-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QjmN2fChY0xTc8bxFs5Hh/hMpoD0ZJYdqDSvyQy/sglT3IhsjFDbobjxeuPHINnF 33gKTkHAk5C2eCA+qaDSkg== 0000798363-94-000002.txt : 19940816 0000798363-94-000002.hdr.sgml : 19940816 ACCESSION NUMBER: 0000798363-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: 6331 IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09940 FILM NUMBER: 94543941 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 10-Q 1 10-Q INDEPENDENT AUDITORS' REPORT The Board of Directors SCOR U.S. Corporation: We have reviewed the consolidated balance sheet of SCOR U.S. Corporation and subsidiaries (the Company) as of June 30, 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for the three month and six month periods ended June 30, 1994 and 1993. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of SCOR U.S. Corporation and subsidiaries as of December 31, 1993, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 1, 1994, except for Note 15, as to which the date was February 10, 1994, we expressed an unqualified opinion on those consolidated financial statements. As discussed in Note 3 to the consolidated financial statements for the three month and six month periods ended June 30, 1994, the Company changed its method of accounting for multiple year retrospectively rated reinsurance contracts and for the adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 113,"Accounting and Reporting of Short-Duration and Long- Duration Contracts," in 1993. KPMG Peat Marwick (Signature) New York, New York August 2, 1994 SCOR U.S. CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December 31, 1994 1993 ASSETS Investments: Fixed maturities: Available for sale, at fair value (amortized cost: $585,826 and $558,882) $ 569,422 $ 581,104 Held to maturity, at amortized cost (fair value: $19,977 and $27,109) 19,849 24,876 Equity securities, at fair value (cost: $14,483 and $15,581) 15,043 18,951 Short-term investments, at cost 55,157 90,642 Other long-term investments 1,200 1,081 660,671 716,654 Cash 13,994 17,096 Accrued investment income 10,275 10,169 Premiums receivable 109,975 80,319 Reinsurance recoverable on paid losses: Affiliates 12,216 9,498 Other 43,672 27,329 Reinsurance recoverable on unpaid losses: Affiliates 125,463 134,154 Other 98,605 87,689 Prepaid reinsurance premiums: Affiliates 10,407 14,578 Other 12,033 11,839 Deferred policy acquisition costs 25,609 24,140 Deferred Federal income tax benefits 38,280 11,894 Investment in affiliates 11,048 10,789 Other assets 42,455 37,963 $ 1,214,703 $ 1,194,111 See notes to consolidated financial statements.
4 SCOR U.S. CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December 31, 1994 1993 LIABILITIES Losses and loss expenses $ 622,829 $ 562,209 Unearned premiums 121,633 114,376 Funds held under reinsurance treaties: Affiliates 3,719 21,777 Other 19,485 17,825 Reinsurance balances payable: Affiliates 9,898 18,196 Other 59,825 42,037 Convertible subordinated debentures 86,250 86,250 Notes payable 20,000 20,000 Commercial paper 10,954 10,721 Other liabilities 13,309 10,031 967,902 903,422 STOCKHOLDERS' EQUITY Preferred stock, no par value, 5,000 shares authorized; no shares issued -0- -0- Common stock, $0.30 par value, 50,000 shares authorized; 18,299 and 18,299 shares issued 5,490 5,490 Additional paid-in capital 112,894 112,670 Unrealized appreciation (depreciation) of investments (10,299) 16,634 Foreign currency translation adjustment (269) 12 Retained earnings 140,452 157,532 Treasury stock, at cost(158 and 190 shares) (1,467) (1,649) 246,801 290,689 $ 1,214,703 $ 1,194,111 See notes to consolidated financial statements.
5 SCOR U.S. CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three Months Ended June 30, June 30, 1994 1993 1994 1993 REVENUES Net premiums earned $ 54,983 $ 56,722 $ 117,668 $ 110,482 Net investment income 10,208 10,866 20,206 20,898 Net realized investment gains 413 2,029 736 5,357 65,604 69,617 138,610 136,737 LOSSES AND EXPENSES Losses and loss expenses, net 42,991 37,770 113,498 71,744 Commissions, net 14,356 14,489 31,875 27,769 Other underwriting and administration expenses 5,980 6,866 12,787 13,006 Other expenses 1,062 978 1,475 1,928 Interest expense 2,204 2,349 4,528 3,521 66,593 62,452 164,163 117,968 Income (loss) from operations before Federal income taxes and cumulative effect of accounting changes (989) 7,165 (25,553) 18,769 Federal income taxes (benefit) (1,592) 1,292 (11,738) 4,123 Income (loss) from operations 603 5,873 (13,815) 14,646 Cumulative effect of accounting changes -0- -0- -0- (2,600) Net income (loss) $ 603 $ 5,873 $ (13,815) $ 12,046 See notes to consolidated financial statements.
6 SCOR U.S. CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 PER SHARE DATA PRIMARY Average common and common equivalent shares outstanding 18,191 18,472 18,125 18,483 Income (loss) from operations $ 0.03 $ 0.32 $ (0.76) $ 0.79 Cumulative effect of accounting changes -0- -0- -0- (0.14) Net income (loss) $ 0.03 $ 0.32 $ (0.76) $ 0.65 FULLY DILUTED Average common and common equivalent shares outstanding 18,191 21,742 18,125 20,152 Income (loss) from operations $ 0.03 $ 0.31 $ (0.76) $ 0.77 Cumulative effect of accounting changes -0- -0- -0- (0.13) Net income (loss) $ 0.03 $ 0.31 4 (0.76) $ 0.64 See notes to consolidated financial statements.
7 SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Six Months Ended June 30, (Unaudited) (in thousands, except per share data) 1994 1993 COMMON STOCK Balance at beginning of year $ 5,490 $ 5,453 Issuance of common stock -0- 37 Balance at end of period 5,490 5,490 ADDITIONAL PAID-IN CAPITAL Balance at beginning of year 112,670 112,068 Issuance of common stock 179 1,416 Change in unpaid stock options exercised 45 (787) Balance at end of period 112,894 112,697 UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS Balance at beginning of year 16,634 11,416 Change in unrealized appreciation (26,933) 7,012 Balance at end of period (10,299) 18,428 FOREIGN CURRENCY TRANSLATION ADJUSTMENT Balance at beginning of year 12 254 Change in foreign currency translation adjustment (281) (45) Balance at end of period (269) 209 RETAINED EARNINGS Balance at beginning of year 157,532 138,002 Net income (13,815) 12,046 Dividends ($.18 and $.16 per share) (3,265) (2,899) Balance at end of period 140,452 147,149 TREASURY STOCK Balance at beginning of year (1,649) (1,077) Net (purchases) reissuance of treasury stock 182 (4) Balance at end of period (1,467) (1,081) TOTAL STOCKHOLDERS' EQUITY AT END OF PERIOD $ 246,801 $ 282,892 Common stock shares Balance at beginning of year 18,299 18,176 Issuance of common stock -0- 123 Balance at end of period 18,299 18,299 Treasury stock shares Balance at beginning of year 190 153 Net purchases (reissuance) of treasury stock (32) 1 Balance at end of period 158 154 See notes to consolidated financial statements.
8 SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Mon
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 603 $ 5,873 $(13,815) $ 12,046 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of accounting changes -0- -0- -0- 2,600 Realized investment gains (413) (2,029) (736) (5,357) Changes in assets and liabilities: Accrued investment income (162) (1,976) (106) (280) Premium balances, net (23,384) (4,177) (20,166) (8,144) Prepaid reinsurance premiums 2,295 3,894 3,977 (5,944) Reinsurance recoverable on paid losses (5,669) (2,048) (19,061) 7,068 Deferred policy acquisition costs (51) 685 (1,469) (1,910) Losses and loss expenses 7,453 (10,339) 60,620 1,617 Unearned premiums (1,189) (351) 7,257 9,078 Reinsurance recoverable on unpaid losses 6,375 2,658 (2,225) (14,353) Funds held under reinsurance treaties 123 (2,328) (16,398) (491) Federal income taxes (1,592) (1,007) (13,538) 9,324 Other 431 582 201 712 Net cash provided by (used in) operating (15,180) (10,563) (15,459) 5,966 activities See notes to consolidated financial statements.
9 SCOR U.S. CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Mon
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities or redemptions of fixed maturities 98,862 70,454 138,788 183,097 Sales of equity securities 2,145 3,435 4,516 4,953 Net sales (purchases) of short-term investments (7,520) 63,401 36,734 (42,990) Investments in fixed maturities (80,865) (112,295) (159,668) (225,819) Investments in equity securities (486) (3,536) (2,215) (4,368) Other (1,808) (2,339) (2,980) (3,594) Net cash provided by (used in) investing activities 10,328 19,120 15,175 (88,721) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (1,632) (1,452) (3,265) (2,899) Proceeds from issuance of convertible subordinated debentures -0- -0- -0- 85,172 Proceeds from issuance of commercial paper-net 6 16 27 57 Proceeds from stock options exercised 27 837 45 960 Other 282 (747) 375 297 Net cash provided by (used in) financing activities (1,317) (1,346) (2,818) 83,587 Net increase (decrease) in cash (6,169) 7,211 (3,102) 832 Cash at beginning of period 20,163 13,999 17,096 20,378 Cash at end of period $ 13,994 $ 21,210 $ 13,994 $ 21,210 See notes to consolidated financial statements.
