Scor Se · EURONEXT:SCR
Scor — Investor Presentation (June 2006)
41 slides from Scor's investor presentation, Jun 26, 2006
Slide 1: Embedded Value of SCOR VIE as at 31 December 2005
Embedded Value of SCOR VIE as at 31 December 2005 26 June 2006 SCOR Vie EV as at December 31, 2005 June 26, 2006
Slide 2: Notice
Notice Certain statements contained in this presentation are forward-looking statements, of necessity provisional, that are based on risks and uncertainties that could cause actual results, performance or events to differ materially from those in such statements. Additional information regarding
Slide 3: Plan
Plan Introduction Embedded Value – Methodology Economic Assumptions Results Analysis of Changes SCOR Vie EV as at December 31, 2005 June 26, 2006 3
Slide 4: Introduction: Scope
Introduction Scope 100% SCOR VIE Including Branches (except Canada) SCOR VIE Canadian 100% Branch SFS (Ireland) 100% SCOR Life Re (USA) SCOR Vie EV as at December 31, 2005 June 26, 2006 4
Slide 5: Plan
Plan Introduction Embedded Value – Methodology Economic Assumptions Results Analysis of Changes SCOR Vie EV as at December 31, 2005 June 26, 2006 5
Slide 6: Methodology
Methodology As at 31/12/2005, SCOR Vie has adopted CFO Forum principles for the calculation of European Embedded Value (EEV). The impact of the application of these principles to SCOR VIE’s traditional EV is as follows Principle 1: EEV Definition Principle 7: Cost of Financial Options and Guarantees
Slide 7: Methodology
Methodology Net Asset Value + Value of portfolio of treaties in force - Cost of locking-in a solvency margin - Cost of FOGs Embedded Value SCOR Vie EV as at December 31, 2005 June 26, 2006 7
Slide 8: Methodology: Net Asset Value
Methodology Net Asset Value Capital and surplus Adjustment for investment in subsidiaries Removing the intangible assets Adding the part of the unrealised capital gains that is attributable to the shareholders and that is not taken into account in the value of business in force This is not a typical
Slide 9: Methodology
Methodology Net Asset Value + Value of portfolio of treaties in force - Cost of locking-in a solvency margin - Cost of FOGs Embedded Value SCOR Vie EV as at December 31, 2005 June 26, 2006 9
Slide 10: Methodology: Value of the portfolio
Methodology Value of the portfolio Value of the portfolio of treaties in force = Present value of future profits, net of tax, generated by the portfolio of treaties in force as at the valuation date. Projection of the profit and loss account: Premiums + Investment return - Claims - Change in reserve
Slide 11: Methodology: Business in force and new business
Methodology Business in force and new business Prudent definition of the business in force : New treaties Premiums New business n on in force treaties Premiums from business in force as at n-1 SCOR Vie EV as at December 31, 2005 June 26, 2006 11
Slide 12: Methodology: Future investment return rate
Methodology Future investment return rate Asset investment return rate determined : Æ On the basis of the asset mix as at 31/12/2005 for each entity Æ For SCOR VIE Paris, with constant market return assumptions for each type of asset (stocks, bonds, cash) Æ For the portfolios of SCOR Life Re and of
Slide 13: Methodology: Modeling of operating expenses
Methodology Modeling of operating expenses Æ Direct expenses of SCOR VIE, internal billing for common services from SCOR to SCOR VIE, SCOR expenses allocated to SCOR VIE Split administration / acquisition expenses Æ Based on an internal study Projection: only administration expenses Æ Assumption: co
Slide 14: Methodology: Approach for tax
Methodology Approach for tax Æ Valuation before and after tax Æ The effect of the tax consolidation of SCOR VIE into the SCOR Group has not been taken into account SCOR Vie EV as at December 31, 2005 June 26, 2006 14
Slide 15: Methodology
Methodology Net Asset Value + Value of portfolio of treaties in force - Cost of locking-in a solvency margin - Cost of FOGs Embedded Value SCOR Vie EV as at December 31, 2005 June 26, 2006 15
