SCOR issues a new contingent capital facility
(Thomson Reuters ONE) -
Press Release
15 December 2016 - N° 32
SCOR issues a new contingent capital facility
SCOR announces the launch of a new 3-year contingent capital facility. This
takes the form of a contingent equity line, providing the Group with EUR 300
million coverage in case of extreme natural catastrophe or life events impacting
mortality. The facility enables the Group to protect its solvency in case of
catastrophe events and is consistent with the "Vision in Action" strategic plan.
This is the third contingent capital facility launched by SCOR - its first,
pioneering solution was launched on January 1, 2011. This new solution is
consistent with the previous facilities.
Following the authorization granted by the General Meeting of SCOR shareholders
in April 2016, SCOR has arranged a new contingent capital equity line with BNP
Paribas. This equity line facility will replace, as of January 1, 2017, the
current contingent capital facility which comes to an end on December 31, 2016.
Under this new EUR 300 million arrangement, SCOR raises its protection versus
the existing contingent capital solution by EUR 100 million.
As with the previous facility, this protection would be triggered in case of
extreme life events impacting mortality, as well as natural catastrophe events.
It is calibrated to safeguard SCOR's solvency, in case of such major events. The
solution also allows SCOR to diversify its ways and means of protecting its
solvency, and offers a very cost effective alternative to traditional retro and
ILS.
The probability that the events triggering the contingent capital facility will
occur remains very low - and lower than that of the initial 2011 solution -,
which minimizes the probability-weighted costs for SCOR and its shareholders.
Under the new facility, a drawdown may result in an aggregate increase in the
share capital of up to
EUR 300 million (including issuance premium), in respect of which SCOR has
entered into a firm subscription commitment with BNP Paribas. The issuance of
the shares would be triggered when SCOR has experienced total annual aggregated
losses or claims from natural catastrophes or extreme events impacting mortality
claims above a certain threshold, which is not made public, between
January 1, 2017 and December 31, 2019.
As well as being recognized in SCOR's internal model, the solution has received
substantial favorable qualitative and quantitative assessments from the rating
agencies. Of course, in the absence of any extreme triggering event, no shares
will be issued under the facility. It is therefore highly likely that this
facility will reach its term without any dilutive impact for the shareholders.
Denis Kessler, Chairman & Chief Executive Officer of SCOR, comments: "This new
contingent capital facility is fully in line with the active capital management
policy at the heart of our 3-year plan "Vision in Action" and helps to safeguard
the Group's solvency in case of extreme catastrophe events. This facility
protects SCOR's solvency, at a very low cost for our shareholders, against
events such as a global pandemic or a natural catastrophe of historic
proportions."
Characteristics of the contingent equity line
The transaction will give rise to the issuance of approximately 9.6 million
warrants issued by SCOR to BNP Paribas. Each warrant gives BNP Paribas the right
to subscribe to two new SCOR shares without exceeding 10% of SCOR's share
capital.
The issuance of the warrants was authorized by the 17th resolution of the
Extraordinary General Meeting of SCOR shareholders on April 27, 2016 and was
approved by a resolution of its Board of Directors on October 26, 2016.
Under the transaction agreement, SCOR has undertaken to drawdown the facility
upon the occurrence of a triggering event resulting from natural or non-natural
catastrophes as described below, and BNP Paribas has undertaken to exercise
accordingly the number of warrants necessary for the subscription of EUR 300
million[1] (issuing premium included) of new shares in two separate tranches
of EUR 150 million each.
The drawdowns of the facility will only be available when:
1. the amount of the estimated ultimate net loss[2] incurred by the SCOR group
as an insurer or reinsurer (as reviewed by SCOR's statutory auditors)
reaches pre-defined thresholds in a given calendar year from January
1, 2017 to December 31, 2019, as a direct result of the occurrence within
that year of one or more natural catastrophe-type events, including but not
limited to:
* earthquake, seaquake, earthquake shock, seismic and/or volcanic
disturbance/eruption,
* hurricane, rainstorm, storm, tempest, tornado, cyclone, typhoon,
* tidal wave, tsunami, flood,
* hail, winter weather/freeze, ice storm, weight of snow, avalanche,
* meteor/asteroid impact,
* landslip, landslide, mudslide, bush fire, forest fire and lightning.
Or, when
2. the amount of net claims[3] of the SCOR group's life reinsurance segment
over two (2) consecutive semesters over the period from July 1, 2016 to
December 31, 2019 (as reviewed by SCOR's statutory auditors) reaches pre-
defined thresholds as the consequence, in particular, of one or more of the
following life business related events:
* deviation of epidemic, pandemic or a similar incidence or wide spread of
one or more medical conditions deriving from any disease(s),
* acts of war, acts of terrorism,
* accidents due to non-natural cause(s),
* material deviation from forecast biometric trends (mortality, morbidity,
disability or longevity) recorded by the life segment for any reason
whatsoever.