10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL SCOR U.S. Corporation ("SCOR U.S." or "Company") is a holding company, the principal operating subsidiaries of which are SCOR Reinsurance Company ("SCOR Re"), General Security Insurance Company ("GSIC"), The Unity Fire and General Insurance Company ("Unity Fire") and General Security Indemnity Company ("GSIND"). The Company, through its subsidiaries, provides property and casualty insurance and reinsurance to primary insurance companies on both a treaty and facultative basis. SCOR Re specializes in underwriting treaties covering non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. SCOR Re writes treaty business almost exclusively through reinsurance intermediaries. SCOR Re writes facultative business directly with primary insurance companies and through reinsurance intermediaries. GSIC and Unity Fire provide property and casualty insurance on both a primary and excess basis, specializing in alternative risk market coverages. GSIND provides commercial property and casualty coverages on a surplus lines basis. The unaudited interim consolidated financial statements have been prepared on the basis of Generally Accepted Accounting Principles ("GAAP") and in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company's 1993 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. PER SHARE DATA Primary earnings per share are based on the weighted average number of common shares outstanding during the period and, if dilutive, common shares assumed to be outstanding which are issuable under stock option plans. Fully diluted earnings per share are based on the additional assumption that the Debentures (as defined in Note 6) are converted into common shares, if dilutive. 3. ACCOUNTING CHANGES Effective as of December 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable 11 fair values and for all investments in debt securities. Under SFAS 115, investments are classified into three categories. Debt securities that management has the positive intent and the ability to hold to maturity are classified as "held to maturity" and reported at amortized cost. Debt and equity securities that are bought and held for the purpose of selling them in the near term are classified as "trading securities" and reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either of the above categories are classified as "available for sale securities" and reported at fair value with unrealized gains and losses reported as a separate component of stockholders' equity. The adoption of SFAS 115 did not have any effect on the Company's financial position or its results from operations. The FASB's Emerging Issues Task Force ("EITF") reached a consensus on July 22, 1993 regarding Issue No. 93-6, "Accounting for Multiple-Year Retrospectively-Rated Contracts by Ceding and Assuming Enterprises" ("EITF 93-6"). EITF 93-6 has had an impact on certain of the Company's retrocessional agreements. As a result of the Company's implementation of the change in accounting method, as of January 1, 1993, $2.6 million, or $0.14 per share (after-tax), is included as a reduction to income as a cumulative adjustment. The effect of this change, excluding the cumulative adjustment, for the three months and six months ended June 30, 1993 was to increase net income by $19,000, or $0.00 per share, and $1.3 million, or $0.06 per share, respectively. In the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" ("SFAS 113"). The significant provisions of SFAS 113 require grossing-up the balance sheet to eliminate the reporting of assets and liabilities relating to reinsured contracts net of the effects of reinsurance, establish the conditions for a contract to be accounted for as reinsurance, require the deferral and amortization of any gain from retroactive contracts as defined in SFAS 113, and provide guidance in assessing transfer of insurance risk in reinsurance. The adoption of SFAS 113 did not have a material effect on the Company's financial position or its results from operations. 4. INCOME TAXES The Company's effective income tax rate differs from the current statutory federal income tax rate of 35% principally due to tax-exempt interest income and dividends received deductions. 12 5. REINSURANCE The effect of ceded reinsurance on the Statement of Operations for the three and six months ended June 30, 1994 and 1993 are as follows (in thousands):
THREE MONTHS ENDED JUNE 30, 1994 Loss and Loss Premium Premium Expenses Written Earned Incurred Direct $ 2,365 $ 3,017 $ 2,536 Assumed 66,833 67,370 43,632 Ceded- affiliate (6,052) (7,286) (2,285) Ceded - other (7,057) (8,118) (892) Net $ 56,089 $ 54,983 $ 42,991 THREE MONTHS ENDED JUNE 30, 1993 Direct $ 2,336 $ 1,679 $ 141 Assumed 72,690 73,698 55,170 Ceded - affiliate (9,102) (7,844) (10,031) Ceded - other (5,659) (10,811) (7,510) Net $ 60,265 $ 56,722 $ 37,770 SIX MONTHS ENDED JUNE 30, 1994 Loss and Loss Premiums Premiums Expenses Written Earned Incurred Direct $ 5,955 $ 6,823 $ 5,636 Assumed 157,986 149,861 163,045 Ceded - affiliate (16,930) (20,933) (25,679) Ceded - other (18,109) (18,083) (29,504) Net $ 128,902 $ 117,668 $ 113,498 SIX MONTHS ENDED JUNE 30, 1993 Direct $ 4,833 $ 4,157 $ 6,144 Assumed 155,827 147,427 110,801 Ceded - affiliate (22,039) (21,020) (23,081) Ceded - other (25,007) (20,082) (22,120) Net $ 113,614 $ 110,482 $ 71,744
13 6. CONVERTIBLE SUBORDINATED DEBENTURES On March 29, 1993, SCOR U.S. sold at par $86.25 million of 5.25% Convertible Subordinated Debentures due April 1, 2000 ("Debentures") through a private offering. The Debentures are not redeemable by the Company prior to April 3, 1996 and are convertible into approximately 3.4 million shares of SCOR U.S. common stock at a conversion price of $25.375 per share. Expenses incurred in the offering of approximately $1.8 million were deferred and are being amortized over the life of the Debentures. The Company contributed $50 million of the net proceeds to SCOR Re. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL SCOR U.S. Corporation ("SCOR U.S." or the "Company") is a holding company, the principal operating subsidiaries of which are SCOR Reinsurance Company ("SCOR Re"), General Security Insurance Company ("GSIC"), The Unity Fire and General Insurance Company ("Unity Fire") and General Security Indemnity Company ("GSIND"). The Company, through its subsidiaries, provides property and casualty insurance and reinsurance to primary insurance companies on both a treaty and facultative basis. SCOR Re specializes in underwriting treaties covering non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. SCOR Re writes treaty business almost exclusively through reinsurance intermediaries. SCOR Re writes facultative business directly with primary insurance companies and through reinsurance intermediaries. GSIC and Unity Fire provide property and casualty insurance on both a primary and excess basis, specializing in alternative risk market coverages. GSIND provides commercial property and casualty coverages on a surplus lines basis. The operating results of the property and casualty insurance and reinsurance industry are subject to significant fluctuations due to competition, catastrophic events, general economic conditions, interest rates and other factors such as changes in tax laws and regulations. The operating results of SCOR U.S. have been influenced by these cycles. UNDERWRITING RESULTS The underwriting results of a property and casualty insurer or reinsurer are discussed frequently by reference to its loss ratio, underwriting expense ratio and combined ratio. The loss ratio is the result of dividing losses and loss expenses incurred by net premiums earned. The underwriting expense ratio is the result of dividing underwriting expenses by net premiums written for purposes of Statutory Accounting Practices ("SAP") and net premiums earned for purposes of Generally Accepted Accounting Principles ("GAAP"). The combined ratio is the sum of the loss ratio and the underwriting expense ratio. A combined ratio under 100% generally indicates underwriting profits and a combined ratio exceeding 100% generally indicates underwriting losses. Underwriting profit is only one element of overall profitability, 15 which also includes investment results, interest expense and the effects of income taxation. Accordingly, the combined ratio alone should not be used to measure overall profitability. The ratios discussed below have been calculated on a GAAP basis. The following table sets forth the Company's GAAP combined ratios and the components thereof for the periods indicated, and the SAP combined ratio for the Company's insurance and reinsurance subsidiaries. The GAAP ratios include the operating expenses of the holding company and the non-insurance subsidiaries, in addition to the operating expenses of the insurance and reinsurance subsidiaries. The SAP expense ratios include only the operating expenses of the insurance and reinsurance subsidiaries. In addition, the GAAP loss ratio takes into consideration recoveries under certain retrocessional agreements with SCOR S.A., the Company's majority shareholder, whereas these recoveries are included in other income for SAP purposes.
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 GAAP RATIOS (Total Company) Loss ratio 78.2% 66.6% 96.5% 64.9% Commission ratio 26.1% 25.5% 27.1% 25.1% U/W, admin. and other expense ratio 12.8% 13.8% 12.1% 13.5% Expense ratio 38.9% 39.3% 39.2% 38.6% Combined ratio 117.1% 105.9% 135.7% 103.5% SAP RATIOS* Combined ratio 114.0% 98.1% 130.1% 106.5% * Reinsurance and insurance subsidiaries only.