Slide 16: Methodology: Cost of locking-in a solvency margin
Methodology Cost of locking-in a solvency margin Solvency margin: Æ minimum European regulatory margin for insurers (used for SCOR VIE and SFS), because European reinsurance directive not yet in force Æ 200% of NAIC Risk Based Capital (SLRe) The cost of locking-in reflects the spread between: Æ The
Slide 17: Methodology
Methodology Net Asset Value + Value of portfolio of treaties in force - Cost of locking-in a solvency margin - Cost of FOGs Embedded Value SCOR Vie EV as at December 31, 2005 June 26, 2006 17
Slide 18: Financial Options and Guarantees
Financial Options and Guarantees Description and nature of FOGs No FOGs in the books of SCOR VIE and its branches FOGs identified in SCOR Life RE (USA) : Æ mainly in Annuities: Equity Indexed Annuities, Fixed Deferred Annuities Æ to a lesser extent in Universal Life The identified FOGs are : Æ Guara
Slide 19: Valuation of Financial Options and Guarantees (1/2)
Valuation of Financial Options and Guarantees Methodology (1/2) Principle 7 of the CFO Forum stipulates that the cost of FOGs must be explicitely valued. The time value of FOGs is deducted from the deterministic EV For FOGs that are not annuitization options: Æ Stochastic simulation of neutral-risk
Slide 20: Valuation of Financial Options and Guarantees (2/2)
Valuation of Financial Options and Guarantees Methodology (2/2) For annuitization options, valuation made through a closed formula based on the same interest rate model For Universal Life policies: Æ low amount of reserves Æ derived proportionally (based on reserves) from Fixed Deferred Annuities FO
Slide 21: Plan
Plan Introduction Embedded Value – Methodology Economic Assumptions Results Analysis of Changes SCOR Vie EV as at December 31, 2005 June 26, 2006 21
Slide 22: Economic Assumptions
Economic Assumptions Risk free rate: 10 year Government Bonds (Europe, USA, Canada) A spread on bond portfolio is taken into account Stocks: Risk free rate + 350 bp Cash Europe: EONIA (interbank rate) Cash US: 6 month Treasury Bill rate Cash Canada: overnight target rate SCOR Vie EV as at December 3
Slide 23: Economic Assumptions: Basis
Economic Assumptions Basis of economic assumptions Euro Zone Canada USA 10 year Government Bond 3.30 % 3.98 % 4.39 % Spread 20 bp 30 bp 30 bp Bond yield 3.50 % 4.28 % 4.69 % Cash and short term investments 2.42 % 3.25 % 4.37 % Stocks 6.80 % 7.48 % 7.89 % Net investment rate projected 3.80 % 3.94 % (
Slide 24: Determination of discount rate
Methodology Determination of discount rate Æ Top Down approach Æ Discount rate derived from CAPM formula re = r f + β ⋅ (rM − r f ) Æ re return expected by shareholder (discount rate) Æ β correlation between reinsurance stocks and stock market Æ rM − rf risk premium on stock market, Æ rf risk free r
Slide 25: Methodology: Assumptions
Methodology Assumptions: Risk premium for stock markets is consistent with the one used for stock return in projections of cash flows (350 bp) Risk free rate is the 10 year Government Bond for each geographical zone the beta factor has been estimated on a 2 year period using a sample of 7 internatio
Slide 26: Discount rate per geographical zone
Methodology Discount rate per geographical zone Zone Europe Canada USA Risk free rate 3.30 % 3.98 % 4.39 % Stock risk 350 bp 350 bp 350 bp premium Beta 1.08 1.08 1.08 Discount rate 7.08 % 7.76 % 8.17 % SCOR Vie EV as at December 31, 2005 June 26, 2006 26
Slide 27: Plan
Plan Introduction Embedded Value – Methodology Economic Assumptions Results Analysis of Changes SCOR Vie EV as at December 31, 2005 June 26, 2006 27
Slide 28: Results: Consolidated Embedded Value
Results: Consolidated Embedded Value EV SCOR Vie European 31/12/2004 EV SCOR Vie 31/12/2005 EUR million Adjusted Net Asset Value (after tax) 266.9 309.6 Value of business in force before cost of locking-in 432.8 481.6 (after tax) Cost of locking-in the solvency margin (after tax) (80.8) (96.4) Value
