|
pp. 95 to 96
|
|
See RD |
20.2 Pro forma financial information
|
|
Not applicable
|
|
Not applicable |
a) pro forma balance sheet and income statement;
|
|
Not applicable
|
|
Not applicable |
b) auditors report.
|
|
Not applicable
|
|
Not applicable |
20.3
Consolidated financial statements33
|
|
pp. 11 to 72
|
|
See RD |
a) balance sheet;
|
|
pp. 10 to 12
|
|
See RD |
b) income statement;
|
|
p. 13; pp. 16 and 17
|
|
See RD |
c) statement of changes in equity;
|
|
p. 15
|
|
See RD |
d) cash flow statement;
|
|
p. 14
|
|
See RD |
e) accounting principles and explanatory notes;
|
|
pp. 21 to 69
|
|
See RD |
e) corresponding audit report.
|
|
pp. 70 to 71
|
|
See RD |
20.4 Auditing of historical annual financial information |
|
|
|
|
20.4.1 Statement that the historical financial information has been audited;
|
|
pp. 95 to 96 and
pp. 70 to 71
|
|
p. 49-50 |
20.4.2 Other information audited by the auditors;
|
|
p. 180
|
|
p. 4 |
20.4.3 Source of financial information not from the issuers audited financial
statements and statement that the data is unaudited.
|
|
Not applicable
|
|
p. 14-15 |
20.5 Age of the latest financial information
|
|
Not applicable
|
|
Not applicable |
20.6 Interim and other financial information |
|
|
|
|
20.6.1 Quarterly or half yearly financial information since the date of the
last audited financial statements and auditors report.
|
|
Not applicable
|
|
pp. 25 to 50 |
20.7 Dividend distribution policy
|
|
p. 7; pp. 58 to 59;
p. 91
|
|
p. 22 |
20.8 Legal and arbitration proceedings
|
|
pp. 63 to 65 ; pp.
93 to 94 and p. 130
to 132
|
|
p. 64 |
20.9 Significant change in the financial or trading position.
|
|
p. 110
|
|
p. 35 ; pp.51 to 54
; p. 64-65 |
21. ADDITIONAL INFORMATION |
|
|
|
|
21.1 Share Capital |
|
|
|
|
21.1.1 The amount of issued capital and additional information:
|
|
p. 102
|
|
See RD |
a) Number of shares authorized;
|
|
p. 102; p. 107
|
|
p. 57 and 58 |
|
|
|
33 |
|
The following are also included by reference
in this update to address this entry: |
|
|
|
the Companys consolidated statements for the financial year ended
31 December, 2004, and the statutory auditors report on those
statements as presented on pages 10 to 58 of the Reference Document filed
with the Autorité des marchés financiers on
19 April, 2005
under the number D.05-0481; |
|
|
|
the Companys consolidated statements for the financial year ended
31 December, 2003, and the statutory auditors report on those statements
as presented on pages 16 to 54 of the Reference Document filed with the
Autorité des marchés financiers on 9 April, 2004 under number
D.04-0460 and in its update filed on 6 May, 2004 under number D.04-0460-A01. |
68
|
|
|
|
|
|
|
Reference |
|
|
|
|
Document |
|
|
|
|
(Document de |
|
|
Appendix
I of EC Regulation No. 809/2004 of 29 April, 2004 |
|
Référence) |
|
Update Document |
b) Number of shares issued and fully paid and issued but not fully
paid;
|
|
p. 102
|
|
See RD |
c) Par value per share, and
|
|
p. 102
|
|
p. 56-57 |
d) A reconciliation of the number of shares outstanding at the
beginning and end of the year.
|
|
p. 105
|
|
See RD |
21.1.2 Existence of shares not representing capital;
|
|
Not applicable
|
|
Not applicable |
21.1.3 The number, book value and face value of shares in the issuer held by or
on behalf of the issuer;
|
|
pp. 89 to 102
|
|
p. 55 |
21.1.4 The amount of convertible securities, exchangeable securities or
securities with warrants with an indication of the conditions governing and the
procedures for conversion, exchange or subscription;
|
|
p. 48 and 49; pp.