COMPARISON OF SECOND QUARTER RESULTS FOR 1994 WITH 1993 Gross premiums written for 1994 decreased 8% to $69.2 million from $75.0 million in 1993. Net premiums written for 1994 decreased 7% to $56.1 million from $60.3 million for 1993. The decrease in premium volume was attributable principally to the continued withdrawal from certain property and casualty lines of business where the Company believes rates and/or conditions are inadequate. More specifically, throughout 1994 16 the Company has been reducing its property business written on a pro rata basis. A combination of an acceleration in the reduction of this business and fewer attractive opportunities in targeted lines of business caused the reduction in 1994 premium volume. Net losses and loss expenses incurred increased 14% in 1994 to $43.0 million from $37.8 million in 1993. The loss ratio was 78.2% for 1994 as compared with 66.6% for 1993. During 1993 the Company incurred $3.0 million of net losses ($4.0 million of gross losses) resulting from property catastrophe events, primarily the World Trade Center bombing and the East Coast blizzard, which adversely affected the loss ratio by 5.5 points. The Company did not experience any material amount of incurred losses from property catastrophe events in the second quarter of 1994. The Company experienced an increase in non-catastrophe related treaty incurred losses during the second quarter of 1994. During 1994 and 1993, the Company ceded $15.4 million and $18.7 million of earned premiums, respectively. The Company recovered from retrocessionnaires $3.2 million and $17.5 million of losses during 1994 and 1993, respectively. Commission expenses decreased 1% to $14.4 million in 1994 from $14.5 million in 1993. The commission ratio was 26.1% for 1994, compared with 25.5% for 1993. Underwriting, administration and other expenses decreased 10% in 1994 to $7.0 million from $7.8 million in 1993. The underwriting and other expense ratio was 12.8% for 1994 as compared with 13.8% for 1993. The combined ratio was 117.1% for 1994, compared with 105.9% for 1993. The effect of property catastrophe events on the 1993 combined ratio was 5.5 points. Net investment income for 1994 decreased 6% to $10.2 million from $10.9 million in 1993. Net investment income (pre- tax) has been affected adversely by the high level of claim payments made since mid-1992 related to catastrophic events and the Company's managed shift toward a greater percentage of tax- exempt securities. Offsetting the above factors was an increase in investment income related to the proceeds of the issuance by the Company in March, 1993 of $86.25 million of 5.25% Convertible Subordinated Debentures due April 1, 2000 ("Debentures") (see Liquidity and Capital Resources). On an after-tax basis, net investment income decreased 4% to $8.1 million for 1994, compared with $8.3 million in 1993. Net realized investment gains for 1994 were $400,000, compared with $2.0 million for 1993. Interest expense decreased 6% to $2.2 million in 1994 from $2.3 million in 1993. 17 The Company's net income for 1994 was $600,000, or $0.03 per share, on a primary basis, compared with $5.9 million, or $0.32 per share, for 1993. The 1993 results were affected by after-tax charges to operations, net of reinsurance, of $1.9 million, or $0.11 per share for property catastrophe events. Average common and common equivalent shares outstanding (on a primary basis) for 1994 were 18.2 million, compared with 18.5 million for 1993. COMPARISON OF YEAR TO DATE RESULTS FOR 1994 WITH 1993 Gross premiums written for 1994 increased 2% to $163.9 million from $160.7 million in 1993. Net premiums written for 1994 increased 13% to $128.9 million from $113.6 million for 1993. Gross premiums written and net premiums written for 1994 were increased by $800,000 and reduced by $5.4 million, respectively, of additional premiums to reinstate catastrophe reinsurance protections subsequent to the January 1994 Northridge earthquake. Excluding these reinstatement premiums, gross premiums written and net premiums written for 1994 increased by 2% and 18%, respectively, compared with 1993. The increase in premium volume was attributable principally to the first quarter effect of new and increased participations in treaty business from targeted market segments such as nonstandard automobile. Offsetting most of the Company's premium growth was the continued withdrawal from certain property and casualty lines of business where the Company believes rates and/or conditions are inadequate. Net losses and loss expenses incurred increased 58% in 1994 to $113.5 million from $71.7 million in 1993. The loss ratio was 96.5% for 1994 as compared with 64.9% for 1993. During 1994 the Company incurred $31.5 million of net losses ($61.0 million of gross losses) resulting from property catastrophe events, which added 29.7 points to the loss ratio. Of these amounts, the January 1994 Northridge, California earthquake accounted for $26.1 million of net incurred losses and $54.8 million of gross incurred losses. During 1993 the Company incurred $9.0 million of net losses ($12.1 million of gross losses) resulting from property catastrophe events, primarily the World Trade Center bombing and the East Coast blizzard, which adversely affected the loss ratio by 8.1 points. During 1994 and 1993, the Company ceded $39.0 million and $41.1 million of earned premiums, respectively. The Company recovered from retrocessionnaires $55.2 million and $45.2 million of losses during 1994 and 1993, respectively. Ceded premiums in 1994 included $6.0 million of reinstatement premiums paid by the Company. Ceded losses in 1994 included $29.5 million of losses resulting from property catastrophe events. 18 Commission expenses increased 15% to $31.9 million in 1994 from $27.8 million in 1993. The commission ratio was 27.1% for 1994, compared with 25.1% for 1993. The increase in the commission ratio for 1994 is primarily attributable to the effect of net reinstatement premiums related to the property catastrophe events, which added 1.1 points to the 1994 commission ratio. Underwriting, administration and other expenses decreased 4% in 1994 to $14.3 million from $14.9 million in 1993. The underwriting and other expense ratio was 12.1% for 1994 as compared with 13.5% for 1993. The effect of net reinstatement premiums related to the property catastrophe events added 0.5 points to the 1994 ratio. The decrease in the underwriting and other expense ratio in 1994 was principally caused by the higher growth rate of net premiums earned as compared with the 4% decline in expenses. The combined ratio was 135.7% for 1994, compared with 103.5% for 1993. The effect of property catastrophe events on the 1994 and 1993 combined ratio was 31.3 points and 8.1 points, respectively. Net investment income for 1994 decreased 3% to $20.2 million from $20.9 million in 1993. Net investment income (pre- tax) has been affected adversely by the high level of claim payments made since mid-1992 related to catastrophic events and the Company's managed shift toward a greater percentage of tax- exempt securities. Offsetting the above factors was an increase in investment income related to the proceeds of the issuance by the Company in March, 1993 of the Debentures. On an after-tax basis net investment income for 1994 was virtually unchanged at $16.1 million. Net realized investment gains for 1994 were $700,000 compared with $5.4 million for 1993. Interest expense increased 29% to $4.5 million in 1994 from $3.5 million in 1993. The increase was principally attributable to six months of interest expense recognized on the Debentures in 1994 compared with three months of interest expense in 1993. The Company's net loss for 1994 was $13.8 million, or $0.76 per share, on a primary basis, compared with net income of $12.0 million, or $0.65 per share, for 1993. The 1994 results were affected by after-tax charges to operations, net of reinsurance, of $23.8 million, or $1.31 per share for property catastrophe events. The 1993 results were affected by after-tax charges to operations, net of reinsurance, of $5.9 million, or $0.32 per share for property catastrophe events. Average common and common equivalent shares outstanding (on a primary basis) for 1994 were 18.1 million, compared with 18.5 million for 1993. 19 INCOME TAXES Statement of Financial Accounting Standards No. 109 requires the establishment of a valuation allowance for deferred income tax benefits where it is more likely than not that some portion of the deferred income tax benefits will not be realized. Management believes, based on the Company's historical record of generating taxable income and its expectations of future earnings, that the Company's taxable income in future periods will be sufficient to realize the net deferred income tax benefits reflected on its consolidated balance sheet as of June 30, 1994. The Company also has the ability to recover certain income taxes paid on capital gains if capital losses were to be realized. In addition, management believes certain tax planning strategies exist, including its ability to alter the mix of its investment portfolio to taxable investments from tax-exempt investments, which could be implemented if necessary to ensure sufficient taxable income to realize fully its net deferred income tax benefits. Accordingly, SCOR U.S. has not established a valuation allowance with respect to its net deferred income tax benefits. LIQUIDITY AND CAPITAL RESOURCES SCOR U.S. is a holding company. Its principal sources of cash are cash dividends from its operating subsidiaries, borrowings, and the issuance of equity securities. Generally, dividends that can be paid, without prior approval of the New York Insurance Superintendent, by insurers domiciled in New York State, including SCOR Re, are limited for any twelve-month period to the lesser of 10% of statutory surplus or adjusted net investment income (as defined by New York Insurance Law) for the previous twelve months. During the twelve months ended June 30, 1994, $19.1 million of dividends were declared to SCOR U.S. At June 30, 1994, the aggregate statutory surplus of the SCOR U.S. operating subsidiaries was $240.5 million. On March 29, 1993, SCOR U.S. sold at par $86.25 million of 5.25% Convertible Subordinated Debentures due April 1, 2000 through a private offering. The Debentures are not redeemable by the Company prior to April 3, 1996 and are convertible into approximately 3.4 million shares of SCOR U.S. common stock at a conversion price of $25.375 per share. Expenses incurred in the offering of approximately $1.8 million were deferred and are being amortized over the life of the Debentures. The Company contributed $50 million of the net proceeds to SCOR Re. On October 1, 1990 SCOR U.S. renewed a $20.0 million note which was payable on that date. The new note is due and payable on October 3, 1995 and bears interest at a fixed annual rate of 9.575%. The Company has entered into an interest rate swap 20 agreement on this note with a commercial bank. The swap agreement has a maturity date of October 1, 1995 and provides for the Company to make floating rate payments in exchange for fixed rate payments to be made by the counter party. SCOR U.S. has established a commercial paper program which allows it to raise up to $50.0 million. At June 30, 1994, $11.0 million of commercial paper was outstanding. SCOR U.S. has a $30.0 million revolving line of credit with a bank which serves as a backstop for its commercial paper program. No borrowings have been made under this facility. At June 30, 1994, the amount remaining under the Company's existing stock repurchase program is approximately $1.4 million, which may be utilized as market conditions permit. The Company has not repurchased any shares during 1994. The primary sources of liquidity for the SCOR U.S. insurance and reinsurance subsidiaries are net cash flow from operating activities, the maturity or sale of investments, and capital contributions from SCOR U.S. Net cash used in operating activities was $15.5 million for 1994 compared with cash provided by operations of $6.0 million for 1993. Cash flow from operating activities during 1994 was adversely affected by continued property catastrophe paid loss activity as well as the payment of several large