Slide 29: Valuation of Financial Options and Guarantees: Results
Valuation of Financial Options and Guarantees Results In the financial environment as at 31/12/2005 (US rates above 4%), the largest part of the cost of FOGs is linked to equity risk on Equity Indexed Annuities Time value of FOGs, EUR million Equity Indexed Annuities 2.034 Other FOGs in SCOR Life Re
Slide 30: Results: Adjusted Net Asset Value
Results Adjusted Net Asset Value as at 31/12/2005 after tax EUR million Shareholders’ equity of SCOR VIE (Paris) 424.8 Intangible assets (28.1) Adjustment for investment in subsidiaries (187.5) Shareholders’ interest in unrealised capital gains 4.6 Total adjusted Net Asset Value of SCOR VIE 213.9 Ad
Slide 31: Plan
Plan Introduction Embedded Value – Methodology Economic Assumptions Results Analysis of Changes SCOR Vie EV as at December 31, 2005 June 26, 2006 31
Slide 32: Analysis of Changes
Analysis of Changes EUR million Embedded Value as at 31/12/2004 before tax 857.6 Dividend and tax paid on 2004 income (25.4) Change due to operating activity of SCOR VIE before tax 92.3 Change due to the economic environment before tax (5.4) Embedded Value as at 31/12/2005 before tax 919.1 (constant
Slide 33: Analysis of change due to operating activity
Analysis of Changes Analysis of change due to operating activity EUR million Effect of unwinding of the discount rate 67.0 Experience deviation during the year (2.1) Impact of change in non economic assumptions (9.7) Value of new business (before tax) 37.1 Operating activity of SCOR VIE (before tax)
Slide 34: Change due to operating activity (continued)
Analysis of Changes Change due to operating activity (continued) Experience deviation during the year: close to zero in total Non economic assumptions: improvements / refinements in modeling and adjustments of parameters, in line with Principle 9 of CFO Forum New business: + 8.5 % on 2004 level SCOR
Slide 35: Analysis of Changes: Economic environment
Analysis of Changes Economic environment EUR million Financial deviation from expected to actual during current year (5.9) Changes in economic assumptions 0.5 Changes due to the economic environment (before tax) (5.4) SCOR Vie EV as at December 31, 2005 June 26, 2006 35
Slide 36: Analysis of Changes: Impact of exchange rate
Analysis of Changes Impact of exchange rate : EUR 54.5 Million before tax mainly due to the strengthening of USD against EUR from 31/12/2004 to 31/12/2005 SCOR Vie EV as at December 31, 2005 June 26, 2006 36
Slide 37: Analysis of Value Creation: +13.5%
Analysis of Value Creation : +13.5 % +54.5 Figures before tax, EUR million 973.6 + 13.5 % +37.1 +67.0 -17.2 -25.4 857.6 30 30 30 30 30 30 30 30 30 30 30 30 Embedded Dividend and Effect of Experience Value of New Impact of Embedded Value * as at tax paid on moving deviation and Business exchange rate
Slide 38: Sensitivity Analysis for Business in Force
Sensitivity Analysis for Business in Force Value of business as at 31/12/2005 (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 (as well as return on deposits and (43.3) discount rat
Slide 39: Embedded Value and Consolidated Balance Sheet of SCOR VIE
Embedded Value and Consolidated Balance Sheet of SCOR VIE EUR million 800 693 612 81 600 400 200 0 Consolidated Capital Embedded Value SCOR VIE Part of Embedded Value not recognized in Consolidated Balance Sheet of SCOR VIE SCOR Vie EV as at December 31, 2005 June 26, 2006 39
Slide 40: Part of EV not recognized in the Consolidated Balance Sheet
Part of EV not recognized in the Consolidated Balance Sheet of SCOR Embedded Value after tax as at 31/12/2005 693 - Adjusted Net Asset Value as at 31/12/2005 310 - DACs (Scor Vie and subsidiaries) 419 - deferred tax (108) + other adjustments (URCG, others) 9 Total 81 SCOR Vie EV as at December 31, 2
Slide 41: Conclusion
Conclusion Embedded Value 2005 significant growth compared to 2004: +12 % confirms the strength and the dynamism of SCOR VIE’s portfolio SCOR Vie EV as at December 31, 2005 June 26, 2006 41