SCOR announces the finalization of its 3-year EUR 150 million Nat Cat financial coverage facility taking the form of an event-driven guaranteed equity as an innovative contingent capital solution.
Pursuant to the authorization granted by SCOR’s shareholders1 and the agreement entered into with UBS on September 10, 2010, designed to provide SCOR with additional capital in the event of natural catastrophes, SCOR issued 9.521.424 warrants to UBS today (each warrant commits UBS to subscribe for two new SCOR shares).
As announced on September 10, 2010, the issuance of the shares will be automatically triggered when the aggregated amount of the estimated ultimate net losses resulting from natural catastrophes incurred by the SCOR group (in its capacity as an insurer/reinsurer) reaches certain thresholds in any given calendar year between January 1, 2011 and December 31, 2013.2
Under the transaction, SCOR will benefit from a contingent capital equity line for a maximum amount of EUR 150 million (including issuance premium), which will be available in two separate tranches of EUR 75 million each (including issuance premium). In the absence of any triggering event, no shares will be issued under the facility. The facility may therefore reach its term without any dilutive impact for shareholders.
Characteristics of the contingent equity line
The list of events that may trigger the issuances and the potential impact of the transaction for the shareholders are detailed in the press release published by SCOR on September 10, 2010.
As reminder, in addition to the occurrence of estimated ultimate net losses reaching certain thresholds, in the event that the daily volume weighted average price of SCOR shares on Euronext Paris falls below EUR 10 (i.e. a price level close to the par value of SCOR shares), the issuance of EUR 75 million (including issuance premium) will be automatically triggered in order to ensure the availability of this financial cover (the warrants being unexercisable below par value) should a natural catastrophe-type event occur during the remainder of the risk coverage period. Such share price trigger can only be actioned once in the life of the transaction.
The warrants will remain exercisable during the entire risk coverage period (from January 1, 2011 to December 31, 2013) and up until three months after the expiry of the above risk coverage period (subject to certain extension and/or suspension periods for regulatory or other reasons).
In the event of issuance of SCOR shares under the terms of this transaction, the subscription price for the new shares acquired by UBSwill be equal to 90% of the volume weighted average price of the SCOR shares on Euronext Paris over the three trading days preceding the exercise of the warrants. The shares issued may be resold by UBS by way of private placements and/or sales on the open market.
From the notification of the occurrence of a triggering event by SCOR to UBSuntil the exercise of the warrants, UBSwill be prohibited from engaging in hedging transactions on SCOR shares, other than ordinary course transactions undertaken independently by UBS's affiliated banking and brokerage businesses.
1 17th resolution of the shareholders meeting of SCOR of April 28, 2010.
2 The estimated ultimate net losses are defined as the aggregation of the individual estimated ultimate net losses of all natural catastrophe events in a given calendar year. The individual estimated ultimate net loss is the estimated pre-tax impact of any qualifying natural catastrophe event, net of all recoveries (reinsurance and derivatives) and additional expenses as recorded in the SCOR Group books.