previously reserved casualty claims. The Company has not suffered any adverse effect due to the recent catastrophe activity in the timing of recoveries or credit worthiness of retrocessionnaires. Loss payments associated with the recent catastrophe activity are not expected to have an adverse material effect on the Company's short-term or long-term liquidity. During 1993, the Company incurred $9.4 million of capital expenditures, which primarily related to the development of information systems. At June 30, 1994, the Company had no significant commitments for capital expenditures. Effective January 1, 1991, SCOR Re and certain of the Company's other operating subsidiaries operate under a reinsurance pooling agreement pursuant to which the net amounts under all new and renewal business written by each such company are pooled. The net balances of the pool are then distributed to each company in accordance with established proportions. At June 30, 1994, total investments and cash at carrying value were $674.7 million compared with $733.8 million at December 31, 1993. The decreased level of investments and cash is primarily attributable to the decrease during the period in the fair value of investments carried at fair value and the negative cash flow from operations during the period. SCOR U.S. fixed maturity investments are substantially all investment 21 grade, liquid securities with a weighted average maturity of 7 years. Approximately 98% of the fixed maturity portfolio is rated A or better. SCOR U.S. does not have any investment in real estate or high yield bonds. At June 30, 1994, the Company did not have any non-income producing investments. SCOR U.S. believes that cash and short-term investments are maintained at an adequate level for payment of claims and expenses as they become due. In addition, SCOR U.S. maintains a maturity distribution profile of fixed maturity investments sufficient to fund anticipated loss and loss expense obligations as they become due. The Company's long-term obligations primarily consist of the Debentures and the claims liabilities of the principal operating subsidiaries, which at June 30, 1994 averaged approximately 4.5 years. The Company may be subject to gains and losses resulting from currency fluctuations because some of its investments are denominated in currencies other than United States dollars, as are some of its net loss reserve liabilities. The Company makes investments denominated in foreign currencies to mitigate, in part, the effects of currency fluctuations on its results of operations. Investments denominated in foreign currencies do not constitute a material portion of the Company's investment portfolio and, in the opinion of management, are sufficient to meet its foreign currency obligations. Net gains (losses) resulting from foreign currency transactions during the six month periods ended June 30, 1994 and 1993 were $ 200,000 and (200,000), respectively. Stockholders' equity at June 30, 1994 was $246.8 million, a decrease of $43.9 million over December 31, 1993. This decrease resulted primarily from the net loss of $13.8 million for the period, unrealized depreciation of investments carried at fair value, net of tax effect, of $26.9 million, and cash dividends declared of $3.3 million. The ratio of net premiums written to surplus, sometimes referred to as "insurance exposure", relates to the amount of risk to which an insurer's statutory capital and surplus can be exposed, as measured by the amount of premiums written in relation to such surplus. Insurance practice and regulatory guidelines suggest that property and casualty insurance companies maintain a net premiums written to surplus ratio of less than 3 to 1. For the reinsurance industry, a ratio of 2 to 1 or less is generally considered prudent. SCOR U.S.'s net premiums written to surplus ratios were 1.08 to 1 and 0.81 to 1 for 1994 and 1993, respectively. 22 REGULATORY MATTERS The National Association of Insurance Commissioners ("NAIC"), an organization that assists state insurance regulators in achieving regulatory objectives, established minimum capital requirements, referred to as risk based capital, by adopting a risk-based capital formula for property and casualty companies in December 1993. The risk based capital formula will be applied to statutory financial statements beginning for the year ending December 31, 1994. The essential elements of these requirements focus on a company's types of business, historical loss development patterns and asset quality. Based on the preliminary assessment of the requirements, however, SCOR U.S. believes that the statutory surplus of each of its operating subsidiaries will be sufficient to meet these risk based capital requirements and to conduct its respective operations. The NAIC is currently developing an Investments of Insurers Model Act, which, if adopted by state regulatory authorities, would establish uniform limitations upon the type and amounts of investments insurers may hold. Based upon the current proposals of this Model Act, which are subject to review and change, the Company does not believe a uniform standard would significantly affect the current investment mix or operations of its insurance and reinsurance subsidiaries. ACCOUNTING PRONOUNCEMENTS Effective as of December 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115 addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Under SFAS 115, investments are classified into three categories. Debt securities that management has the positive intent and the ability to hold to maturity are classified as "held to maturity" and reported at amortized cost. Debt and equity securities that are bought and held for the purpose of selling them in the near term are classified as "trading securities" and reported at fair value with unrealized gains and losses included in earnings. Debt and equity securities not classified as either of the above categories are classified as "available for sale securities" and reported at fair value with unrealized gains and losses reported as a separate component of stockholders' equity. The adoption of SFAS 115 did not have any effect on the Company's financial position or its results from operations. The FASB's Emerging Issues Task Force ("EITF") reached a consensus on July 22, 1993 regarding Issue No. 93-6, "Accounting for Multiple-Year Retrospectively-Rated Contracts by Ceding and Assuming Enterprises" ("EITF 93-6"). EITF 93-6 has had an impact 23 on certain of the Company's retrocessional agreements. As a result of the Company's implementation of the change in accounting method, as of January 1, 1993, $2.6 million, or $0.14 per share (after-tax), is included as a reduction to income as a cumulative adjustment. The effect of this change, excluding the cumulative adjustment, for the three months and six months ended June 30, 1993 was to increase net income by $19,000, or $0.00 per share, and $1.3 million, or $0.06 per share, respectively. In the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts" ("SFAS 113"). The significant provisions of SFAS 113 require grossing-up the balance sheet to eliminate the reporting of assets and liabilities relating to reinsured contracts net of the effects of reinsurance, establish the conditions for a contract to be accounted for as reinsurance, require the deferral and amortization of any gain from retroactive contracts as defined in SFAS 113, and provide guidance in assessing transfer of insurance risk in reinsurance. The adoption of SFAS 113 did not have a material effect on the Company's financial position or its results from operations. 24 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS SCOR Re, GSIC, Unity Fire and GSIND are each a party to various lawsuits arising in the normal course of their business. SCOR U.S. does not believe that any of the litigation to which SCOR Re, GSIC, Unity Fire or GSIND is currently a party will have a material adverse effect on the operating results or financial condition of SCOR U.S. and its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the June 6, 1994 Annual Meeting of the Stockholders of SCOR U.S. ("Meeting"), held in New York City, the stockholders voted to elect the nominated slate of three directors, each to serve until the Annual Meeting in 1997, to approve amendments to the Stock Option Plan for Directors and to ratify the appointment of KMPG Peat Marwick ("Peat Marwick") as independent auditors of SCOR U.S. for 1994. Holders of record of the Company's common stock as of April 18, 1994 were entitled to vote at the Meeting. On April 18, 1994, there were 18,140,835 shares of common stock outstanding and entitled to vote, and 17,596,616 of such shares were represented at the Meeting. Each of the directors received at least 99.9% of the shares cast in favor of his election. The shares cast for each director are as follows: Raymond H. Deck: 17,592,104 shares for and 4,512 shares withheld; Richard M. Murray: 17,591,238 shares for and 5,378 shares withheld; and Serge M.P. Osouf: 17,581,039 shares for and 15,577 shares withheld. With respect to the approval to amend the Stock Option Plan for Directors, the shares cast were 17,312,874 for, 267,701 shares against and 16,041 shares in abstention. With respect to the ratification of the appointment of Peat Marwick, the shares cast were 17,582,703 for, 2,212 shares against and 11,701 shares in abstention. There were no broker non-votes for any of the matters voted upon at the Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 9(c) SCOR REINSURANCE COMPANY 1994 VOTING TRUST AGREEMENT, dated as of June 6, 1994 among SCOR Reinsurance Company, SCOR U.S. Corporation and the Voting Trustees 25 10(t) SCOR U.S. CORPORATION STOCK OPTION PLAN FOR DIRECTORS as amended by vote of the stockholders at the Annual Meeting of Stockholders held on June 16, 1994. 11 Computation of Earnings per Share 15 Letter re Unaudited Interim Financial Information b) Reports on Form 8-K None. SIGNATURES 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. SCOR U.S. Corporation (Registrant) Dated: August 11, 1994 Jeffrey D. Cropsey (Signature) Senior Vice President and Chief Financial Officer 26 EX-11 2 EARNINGS PER SHARE COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share data)
Three Months Ended, Six Months Ended, June 30 June 30 1994 1993 1994 1993 PRIMARY Net income (loss) applicable to common stock $ 603 $ 5,873 $ (13,815) $ 12,046 Average number of common shares outstanding 18,141 18,198 18,125 18,187 Add: Assumed exercise of stock options 50 274 -0- 296 Common and common equivalent shares outstanding 18,191 18,472 18,125 18,483 Net income (loss) per share assuming exercise of common stock equivalents $ 0.03 $ 0.32 $ (0.76) $ 0.65 FULLY DILUTED Net income (loss) applicable to common stock $ 603 $ 6,649 $ (13,815) $ 12,839 Average number of common shares outstanding 18,141 18,130 18,125 18,089 Add: Assumed exercise of stock options 50 218 -0- 268 Assumed convertion of convertible bonds -0- 3,394 -0- 1,795 Common and common equivalent shares outstanding assuming full dilution 18,191 21,742 18,125 20,152 Net income (loss) per share assuming full dilution $ 0.03 $ 0.31 $ (0.76) $ 0.64
