Activist Fund CIAM Keeps Pressure on Reinsurer SCOR – and its CEO/Chairman Kessler

By | March 30, 2020

The battle between French activist investment fund CIAM and SCOR, which has been waging for more than a year, heated up again recently with yet another push by CIAM to separate the chairman and CEO roles, both held by Denis Kessler.

Luxembourg-domiciled CIAM began its campaign against SCOR in early 2019 after the reinsurer rebuffed a €8.5 billion (US$ 9.5 billion) takeover bid in 2018 from French mutual insurer Covéa.

SCOR’s hostile reaction towards its largest shareholder Covéa (which at the time held a 10% stake) were not appropriate and highlighted problems with the company’s oversight practices, said CIAM in a presentation provided to shareholders at SCOR’s annual general meeting in April 2019.

Additional CIAM complaints – then as now – center on separating the chairman and CEO roles, which would it said would help enhance governance, as well as an aim to resolve “a poorly drafted pay policy that continues to lavishly reward” Kessler. CIAM, which holds about 1% of SCOR’s share capital, tried and failed last year to get shareholders to remove Kessler from the board.

In a letter to shareholders, sent on March 24, 2020, CIAM said, although Kessler’s base salary has been kept at the same level for several years, his “generous pension benefits has led SCOR to provision €24.7 million [US$27.5 million], based on his reference compensation.”

“[O]nly cosmetic changes have been made to the executive pay policy despite nearly half of the shareholders opposing SCOR’s policy last year,” added CIAM. As a result, CIAM has called for a shareholders’ vote against the approval of Kessler’s renumeration. (SCOR announced it would postpone its annual general meeting from April 17 to June 30, 2020 in response to the COVID-19 crisis).

CIAM also wants shareholders to vote against the renewal of Augustin de Romanet as a director who chairs SCOR’s Compensation and Nomination Committee. Kessler and de Romanet have a long friendship, said CIAM, which it said is a potential contributing factor to the “lack of responsiveness” of the compensation committee to consider shareholder concerns about Kessler’s remuneration.

While CIAM said it “welcomes SCOR’s minor step of disclosing that it may consider the separation of the chair/CEO roles in 2021,” it reminded shareholders that Kessler, who has been CEO and chairman for 18 years, will be 69 when his mandate as director ends next year.

“SCOR’s bylaws require that both the CEO and/or the chairman resign at the AGM following reaching the age of 70,” said CIAM.

As a result, CIAM’s shareholder letter requested that SCOR disclose further information on its succession plan and confirm that it would appoint an independent chair.

“An independent chairman eliminates the conflict of interest that inevitably occurs when a CEO is responsible for self-oversight,” CIAM said in its April 2019 presentation at the AGM.

SCOR’s Response

“CIAM puts forward once again seriously unfounded, inaccurate and misleading statements with the purpose of destabilizing SCOR,” said a note from SCOR issued on March 25 in response to CIAM’s shareholder letter..

CIAM “invested in SCOR immediately after Covéa published a press release on Sept. 4, 2018 disclosing its unsolicited proposed combination with the SCOR Group,” which SCOR said shows that CIAM’s investment “is speculative and short-term.”

CIAM has made public several letters, dated Sept. 17, 2018, Sept. 26, 2018, Jan. 31, 2019 and Feb. 6, 2019, which criticize “the governance of the SCOR Group in a seriously unfounded, inaccurate and misleading manner,” said the reinsurer.

SCOR said its board of directors has unanimously decided to reiterate its full support for Denis Kessler and Augustin de Romanet and to recommend the shareholders of SCOR vote against the draft resolution presented by CIAM, proposed in its March 24 letter.

“The board has also acknowledged that the dismissal of Denis Kessler as director would also entail the termination of his office as chief executive officer, with all the foreseeable consequences on the stability and management of the group.”

SCOR then went on to detail “the reasons why the statements made by CIAM in support of its draft resolution and its call for a vote are seriously unfounded, inaccurate and misleading.”

