4.4 Legal risk - Scor

6 BUSINESS OVERVIEW
Between 2002 and 2010, SCOR developed and implemented four three-year strategic plans to strengthen its balance
sheet and achieve its profitability goals through an underwriting policy focused on profitability, including by optimum
allocation of capital throughout the business cycle, and by maintaining its strong customer base and franchise in its three
geographical areas, Europe, Middle East and Africa (“EMEA”), Asia-Pacific, North America and particularly in developing
countries. The Group's acquisitions of Revios (in 2006) and Converium (in 2007) contributed to its diversification strategy
by balancing the proportion of its consolidated premiums written, respectively, in its Non-Life division and in its Life
division.
In September 2010, SCOR launched a new three-year Strategic Plan, known as “Strong Momentum,” which replaced its
previous strategic plan for 2007-2010, known as “Dynamic Lift.” On 7 September 2011, SCOR presented to the public
an update of its Strong Momentum plan called Strong Momentum "SMV1.1". SMV1.1 took into account the August 2011
acquisition of the mortality reinsurance business of Transamerica Re, the July 2011 sale of IIC which was SCOR's U.S.
fixed annuity business, and the latest (at the time) financial and economic developments. SMV1.1 confirmed the three
main targets to be achieved during the 2010-2013 business cycle:
• Optimization of the Group’s risk profile
The Group's strategy is based on a moderate risk appetite, both on the underwriting side and on the asset side. SCOR
continuously seeks to “optimize” its risk profile and has further decided to gradually and moderately increase its risk
appetite in the belly (rather than in the tail) of its target profit/loss probability distribution.
As compared to the previous strategic plan "Dynamic Lift", "Strong Momentum" therefore targets slightly higher expected
returns coupled with slightly higher earnings volatility. The Group believes an increase in risk appetite is appropriate
given its increased size and stronger balance sheet and risk management as compared to the prior three-year plan
period.
• “AA” level of financial security
SCOR seeks to provide a level of security to its insurance and reinsurance clients that is consistent with an "AA"
financial strength rating, based on Standard & Poor’s financial strength rating scale. Such level of security is currently
estimated with its Group Internal Model GIM-SMV1.1 on the basis of a 0.05% probability of default (which corresponds
to the average of Moody's and Standard & Poor's expected default statistics). Although SCOR's objective is to provide
an AA level of security, the Group cannot commit on behalf of the rating agencies to be rated AA.
• Profitability of 1,000 basis points above the three-month risk-free rate over the cycle
SCOR targets a return on equity of 1,000 basis points above the three-month risk-free rate over the three year plan
period. The Group considers the three-month risk-free rate to be the weighted three months daily interest rate of
Treasury bills in the Euro area, the U.S., U.K., Canada and Switzerland averaged over the period under consideration.
The weighted average used for this calculation is based on the percentage of SCOR's managed assets denominated in
the currency of these assets.
SCOR aims to achieve this goal through higher technical profitability (defined as profitability related to underwriting),
increased investment income, generating new fee income streams and higher productivity and efficiency.
On 6 September 2012, SCOR presented to the public an update of its Strong Momentum plan, called "Strong
Momentum" Season 3. "Strong Momentum" Season 3 presented updated information and analyses demonstrating that
the Group is consistently delivering on its promises and is well positioned to seize new profitable growth opportunities,
leveraging on its competitive advantages.
In spite of an increasingly uncertain environment with high market volatility, low yields and economic stagnation, "Strong
Momentum Season Three" demonstrated that SCOR's operational performance is consistent with the assumptions and
objectives of its strategic plan "Strong Momentum V1.1":
• SCOR's return on equity is in line with its "Strong Momentum V1.1" target
• Improved solvency and recent A+ upgrades confirm SCOR's capacity to provide an AA level of security to its
clients
• The Group experiences double-digit growth, supported by robust January, April and July 2012 P&C renewals
and a deepening global franchise.
• SCOR Global P&C exceeds "Strong Momentum V1.1" technical profitability assumptions, confirming an ongoing
positive trend.
• SCOR Global Life delivers a technical performance consistent with "Strong Momentum V1.1" assumptions,
with the successful integration of the ex-Transamerica Re.
• SCOR Global Investments maintains a prudent strategy with high investment flexibility.
• SCOR's cost ratio trends towards the "Strong Momentum V1.1" assumption, while actively investing for the
future, with more than 25 on-going projects.
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