EX-15 3 AUDITOR'S CONSENT SCOR U.S. Corporation New York, New York Gentlemen: We acknowledge our awareness that our report dated August 2, 1994 related to our review of interim financial information of SCOR U.S. Corporation for the three month and six month periods ended June 30, 1994 and included in the quarterly report on Form 10-Q is incorporated by reference in the Company's Registration Statements on Form S-8 (Registration Nos. 33-12604, 33-44577, and 33-46753). Our report refers to the changes in the Company's methods of accounting for multiple year retrospectively rated reinsurance contracts and for the adoption of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," in 1993. Pursuant to Rule 436(c) under the Securities Act, such report is not considered a part of a Registration Statement prepared or certified by an accountant within the meaning of Section 7 and 11 of the Act. Very truly yours, KPMG Peat Marwick (Signature) August 10, 1994 EX-99 4 STOCK OPTION PLAN Board Approval: September 19, 1990 Stockholder Approval: June 6, 1991 Amended: December 11, 1991 Amended: March 25, 1994 Stockholder Approval: June 16, 1994 SCOR U.S. CORPORATION STOCK OPTION PLAN FOR DIRECTORS 1. PURPOSE. The purpose of this Plan is to promote the interests of the Company and its stockholders by strengthening the Company's ability to attract, motivate and retain qualified directors and by providing its directors with a proprietary interest in the Company's financial success and growth. 2. DEFINITIONS. The following terms, when used in the Plan, shall have the meanings set forth below, unless otherwise required by the context. (a) Board: The Board of Directors of the Company. (b) Common Stock: The Common Stock (par value $0.30 per share) of the Company. (c) Company: SCOR U.S. Corporation, a Delaware Corporation. (d) Disability: The inability of a Participant to perform the services normally rendered by such Participant due to any physical or mental impairment that can be expected to be of either permanent or indefinite duration, as determined by the Board or a duly authorized committee of the Board on the basis of appropriate medical evidence. (e) Eligible Director: A member of the Board or of the board of directors of a subsidiary of the Company (or both) who is not an employee of the Company or any subsidiary of the Company. (f) Fair Market Value: The closing sale price of a share of Common Stock on the date as of which fair market value is to be determined, as reported in the Wall Street Journal's New York Stock Exchange -- Composite Transactions Index, or if such date was not a trading day or no sale was made on such date, the closing sale price so reported for the next preceding trading day on which there was a sale. (g) Grant Date: Each of the following dates: (i) the date upon which an individual first becomes an Eligible Director, other than on the date of an annual meeting of the Company's shareholders, and (ii) the third business day following each annual meeting of the Company's shareholders during the term of the Plan."; (h) Option: A stock option granted under this Plan. (i) Participant: An Eligible Director who receives an Option under the Plan. (j) Plan: The SCOR U.S. Corporation Stock Option Plan for Directors as set forth herein, as the same may be amended from time to time. (k) Service: Service as a member of the Board or of a board of directors of a subsidiary of the Company or of both. 3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 8, the aggregate number of shares of Common Stock that may be issued or transferred under the Plan shall not exceed 220,000 shares. Such shares may be either authorized but unissued shares or shares issued and thereafter acquired by the Company. Upon the expiration or termination of an unexercised Option, in whole or in part, the number of shares as to which the Option was not exercised shall no longer be charged against the foregoing limitation and may again be made subject to Options under the Plan. 4. ADMINISTRATION OF THE PLAN. (a) The Plan shall be administered by the Board, which shall have full power to interpret the Plan and, subject to its provisions, to prescribe, amend and rescind rules and to make all other determinations necessary for the Plan's administration; provided, however, that the Board may, in its discretion, delegate its authority under this Section to a committee composed of members of the Board. (b) All action taken by the Board (or a committee of the Board) in the administration and interpretation of the Plan shall be final and binding on all concerned. (c) Each member of the Board, when acting in connection with the Plan, shall be considered to be acting in his capacity as a director of the Company. Members of the Board acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for willful misconduct in the performance of their duties. The fact that a member of the Board is, or shall theretofore have been or thereafter may be, a person who has received or is eligible to receive an Option shall not disqualify him from taking part in and voting at any time as a member of the Board in favor of or against any amendment or repeal of the Plan or any determination under it. 5. ELIGIBILITY. Only Eligible Directors shall be eligible to participate in the Plan. 6. GRANT OF OPTIONS. Each individual who is an Eligible Director on a Grant Date shall automatically be granted on such date an Option to acquire 3,000 shares of Common Stock (subject to adjustment pursuant to Section 8). Each Option shall be evidenced by a written instrument in a form approved by the Secretary of the Company, consistent with the terms and conditions of the Plan. No Options shall be granted under the Plan after December 31, 1999. 7. TERMS AND CONDITIONS OF OPTIONS. (a) The purchase price of a share of Common Stock under each Option shall be the Fair Market Value of the Common Stock on the Option's Grant Date. (b) Subject to the provisions of Section 7(d), an Option granted under the Plan shall become exercisable with respect to 50% of the shares of Common Stock covered thereby on the first anniversary of the Option's Grant Date and with respect to the remainder of the shares on the second anniversary of the Option's Grant Date. To the extent exercisable, an Option may be exercised in whole or in part from time to time, except that an Option may not be exercised for fewer than 100 shares unless such exercise is for all the shares then remaining subject to the Option. (c) Each Option shall expire on the tenth anniversary of the Option's Grant Date, unless an earlier expiration date applies pursuant to the provisions of Section 7(d). (d) In the event of the termination of a Participant's Service, each Option held by the Participant shall expire one year after such termination and shall be exercisable only to the extent exercisable immediately prior to such termination; provided, however, that each such Option shall be fully exercisable during such one-year period if termination is due to death or Disability or to retirement with the consent of the Board. (e) Upon the exercise of an Option, the purchase price shall be payable in full (i) in cash, (ii) by the assignment and delivery to the Company of shares of Common Stock owned by the holder of the Option for at least six months prior to exercise (provided that such shares do not secure any obligation of the Participant to the Company), (iii) by the Participant's full recourse promissory note secured by shares of Common Stock having a Fair Market Value on the exercise date equal to at least two times the principal amount of the note (except to the extent that legal restrictions preclude payment of the par value of the shares by such a note), or (iv) by a combination of any of the above. Any shares assigned and delivered to the Company in payment or partial payment of the purchase price will be valued at Fair Market Value on the exercise date. No payment by an assignment of shares or by a promissory note will be allowed except to the extent such payments are permissible under applicable requirements of Federal and state tax, securities and other laws, rules and regulations (including Federal Reserve Board margin requirements) and of any other regulatory authority having jurisdiction. (f) Each promissory note delivered by a Participant pursuant to Section 7(e) shall provide for interest payable quarterly at the minimum rate necessary to avoid imputed income under the Internal Revenue Code of 1986, as amended. Each note shall become immediately due and payable in full upon the earliest of (i) the fifth anniversary date of the note, or (ii) the last day of the sixth full calendar month following termination of the Participant's Service. 8. ADJUSTMENT PROVISIONS. (a) If a dividend or other distribution shall be declared upon the Common Stock payable in shares of the Common Stock, the number of shares of the Common Stock then subject to any outstanding Option or Option to be granted under the Plan, and the number of shares of the Common Stock which may be issued or delivered under the Plan in total, shall be adjusted by adding thereto the number of shares of the Common Stock which would have been distributable thereon if such shares had been outstanding on the date fixed for determining the stockholders entitled to receive such stock dividend or distribution. (b) If the outstanding shares of the Common Stock shall be changed into or exchangeable for a different number or kind of shares of stock or other securities of the Company or another corporation or other property, whether through reorganization, reclassification, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for each share of the CommonStock subject to any then outstanding Option or Option to be granted under the Plan and for each share of the Common Stock which may be issued or delivered under the Plan in total, the number and kind of shares of stock or other securities or property into which each outstanding share of the Common Stock shall be so changed or for which each such share shall be exchangeable. (c) In case of any adjustment or substitution as provided for in this Section 8, the aggregate option price for all shares subject to each then outstanding Option prior to such adjustment or substitution shall be the aggregate option price for all shares of stock or other securities (including any fraction) or property to which such shares shall have been adjusted or which shall have been substituted for such shares. Any new option price per share shall be carried to at least three decimal places with the last decimal place rounded upwards to the nearest whole number. (d) No adjustment or substitution provided for in this Section 8 shall require the Company to issue or sell a fraction of a share or other security. Accordingly, all fractional shares or other securities which result from any such adjustment or substitution shall be eliminated in exchange for a cash payment at the time of exercise. 9. GENERAL PROVISIONS. (a) Nothing in the Plan or in any instrument executed pursuant to the Plan will confer upon any Eligible Director any right to continue as a director of the Company or any subsidiary of the Company. (b) No shares of Common Stock shall be issued or transferred pursuant to an Option unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which the Common Stock may be listed, have, in the opinion of counsel to the Company, been met. The Company may require the Participant to take any reasonable action to meet such requirements. (c) No Participant or other person claiming under or through such Participant shall have any rights as a stockholder with respect to any shares of Common Stock subject to an Option until he shall have become the holder of record of such shares. (d) Each Option shall be exercisable during the life of the Participant only by the Participant or his guardian or legal representative, and after death only by his designated beneficiary or, absent a beneficiary, by his estate or by a person who acquired the right to exercise the Option by will or the laws of descent and distribution. A Participant may designate a beneficiary for purposes of this paragraph only by filing written notice with the Secretary of the Company in a form acceptable to the Secretary, prior to the Participant's death. Such a designation may be revoked or changed, without the consent of the previously designated beneficiary, in the same manner as an original designation. (e) By accepting any benefits under the Plan, each Participant, and each person claiming under or through him, shall be conclusively deemed to have indicated his acceptance and ratification of, and consent to, all provisions of the Plan and any action or decision under the Plan by the Company, its agents and employees, and the Board. (f) The validity, construction, interpretation and administration of the Plan and of any determinations or decisions made thereunder, and the rights of all persons having or claiming to have any interest therein or thereunder, shall be governed by, and determined exclusively in accordance with, the laws of the State of Delaware, the state in which the Company is incorporated, but without giving effect to the principles of conflicts of laws thereof. 