In addition, subject to no drawdown having already been conducted under the
facility, if the daily volume-weighted average price of the SCOR shares on
Euronext Paris falls below EUR 10 (i.e. a price level close to the par value of
the SCOR shares), an individual tranche of EUR 150 million (issuance fees
included) will be drawn down in order to ensure the availability of this
financial cover (the warrants being non-exercisable below par value) if a
natural or non-natural catastrophe-type event occurs during the remainder of the
Risk Coverage Period.
The warrants will remain exercisable until three months after the expiry of the
above Risk Coverage Period.
In accordance with the authorization granted by the General Meeting of SCOR
shareholders on
April 27, 2016, the maximum number of new shares issued in the event of exercise
of the warrants may not exceed 10% of SCOR's share capital.
All subscriptions for new shares by BNP Paribas will be made at a price equal to
the volume-weighted average price of the SCOR shares on Euronext Paris over the
three trading days preceding the exercise of the warrants, with a discount of
5%.
BNP Paribas is committed to subscribing to the new shares but does not intend to
become a long-term shareholder of SCOR and will resell the shares by way of
private placements and/or sales on the open market. In this respect SCOR and BNP
Paribas have entered into a profit sharing arrangement whereby 75% of the gain,
if any, will be retroceded to SCOR. If the resale of the new shares occurs
immediately upon exercise of the warrants through an off-market transaction, the
profit share ratio owed to SCOR will be paid in the form of SCOR shares in order
to limit the dilutive impact of the transaction for SCOR's shareholders.
From the notification of the occurrence of a triggering event by SCOR to BNP
Paribas until the exercise of the warrants, BNP Paribas will be prohibited from
engaging in hedging transactions on SCOR shares, other than ordinary course of
business transactions undertaken independently by BNP Paribas's affiliated
banking and brokerage businesses.
By way of illustration:
a/ Under current market conditions (i.e. an issuance price of EUR 29.81 based on
a 5% discount on a
3-trading day volume-weighted average price of EUR 31.38[4] per share), drawdown
of the total cover
(EUR 300 million) would account for a maximum of 5.23% of SCOR's share
capital[5].
b/ In the highly adverse event that a single tranche of EUR 150 million is drawn
down due to the fall of SCOR's share price, based on a 3-trading day volume-
weighted average price of EUR 10 per share (i.e. an issuance price of EUR 9.5
per share after the 5% discount) the transaction would account for 8.20% of
SCOR's share capital[6].
Given these theoretical dilution levels, and because the number of new shares
issued upon exercise of the warrants cannot exceed 10% of SCOR's share capital,
no prospectus for the AMF will be prepared in connection with the setting up of
this contingent equity line. Should the contingent capital be triggered and
issued, SCOR will make the appropriate disclosures to the market in compliance
with applicable market regulations as at the time of issuance of the new shares,
regarding the circumstances of such issuance, the amount of the drawdown, the
issuance price, the number of shares issued and the consequences of such
issuance for its shareholders.
The transaction will have no impact on SCOR's 2016 accounts except for the
immaterial subscription amount received by SCOR from BNP Paribas for the warrant
issuance (EUR 0.001 per warrant).
Limited potential dilutive impact of the transaction for SCOR shareholders
This financial coverage is an event-driven contingent capital equity line, which
may only be triggered by the occurrence of the aforementioned triggering events.
Its potential dilutive impact therefore depends on the probability of occurrence
of such triggering events, as well as on the share price at the time of trigger.
SCOR's management believes that such a contingent capital solution provides a
significant net economic benefit for its shareholders, as it favorably compares
to traditional retrocession and ILS and it optimizes SCOR's risk protection
costs with a limited potential dilutive impact. SCOR estimates that the annual
probability of any of the triggers occurring over the program is less than 2%,
which in practice puts the probable average dilution at approximately 0.15%[7].
The following chart summarizes the potential dilutive impact of the transaction
under various scenarios for a shareholder holding 1% of SCOR's share capital
prior to the share issuance (calculated on the basis of the number of shares
that make up the share capital as at November 30, 2016).