Some of the reinsurer’s arguments follow:

1) CIAM states that “the evolution of SCOR’s share market price appears poor compared to its peers.” SCOR said the facts prove otherwise:

  • A total return for SCOR shareholders, with dividends reinvested, has reached 301% over the past 10 years.
  • Since the launch of its most recent strategic plan, Vision in Action, in September 2016, SCOR has outperformed all its main Tier 1 reinsurance competitors, with its share market price having increased by 42.4%.
  • During 2018, SCOR paid €312 million in dividends and completed share buy-backs for an amount of €194 million, which represents in aggregate more than €500 million paid to its shareholders within a year.

2) CIAM states that it is necessary for the board to be chaired by a chairman free from any conflicts of interest and that corporate governance specialists recommend separating the functions of chairman and chief executive officer. Once again, SCOR said the facts prove otherwise:

  • The board of directors of SCOR considers that the governance model with a combined chairman and CEO has in particular allowed SCOR “to benefit from efficient decision-making process and a strategic alignment of its governance bodies,” said SCOR.. “This analysis is fully shared by a vast majority of the shareholders of SCOR, which, on April 27, 2017, renewed the office of Denis Kessler as director for a term of four years with 80.60% of favorable votes.”
  • SCOR’s governance model is in line with French corporate governance practices.
  • The French corporate governance code requires the board of directors appoint a lead independent director with broad powers, which is being performed by Augustin de Romanet.

3) CIAM mentions “inappropriate” review of Covéa’s unsolicited proposal. Contrary to what CIAM alleges, the board of directors of SCOR exercised the utmost diligence and reviewed in detail all the terms and conditions of Covéa’s unsolicited proposal dated August 24, 2018,” said SCOR. These activities included a consultation with “the Strategic Committee,” a session of non-executive directors, convened on Aug. 30, 2018 to review the proposal, as well as advice from two banks and two law firms.

With the help of the consultation it had received, the board of directors on Aug. 30, 2018 “unanimously decided to refuse to initiate discussions with Covéa regarding its unsolicited proposal,” said SCOR. “Such proposal would have … jeopardized the business model of SCOR which creates value for all its shareholders, and in particular its independence, which is a key factor of the performance and financial flexibility of SCOR.”

4) CIAM alleges “unprecedented aggressiveness deployed by [Kessler] against Covéa for it to withdraw its proposed offer.” In part, SCOR explained that Thierry Derez, chairman and CEO of Covéa, was also a director of SCOR. As Covéa was pursuing a hostile takeover of SCOR, his presence on the board was considered to be a conflict of interest. After nearly a three month process, Derez was forced to resign from the board in November 2018.

5) Responding to CIAM’s complaint of Kessler’s “excessive remuneration” SCOR said, the remuneration of Kessler, which is transparent, was approved by at the general shareholders’ meeting held on April 26, 2018 by 87.92% (“ex ante” or before the event) and 78.79% (“ex post” or after the event) of shareholders. [At the 2019 shareholders’ meeting, CIAM said, “only circa 55% of participating shareholders” supported the remuneration policy]. SCOR continued with its response, saying:

  • The methods used to determine the remuneration of Kessler “strictly comply with applicable laws and the best corporate governance practices.” Further, the Compensation and Nomination Committee consists of independent directors and a director representing the employees. It is then validated by the board of directors, without Kessler’s participation, before being submitted to the vote of the shareholders during the general shareholders’ meeting….”
  • A benchmark conducted by the firm Mercer in 2018 at the request of the Compensation and Nomination Committee concludes that the global remuneration of the chairman and CEO of SCOR (including all types of remuneration) is aligned with market practice and amounted to 104% of the median within a list of peers, including major global reinsurers in 2017.
  • Since Kessler’s appointment in November 2002, the turnover has been multiplied by six, reaching €15.3 billion; the balance sheet totals have risen from €13.5 billion in 2004 to €44.4 billion by the end of 2018, and more than €2.7 billion in dividends have been paid since 2005.


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