10. AMENDMENT AND TERMINATION. (a) The Board shall have the power, in its discretion, to amend, suspend or terminate the Plan at any time. No such amendment shall become effective without approval of the stockholders of the Company if such approval is necessary to comply with Federal or State laws, rules or regulations, or the regulations of any stock exchanges upon which the Common Stock may be listed. Notwithstanding the foregoing, the Plan shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (b) No amendment, suspension or termination of the Plan shall, without the consent of the Participant, alter, terminate, impair or adversely affect any right or obligation under any Option previously granted under the Plan. 11. EFFECTIVE DATE AND DURATION OF PLAN. This Plan shall become effective as of the date it is approved by the Board, subject to approval by the Company's stockholders. Notwithstanding any other provision of the Plan to the contrary, no Option may be exercised prior to approval by the Company's stockholders, and if such approval is not obtained within one year after approval by the Board, the Plan and all Options granted under it shall be void. Unless the Plan is previously terminated, no further Options shall be granted under the Plan after December 31, 1999. EX-9 5 VOTING TRUST AGREEMENT VOTING TRUST AGREEMENT FOR THE CAPITAL STOCK OF SCOR REINSURANCE COMPANY VOTING TRUST AGREEMENT VOTING TRUST AGREEMENT made as of this 6th day of June 1994, by and between SCOR REINSURANCE COMPANY, a New York corporation with offices at 110 William Street, New York, New York 10038 (the "Company"), SCOR U.S. CORPORATION, a Delaware corporation with offices at 110 William Street, New York, New York 10038 (the "Stockholder") and each of the persons designated at the end of this Agreement as Voting Trustees (collectively referred to as the "Voting Trustees"). W I T N E S S E T H: WHEREAS the Stockholder owns one hundred percent of the issued and outstanding stock of the Company; and WHEREAS the Stockholder is controlled by SCOR S.A. of Paris, France ("SCOR France") which is, in turn, partially controlled by the Government of the Republic of France; and WHEREAS Section 1102(h) of the New York Insurance Law prohibits the issuance or renewal of such a license to a domestic insurance company that is owned or financially controlled, in whole or in part, by a foreign government; and 2 WHEREAS in order to comply with the provisions of such section of the New York Insurance Law and to remove itself from any such control by the Government of the Republic of France, the Company created a voting trust for its stock, which voting trust terminates on June 6, 1994; and WHEREAS in order to continue in effect the Company's license to act as an insurance and reinsurance company within the State of New York the Company and the Stockholder desire to renew the voting trust for the Company's stock for a term of three years; and NOW, THEREFORE, in consideration of the premises and of the mutual covenants and conditions contained herein, it its agreed as follows: 1. COMMENCEMENT; TRANSFER OF STOCK TO VOTING TRUSTEES. (a) Simultaneous with the execution hereof, the Stockholder shall transfer, assign, set over and deposit with the Voting Trustees, certificates representing all of its stock of the Company and the Voting Trust shall commence. Such stock certificates shall be held by the Voting Trustees in their name, in trust, pursuant to the terms of this Voting Trust Agreement. (b) Should any person other than the Stockholder obtain additional shares of stock of the Company during the term 3 of the Voting Trust, such stockholder may at any time deposit additional certificates for such stock with the Voting Trustees without the further agreement of the Voting Trustees, the Company or the holders of Voting Trust Certificates as hereinafter set forth, but no other stockholder (other than the Stockholder) shall be required to deposit certificates for any of his stock unless he so elects. No stock shall be deposited hereunder except stock having general voting powers as provided in the Company's Certificate of Incorporation. (c) All stock certificates delivered to the Voting Trustees under subparagraphs (a) or (b) hereof shall be duly endorsed, or accompanied by such instruments of transfer as to enable the Voting Trustees to cause them to be transferred into their name. (d) Such certificates for stock of the Company shall be surrendered by the Voting Trustees to the Company and cancelled, and the Company shall issue to the Voting Trustees new stock certificates in the name of "Voting Trustees of SCOR Reinsurance Company." (e) On receipt by the Voting Trustees of such stock certificates in their name, they shall thereupon issue and deliver to the stockholders Voting Trust Certificates in the form set forth in Article 6 hereof evidencing the number of shares so deposited. 4 2. TERM. (a) TheTrust shall continue for a period of three (3) years from the date of this Voting Trust Agreement, subject to the right of the parties to this Agreement to renew the same as hereinafter set forth in Article 7 hereof. (b) The Voting Trust shall be irrevocable, except that any stockholder that may have deposited his shares with the Voting Trustees pursuant hereto may withdraw such shares if the Company's license to write reinsurance business in the State of New York is withdrawn for any reason and such license is not reinstated within a period of sixty days. The Voting Trustees shall return the stock certificates of the Company and/or other property to the persons who withdraw from the Voting Trust in the manner provided in Article 7 hereof as if the Voting Trust had expired as to such shares. If all stock held by the Voting Trustees is withdrawn pursuant hereto, the Voting Trust and this Agreement shall terminate upon the satisfaction by the Voting Trustees of the provisions of Article 7(d) and (e) hereof (relating to the final distribution to holders of Voting Trust Certificates). 3. TRANSFER OF CERTIFICATES. (a) The Voting Trust Certificates shall be transferable by the registered owners thereof on the books of the 5 Voting Trustees at their principal office in New York, New York (or at such other office of the Voting Trustees as they may designate by notice from time to time) according to the rules established for that purpose by the Voting Trustees; and the Voting Trustees may treat the registered holders as owners thereof for all purposes whatsoever, except that they shall not be required to deliver stock certificates hereunder without the surrender of such Voting Trust Certificates. (b) If a Voting Trust Certificate is lost, stolen, mutilated or destroyed, the Voting Trustees, in their discretion, may issue a duplicate of such certificate upon receipt of: (1) evidence of such fact satisfactory to them; (2) indemnity satisfactory to them; (3) the existing certificate, if mutilated; and (4) their reasonable fees and expenses in connection with the issuance of a new Voting Trust Certificate. The Voting Trustees shall not be required to recognize any transfer of a Voting Trust Certificate not made in accordance with the provisions hereof, unless the person claiming such ownership shall have produced indicia of title satisfactory to the Voting Trustees, and shall in addition deposit with the Voting Trustees indemnity satisfactory to them. 4. VOTING TRUSTEES. (a) There shall be at all times five Voting Trustees 6 hereunder, of whom at least three shall be citizens of the United States who reside in the United States. None shall be elected or appointed officials of the Government of the Republic of France. Any Voting Trustee may act as a director or officer of the Company, and he or any firm of which he may be a member, or any corporation of which he may be a shareholder, director or officer, may purchase, sell, own, hold or deal in Voting Trust Certificates, and may contract with the Company, or be pecuniarily interested in any transaction to which the Company may be a party or in which it may in any way be interested, as fully as though he were not a Voting Trustee. (b) Any Voting Trustee (and any successory Trustee) may at any time resign by notifying the other Voting Trustees in writing of such resignation, which shall take effect ten days thereafter or upon the prior acceptance thereof. Upon the death, incapacity or resignation of any Voting Trustee, the remaining Voting Trustees shall have the power to appoint a successor Voting Trustee to act in his place. Such appointment shall be subject to the prior approval of the Superintendent of Insurance of the State of New York (the "Superintendent"). The Voting Trustees shall promptly notify the registered holders of Voting Trust Certificates of such appointment. 5. ACTION BY VOTING TRUSTEES. The Voting Trustees may act by a unanimous written 7 consent signed by all of the Voting Trustees or by majority vote at a meeting called by any Voting Trustee upon five days' notice to the other Voting Trustees, provided that such majority consists of at least two Voting Trustees that are not affiliated with SCOR France. For purposes of the preceding sentence, a person shall not be deemed affiliated with SCOR France if he is an officer or director of the Company or of the Stockholder but is not an officer, director or shareholder of SCOR France. Such majority vote by the Voting Trustees at a duly held meeting shall have the effect of constituting acceptance of such decision by all of the Voting Trustees. Three Voting Trustees shall constitute a quorum for the transaction of business at a meeting thereof, provided that a quorum shall only exist if a majority of those present are citizens of the United States who reside in the United States. The Voting Trustees shall have the power to designate one Voting Trustee to execute certificates and other documents on behalf of all of them in furtherance of their collective decisions. The Voting Trustees may, from time to time, adopt and/or amend their own rules of procedure, and shall record and keep records of all their proceedings at their office in New York. 8 6. FORM OF VOTING TRUST CERTIFICATES. The Voting Trust Certificates shall be in the following form: No...................... .......................Shares SCOR REINSURANCE COMPANY A NEW YORK CORPORATION VOTING TRUST CERTIFICATE FOR CAPITAL STOCK This certifies that . . . . . . . . . or registered assigns is entitled to all the benefits arising from the deposit with the Voting Trustees under the Voting Trust Agreement hereinafter mentioned, of certificates for . . . . . shares of the capital stock of SCOR Reinsurance Company, a New York corporation (hereinafter called the "Company"), as provided in such Voting Trust Agreement and subject to the terms thereof. The registered holder hereof, or assigns, is entitled to receive payment equal to the amount of cash dividends, if any, received by the Voting Trustees upon the number of shares of capital stock of the Company in respect of which this certificate is issued. Dividends received by the Voting Trustees in common or other stock of the Company having general voting powers shall be payable in Voting Trust Certificates, in form similar hereto. Until the Voting Trustees shall have delivered the stock held under such Voting Trust Agreement to the holders of the Voting Trust Certificates, or to the Company, as specified in such Trust Agreement, the Voting Trustees shall possess and shall be entitled to exercise all rights and powers of an absolute owner of such stock, including the right to vote thereon for every purpose, and to execute consents in respect thereof for every purpose, it being expressly stipulated that no voting right passes to the owner hereof, or his assigns, under this certificate or any agreement, expressed or implied. This certificate is issued, received and held under, and the rights of the owner 9 hereof are subject to, the terms of a Voting Trust Agreement dated as of June, 1994 between the Company and the Voting Trustees identified therein, their successors in trust and various holders of similar certificates (copies of which Voting Trust Agreement, and of every agreement amending or supplementing the same, are on file in the principal office of the Company in New York, New York and in the offices of the Voting Trustees in New York, New York and shall be open to the inspection of any stockholder of the Company daily during business hours), to all the provisions of which Voting Trust