+-----------------+----------------+-------------+-----------------------------+
| Share issuance | Scenario |Number of new| Percentage interest |
| price | |shares issued| of the shareholder |
| | | +--------------+--------------+
| | | | Non-diluted |Diluted basis(|
| | | | basis ((1)) | (2)) |
+-----------------+----------------+-------------+--------------+--------------+
|At the current 3-| No trigger | 0 | 1.000% | 0.985% |
| day VWAP of EUR +----------------+-------------+--------------+--------------+
| 31.38 | | | | |
|(issuance price =+----------------+-------------+--------------+--------------+
| EUR 29.81) |2 tranches drawn| | | |
| | down | 10,063,399 | 0.950% | 0.937% |
| | | | | |
+-----------------+----------------+-------------+--------------+--------------+
(1) Based on the dilution of share capital as at November 30, 2016.
(2) Based on the dilution of share capital as at November 30, 2016 which would
result from the exercise of all the outstanding stock options, whether
exercisable or not (including all out-of-the-money options as at the date of
this press release) and final acquisition of all the outstanding shares granted
free of charge.
This table should be read as follows: a shareholder currently holding 1% of
SCOR's share capital (on a non-diluted basis) would hold, on the occurrence of a
triggering event, 0.950% of the capital following exercise of the warrants on
the basis of an issuance price of EUR 29.81 per share (including discount).
*
* *
Contact details
Marie-Laurence Bouchon
Group Head of Communications
+33 (0)1 58 44 76 10
mbouchon(at)scor.com
Ian Kelly
Head of Investor Relations
+44 203 207 8561
ikelly(at)scor.com
http://www.scor.com/
SCOR photo gallery
Twitter: (at)SCOR_SE
Forward-looking statements
SCOR does not communicate "profit forecasts" in the sense of Article 2 of (EC)
Regulation n°809/2004 of the European Commission. Thus, any forward-.looking
statements contained in this communication should not be held as corresponding
to such profit forecasts. Information in this communication may include
"forward-looking statements", including but not limited to statements that are
predictions of or indicate future events, trends, plans or objectives, based on
certain assumptions and include any statement which does not directly relate to
a historical fact or current fact. Forward-looking statements are typically
identified by words or phrases such as, without limitation, "anticipate",
"assume", "believe", "continue", "estimate", "expect", "foresee", "intend", "may
increase" and "may fluctuate" and similar expressions or by future or
conditional verbs such as, without limitations, "will", "should", "would" and
"could." Undue reliance should not be placed on such statements, because, by
their nature, they are subject to known and unknown risks, uncertainties and
other factors, which may cause actual results, on the one hand, to differ from
any results expressed or implied by the present communication, on the other
hand.
Please refer to the 2015 reference document filed on 4 March 2016 under number
D.16-0108 with the French Autorité des marchés financiers (AMF) posted on SCOR's
website www.scor.com (the "Document de Référence"), for a description of certain
important factors, risks and uncertainties that may affect the business of the
SCOR Group. As a result of the extreme and unprecedented volatility and
disruption of the current global financial crisis, SCOR is exposed to
significant financial, capital market and other risks, including movements in
interest rates, credit spreads, equity prices, and currency movements, changes
in rating agency policies or practices, and the lowering or loss of financial
strength or other ratings.
The Group's financial information is prepared on the basis of IFRS and
interpretations issued and approved by the European Union. This financial
information does not constitute a set of financial statements for an interim
period as defined by IAS 34 "Interim Financial Reporting". The Group's financial
information is prepared on the basis of IFRS and interpretations issued and
approved by the European Union. This financial information does not constitute a
set of financial statements for an interim period as defined by IAS 34 "Interim
Financial Reporting".
--------------------------------------------------------------------------------
[1] Without exceeding 10% of SCOR's share capital
[2] The estimated ultimate net loss is the aggregate of the individual estimated
ultimate net losses of all natural catastrophe events in a given calendar year.
The individual estimated ultimate net loss is the estimated pre-tax impact of
any qualifying natural catastrophe event, net of all recoveries (reinsurance and
derivatives) and additional expenses as recorded in the SCOR group books.
[3] The ultimate net claims amount is the aggregate of all claims relating to
non-natural catastrophe events affecting the SCOR group's life segment over a
two (2) semester time period (i.e. amount of gross benefits and claims - amount
of ceded benefits and claims over the time period considered).
[4] From December 12, 2016 to December 14, 2016.
[5] On the basis of SCOR's share capital made up of 192,445,910 shares as at
November 30, 2016, as publicly disclosed on December 1, 2016.
[6] Idem note 5.
[7] On the basis of an issuance price of EUR 29.81 per share.
SCOR Press Release:
http://hugin.info/143549/R/2065458/775355.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: SCOR via GlobeNewswire
Unternehmensinformation / Kurzprofil:
Datum: 15.12.2016 - 08:51 Uhr
Sprache: Deutsch
News-ID 513053
Anzahl Zeichen: 19593
contact information:
Town:
Paris
Kategorie:
Business News
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