56 and 58; pp. 102
to 103; pp. 151 to
154;
|
|
p. 59 to 61 |
21.1.5 Information about and terms of any acquisition rights and or obligations
over authorized but unissued capital or an undertaking to increase the capital;
|
|
pp. 154 to 155
|
|
p. 58 |
21.1.6 Information about any capital of any member of the group which is under
option or agreed conditionally or unconditionally to be put under option and
details of such options including those persons to whom such options relate.
|
|
Not applicable to
exception to 21.1.4
above
|
|
See RD |
21.1.7 A history of share capital, highlighting information about any changes,
for the period covered by the historical financial information.
|
|
p. 105
|
|
See RD |
21.2 Memorandum and Articles of Association |
|
|
|
|
21.2.1 Issuers objectives and purpose.
|
|
p. 98
|
|
See RD |
21.2.2 A summary of any provisions of the issuers articles of association,
statutes, charter or bylaws with respect to the members of the administrative,
management and supervisory bodies.
|
|
pp. 157 to 161
|
|
See RD |
21.2.3 Rights, preferences and restrictions attaching to each class of the
existing shares.
|
|
p. 98-99
|
|
See RD |
21.2.4 Action that is necessary to change the rights of holders of the shares,
indicating where the conditions are more significant than is required by law
|
|
Not applicable
|
|
Not applicable |
21.2.5 Conditions governing the manner in which annual general meetings and
extraordinary general meetings of shareholders are called including the
conditions of admission.
|
|
p. 99
|
|
See RD |
21.2.6 Provisions of the issuers articles of association, statutes, charter or
bylaws that would have an effect of delaying, deferring or preventing a change
in control of the issuer.
|
|
Not applicable
|
|
Not applicable |
21.2.7 Articles of association, statutes, charter or bylaw provisions, if any,
governing the ownership threshold above which shareholder ownership must be
disclosed.
|
|
p. 99
|
|
See RD |
21.2.8 Conditions imposed by the memorandum and articles of association
statutes, charter or bylaw governing changes in the capital, where such
conditions are more stringent than is required by law.
|
|
Not applicable
|
|
Not applicable |
22. MATERIAL CONTRACTS
|
|
p. 53 and 54 ; pp.
65 to 69; p. 130
and p. 171 to 175
|
|
See RD |
23. THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS OF ANY INTEREST |
|
|
|
|
23.1 Expert report.
|
|
Not applicable
|
|
Not applicable |
23.2 Confirmation that information from third parties has been accurately reproduced
and identification of the source(s) of the information.
|
|
p. 2 cover
|
|
p. 4 |
24. DOCUMENTS ON DISPLAY
|
|
p. 98 ; p. 195
|
|
See RD |
25. INFORMATION ON HOLDINGS
|
|
p. 52; pp. 83 to
83; p. 88; pp. 107
to 108 ; pp. 120 to
122; p. 129
|
|
p.10 ; p. 51 ;
p. 64 |
69
In
accordance with Article 28 of European Regulation (EC) No. 809-2004 of 29 April 2004, the following
information is incorporated by reference:
the consolidated financial statements of the Company for the year ended 31 December 2005 and the
report of the statutory auditors as presented on pages 11 to 70 of the Reference Document filed
with the AMF on 27 March 2006 under number D.06-0159;
the consolidated financial statements of the Company for the year ended 31 December 2004 and the
report of the statutory auditors as presented on pages 10 to 58 of the Reference Document filed with the AMF on 19 April 2005 under number D.05-0481; and
the consolidated financial statements of the Company for the year ended 31 December 2003 and the
report of the statutory auditors as presented on pages 16 to 54 of the Reference Document filed
with the AMF on 9 April 2004 under number D.04-0460 and in its update filed 6 May 2004 under number
D.04-0460-A01.
The sections of documents D.05-0481, D.04-0460 and D.04-0460-A01 which are not incorporated by
reference are either not significant for investors, or else covered in another section of the
Reference Document or in this Update Document.
70