Agreement the holder of this certificate, by acceptance hereof, assents and is bound as if such Voting Trust Agreement had been signed by him in person. In the event of the dissolution or total or partial liquidation of the Company, the moneys, securities or property received by the Voting Trustees in respect of the stock deposited under such Trust Agreement shall be distributed among the registered holders of these certificates in proportion to their interest as shown by the books of the Voting Trustees. In the event that any dividend or distribution other than in cash or stock of the Company having general voting powers is received by the Voting Trustees, the Voting Trustees shall distribute the same to the registered holders of Voting Trust Certificates promptly after such receipt or to the registered certificate holders at the close of business on the date fixed by the Voting Trustees for taking a record to determine the certificate holders entitled to such distribution, pursuant to the provisions of Article 11 of the Trust Agreement. Such distribution shall be made to the certificate holder or holders ratably in accordance with the number of shares represented by their respective Voting Trust Certificates. Stock certificates for the number of shares of capital stock then represented by this certificate, or the net proceeds in cash or property of such shares, shall be due and 10 deliverable hereunder upon the termination of such Voting Trust Agreement as provided therein. The Voting Trust Agreement shall continue in full force and effect until June, 1997 (subject to renewal) unless all of the stock subject to the Voting Trust is withdrawn pursuant to Article 2 of the Agreement. The Agreement may be renewed for successive ten-year periods, as provided therein. This certificate is transferable on the books of the Voting Trustees at their office in New York, New York (or elsewhere as designated by the Voting Trustees), by the holder hereof, either in person or by attorney duly authorized, in accordance with the rules established for that purpose by the Voting Trustees and on surrender of this certificate properly endorsed. Title to this certificate when duly endorsed shall, to the extent permitted by law, be transferable with the same effect as in the case of a negotiable instrument. Each holder hereof agrees that delivery of this certificate, duly endorsed by any holder hereof, shall vest title hereto and all rights hereunder in the transferee; provided, however, that the Voting Trustees may treat the registered holder hereof, or when presented duly endorsed in blank the bearer hereof, as the absolute owner hereof, and of all rights and interests represented hereby, for all purposes whatsoever, and the Voting Trustees shall not be bound or affected by any notice to the contrary, or by any notice of any trust, whether express, implied or constructive, or of any charge or equity respecting the title or ownership of this certificate, or the share of stock represented hereby; provided, however, that no delivery of stock certificates hereunder, or the proceeds thereof, shall be made without surrender hereof properly endorsed. This certificate shall not be valid for any purpose until duly signed by the Voting Trustees. The word "Voting Trustees" as used in 11 this certificate means the Voting Trustees or the successor trustees acting under such Voting Trust Agreement. IN WITNESS WHEREOF, the Voting Trustees have signed this certificate on . . . . ., 19 . . . . . . . . . . . . . . . Voting Trustee . . . . . . . . . . . . . . . Voting Trustee . . . . . . . . . . . . . . . Voting Trustee . . . . . . . . . . . . . . . Voting Trustee . . . . . . . . . . . . . . . Voting Trustee 12 (Form of Assignment): FOR VALUE RECEIVED . . . . . . . hereby assigns the within certificate, and all rights and interest represented thereby, to . . . . . . . and appoints . . . . . . . attorney to transfer this certificate on the books of the Voting Trustees mentioned therein, with full power of substitution. . . . . . . . . . . . . . . . . . . Dated In presence of: (Seal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note: The signature on this assignment must correspond with the name as written upon the face of this certificate in every particular, without alteration, enlargement or any change whatever. All endorsements, in the discretion of the Voting Trustees, shall be guaranteed by a bank or trust company satisfactory to the Voting Trustees. 7. TERMINATION PROCEDURE; RENEWAL. (a) Six months prior to the termination of the Voting Trust the Voting Trustees shall mail written notice of such termination to the Superintendent and to the registered owners of the outstanding Voting Trust Certificates, at their addresses as appearing on the transfer books of the Voting Trustees. Such notice shall state that the Voting Trust Certificates must be surrendered by the termination date in order to receive the corresponding Stock in the Company or other property in exchange therefor upon termination of the Voting Trust. 13 (b) At any time after notice of the expiration of the Voting Trust and ending thirty days prior to such expiration, one or more holders of Voting Trust Certificates hereunder may, by agreement in writing with the Voting Trustees and the Company, renew the Voting Trust as to their stock in the Company for an additional period not to exceed ten years. In the event of such renewal, the renewal agreement shall specify the stock that is subject to it. The Voting Trustees shall, prior to the time of expiration of the Trust, deliver a copy of the renewal agreement to the Superintendent and file copies thereof in the principal office of the Company in New York, New York and in the offices of the Voting Trustees in New York, New York. Such renewal shall have the effect of creating a new voting trust as to the shares in the Company to which the renewal applies, except that such shares shall remain in the name and possession of the Voting Trustees as if no termination had occurred. Such renewal shall have no effect on the termination of the Voting Trust as to the remaining shares of stock in the Company not subject to the renewal agreement, which shall be tendered in accordance with the provisions relating to termination hereunder. No such renewal agreement shall extend the term of this Agreement beyond the maximum period permitted by applicable law or affect the rights or obligations of persons not parties thereto. (c) Upon termination of the Voting Trust, the Voting Trust Certificates shall cease to have any effect, and the holders of such Voting Trust Certificates shall have no further 14 rights under this Agreement other than to receive certificates for shares of stock of the Company or other property distributable under the terms hereof upon the surrender of such Voting Trust Certificates. (d) Within thirty days after the termination of the Voting Trust, the Voting Trustees shall deliver to the registered holders of such Voting Trust Certificates, at their addresses as they appear on the records of the Voting Trustees, properly endorsed certificates for the number of shares of the capital stock of the Company represented by the Voting Trust Certificates actually received from them. (e) At any time subsequent to thirty days after the termination of the Voting Trust, the Voting Trustees may deposit with the Company any properly endorsed stock certificates and/or other property which have not been delivered to the holders of Voting Trust Certificates, together with written authority for the Company to deliver the same to the persons entitled thereto upon receipt of their Voting Trust Certificates. Upon such deposit all further liability of the Voting Trustees for the delivery of such stock certificates shall cease and the Voting Trustees shall not be required to take any further action hereunder. 8. RIGHTS AND POWERS OF VOTING TRUSTEES. 15 (a) The Voting Trustees shall possess and be entitled to exercise, subject to the provisions hereof, all the rights and powers of absolute owners of all shares deposited hereunder, including, but withoutlimitation, the right to receive dividends on such shares and the right to vote, consent in writing or otherwise act with respect to any corporate or shareholders' action, to increase or reduce the stated capital of the Company, to classify or reclassify any of the shares as now or hereafter authorized into preferred or common shares or other classes of shares with or without par value, to amend the Certificate of Incorporation or By-Laws, to merge or consolidate the Company with other corporations, to sell all or any part of its assets, to create any mortgage or security interest in or lien on any property of the Company, or for any other corporate act or purpose; it being expressly stipulated that no voting right shall pass to others by or under the Voting Trust Certificates, under this Agreement or by or under any other agreement express or implied. (b) In case the Voting Trustees shall vote or otherwise act in respect of the shares deposited hereunder so as to effect a consolidation or merger of the Company with or into another corporation, or of another corporation with or into the Company, the Voting Trustees may in connection with such consolidation or merger surrender such shares and receive in lieu thereof and exchange therefor the shares issuable therefor in 16 such merger or consolidation, and may hold the shares so received in place of the shares deposited hereunder. Thereafter the rights and obligations of the Voting Trustees and of the holders of Voting Trust Certificates with respect to shares deposited hereunder shall for all purposes be treated as applying to the shares so received, there being substituted for each share of the Company an amount of the new shares received for all of the shares of the Company so surrendered. Upon demand of the Voting Trustees to the holders of Voting Trust Certificates, such holders shall surrender their Voting Trust Certificates and shall accept in lieu thereof one or more new Voting Trust Certificates in form similar to that hereinabove set forth, but modified so as to describe expressly the interest then represented by the Voting Trust Certificate. Any transfer tax or other charges payable in respect to any such exchange, if so required by the Voting Trustee, shall be paid by the holders of the Voting Trust Certificates. (c) The Voting Trustees are authorized to become parties to or prosecute or defend or intervene in any suits or legal proceedings, and the stockholders and holders from time to time of the Voting Trust Certificates agree to hold the Voting Trustees harmless from any action or omission by them in the premises. 17 9. LIABILITY OF VOTING TRUSTEES. The Voting Trustees shall exercise their best judgment in voting the shares of stock of the Company, or otherwise acting hereunder, with respect to such shares, but shall not be liable to the stockholders hereunder for errors of law or of any thing done or suffered or omitted in connection therewith, except for their own individual willful misconduct. The Voting Trustees shall act with due diligence and shall act in compliance with the provisions of the New York Insurance Law and the rules and regulations promulgated thereunder. No Voting Trustee shall be required to give any bond or other security for the discharge of his duties. 10. COMPENSATION OF VOTING TRUSTEES. Each Voting Trustee shall receive for his services hereunder the sum of $1,000 per annum, or such other amount as may be agreed in writing by all of the holders of the then issued and outstanding Voting Trust Certificates. The Voting Trustees may employ counsel, and such other assistance as may be convenient, in the performance of their functions. The Voting Trustees may receive from the Company reimbursement or indemnity for and against any and all claims, expenses (including their compensation) and liabilities incurred by them, or asserted against them, in connection with or growing out of this Agreement or the discharge of their duties hereunder. Any such claims, 18 expenses, or liabilities not so paid may be charged to the holders of Voting Trust Certificates pro rata, and may be deducted from dividends or other distributions to them, or may be made a charge payable as a condition to the delivery of shares in exchange for Voting Trust Certificates as provided herein, and the Voting Trustees shall be entitled to a lien therefor upon the shares, funds or other property in their possession. 11. DIVIDENDS. (a) During the term of the Voting Trust, the holder of each Voting Trust Certificate shall be entitled to receive payments equal to the cash dividends, if any, received by the Voting Trustees upon a like number and class of shares of capital stock of the Company as is called for by each such Voting Trust Certificate. If any dividend in respect of the stock deposited with the Voting Trustees is paid, in whole or in part, in stock of the Company having general voting powers, the Voting Trustees shall likewise hold, subject to the terms of this Agreement, the certificates for stock which are received by them on account of such dividend, and the holder of each Voting Trust Certificate representing stock on which such stock dividend has been paid shall be entitled to receive a Voting Trust Certificate issued under this Agreement for the number of shares and class of stock received as such dividend with respect to the shares represented by such Voting Trust Certificate. Holders entitled to receive 19 the dividends described above shall be those registered as such on the transfer books of the Voting Trustees at the close of business on the day fixed by the Company for the taking of a record to determine those holders of its stock entitled to receive such dividends, or if the Voting Trustees have fixed a date, as hereinafter in this paragraph provided, for the purpose of determining the holders of Voting Trust Certificates entitled to receive such payment or distribution, then registered as such at theclose of businesson the date sofixed by theVoting Trustees. (b) If any dividend in respect of the stock deposited with the Voting Trustees is paid other than in cash or in capital stock having general voting powers, then the Voting Trustees shall distribute the same among the holders of Voting Trust Certificates registered as such at the close of business on the day fixed by the Voting Trustees for taking a record to determine the holders of Voting Trust Certificates entitled to receive such distribution. Such distribution shall be made to such holders of Voting Trust Certificates ratably, in accordance with the number of shares represented by their respective Voting Trust Certificates. (c) The transfer books of the Voting Trustees may be closed temporarily by the Voting Trustees for a period not exceeding twenty days preceding the date fixed for the payment or distribution of dividends or the distribution of assets or rights, or at any other time in the discretion of the Voting Trustees. In lieu of providing for the closing of the transfer 20 books, the Voting Trustees may fix a date not exceeding twenty days preceding any date fixed by the Company for the payment or distribution of dividends, or for the distribution of assets or rights, as a record date for the determination of the holders of Voting Trust Certificates entitled to receive such payment or distribution, and the holders of Voting Trust Certificates of record at the close of business on such date shall exclusively be entitled to participate in such payments or distribution. (d) In lieu of receiving cash dividends upon the capital stock of the Company and paying the same to the holders of Voting Trust Certificates pursuant to the provisions of this Agreement, the Voting Trustees may instruct the Company in writing to pay such dividends to the holders of the Voting Trust Certificates directly. Upon receipt of such written instructions, the Company agrees to thereafter pay such dividends to the holders of the Voting Trust Certificates directly. Upon such instructions being given by the Voting Trustees to the Company, and until revoked by the Voting Trustees, all liability of the Voting Trustees with respect to such dividends shall cease. The Voting Trustees may at any time revoke such instructions and by written notice to the Company direct it to make dividend payments to the Voting Trustees. 12. SUBSCRIPTION RIGHTS. 21 In case any stock or other securities of the Company are offered for subscription to the holders of capital stock of the Company deposited hereunder, the Voting Trustees, promptly upon receipt of notice of such offer, shall mail a copy thereof to each of the holders of the Voting Trust Certificates. Upon receipt by the Voting Trustees, at least five days prior to the last day fixed by the Company for subscription and payment, of a request from any such registered holder of a Voting Trust Certificate to subscribe in his behalf, accompanied with the sum of money required to pay for such stock or securities (not in excess of the amount subject to subscription in respect of the shares represented by the Voting Trust Certificate held by such certificate holder), the Voting Trustees shall make such subscription and payment, and upon receiving from the Company the certificates for shares or securities so subscribed for, shall issue to such holder a Voting Trust Certificate in respect thereof if the same be stock having general voting powers, but if the same be securities other than stock having general voting powers, the Voting Trustees shall mail or deliver such securities to the certificate holder in whose behalf the subscription was made, or may instruct the Company to make delivery directly to the certificate holder entitled thereto. 13. DISSOLUTION OF COMPANY. 22 In the event of the dissolution or total or partial liquidation of the Company, whether voluntary or involuntary, the Voting Trustees shall receive the moneys, securities, rights, or property to which the holders of the capital stock of the Company deposited hereunder are entitled, and shall distribute the same among the registered holders of Voting Trust Certificates in proportion to their interests, as shown by the books of the Voting Trustees, or the Voting Trustees may in their discretion deposit such moneys, securities, rights or property with any bank or trust company doing business in New York, New York with authority and instructions to distribute the same as above provided, and upon such deposit all further obligations or liabilities of the Voting Trustees in respect of such moneys, securities, rights or property so deposited shall cease. 14. REORGANIZATION OF COMPANY. In case the Company is merged into or consolidated with another corporation, or all or substantially all of the assets of the Company are transferred to another corporation, then in connection with such transfer the term "Company" for all purposes of this Agreement shall be taken to include such successor corporation, and the Voting Trustees shall receive and hold under this Agreement any stock of such successor corporation received on account of the ownership, as Voting Trustees hereunder, of the 23 stock held hereunder prior to such merger, consolidation and transfer. Voting Trust Certificates issued and outstanding under this Agreement at the time of such merger, consolidation or transfer may remain outstanding, or the Voting Trustees may, in their discretion, substitute for such Voting Trust Certificates new Voting Trust Certificates in appropriate form, and the terms "stock" and "capital stock" as used herein shall be taken to include any stock which may be received by the Voting Trustees in lieu of all or any part of the capital stock of the Company. 15. NOTICE. (a) Unless otherwise in this Agreement specifically provided, any notice to or communication with the holders of the Voting Trust Certificates hereunder shall be deemed to be sufficiently given or made if enclosed in postpaid wrappers (regular, registered or certified mail, as the Voting Trustees may deem advisable), addressed to such holders at their respective addresses appearing on the transfer books of the Voting Trustees and deposited in any post office or post office box. The addresses of the holders of Voting Trust Certificates, as shown on the transfer books of the Voting Trustees, shall in all cases be deemed to be the addresses of Voting Trust Certificate holders for all purposes under this Agreement, without regard to what other or different addresses the Voting 24 Trustees may have for any Voting Trust Certificate holder on any other books or records of the Voting Trustees. Every notice so given shall be effective, whether or not received. The date of mailing shall be the date such notice is deemed given for all purposes. (b) Any notice to the Company hereunder shall be sufficient if delivered to the Company's Secretary in person or if enclosed in a postpaid wrapper and sent by registered or certified mail, return receipt requested, to the Company addressed as follows: SCOR Reinsurance Company, 110 William Street, New York, New York 10038, Attention: General Counsel and Secretary or to such other address as the Company designate by notice in writing to the Voting Trustees. (c) Any notice to all of the Voting Trustees hereunder may be enclosed in a postpaid wrapper and sent by registered or certified mail, return receipt requested, addressed to them at their office in New York, New York, or if no such address has been furnished by the Voting Trustees, then to the Voting Trustees in care of the Company. Any notice from one Voting Trustee to the other Voting Trustees may be made in person or by mail or telex to them at their addresses as they appear in this Agreement, or at any other address as may be given from time to time. (d) All distributions of cash, securities, or other 25 property hereunder by the Voting Trustees to the holders of Voting Trust Certificates may be made in the same manner as hereinabove provided for the giving of notices to the holders of Voting Trust Certificates. (e) All notices concerning amendments, extensions or the termination of the Voting Trust Agreement or concerning the death, incapacity or resignation of any of the Voting Trustees shall be also delivered to the Superintendent. 16. BOOKS AND RECORDS. Copies of this Agreement, and of every agreement supplemental hereto or amendatory hereof, shall be filed in the principal office of the Company in New York, New York, and in the offices of the Voting Trustees in the State of New York, and shall be open to the inspection of any stockholder of the Company, daily during business hours. 17. CONTINUING AGREEMENT. All voting trust certificates issued as herein provided shall be issued, received and held subject to all the terms of this Agreement. Every person, firm or corporation, including their successors and assigns, that deposits stock of the Company with the Voting Trustees and is entitled to receive Voting Trust Certificates representing such shares, upon accepting the Voting Trust Certificates issued hereunder, shall be bound by the provisions of this Agreement as if such had actually been a 26 signatory hereto, without the further agreement of the Voting Trustees, the Company or of the holders of the other Voting Trust Certificates at such time. IN WITNESS WHEREOF the Company, the Stockholder and each Voting Trustee has signed and sealed this Agreement as of the above date, and the Stockholder has stated the number of shares of capital stock of the Company held by it. THE COMPANY: (Corporate Seal) SCOR REINSURANCE COMPANY ATTEST: By: Secretary President THE STOCKHOLDER: (Corporate Seal) SCOR U.S. CORPORATION ATTEST: By: Secretary Executive Vice President SHARES VOTING TRUSTEES: Patrick Peugeot Jacques P. Bondeau (Signature) (Signature) Patrick Peugeot Jacques P. Blondeau Name Name 82, rue Notre Dame des Champs 79 Boulevard Pereire Address Address Paris, France Paris, France Country of Residence Country of Residence 27 France France Citizenship Citizenship Michel J. Gudefin Allan M. Chapin (Signature) (Signature) Michel J. Gudefin Allan M. Chapin Name Name 128 Dingletown Road 1133 Fifth Avenue, 12th Floor Address Address Greenwich, CT 06830 New York, NY 10128 State State U.S.A. U.S.A. Country of Residence Country of Residence U.S.A. U.S.A. Citizenship Citizenship David J. Sherwood (Signature) David J. Sherwood Name 237 Plantation Circle South Address Ponte Vedra Beach, FL 32082 State U.S.A. Country of Residence U.S.A. Citizenship -----END PRIVACY-ENHANCED MESSAGE-----