Pharmaceuticals Sector - Solvay

Actuarial assumptions used in determining the annual cost
Eurozone Europe Other USA Other
2004 2005 2004 2005 2004 2005 2004 2005
Discount rates 5.5% 5% 3.75% - 7% 3.5% - 7% 6.5% 6% 11.3% 11.3%
Expected rates of
future salary increases
2.5% - 4.75% 2.5% - 4.75% 2% - 6% 2% - 5% 4% 4% 8% 8%
Expected (long-term)
rates of return on plan
assets
Expected rates of
pension growth
Expected rates of
medical care cost
increases
Health, safety and environment provisions
5.5% - 6.5% 5% - 6.5% 3.75% -7.3% 3.75% -7.3% 9% 8.5% 11.3% 11.3%
0% - 2% 0% - 2% 0% - 2.25% 0% - 2.7% NA NA NA NA
2% - 3% 2% - 3% NA NA 5% - 9% 5% - 9% 6.6% 6.6%
These provisions stand at EUR 427 million, compared with EUR 420 million at the end of 2004.
These provisions have been set up to cover liabilities and charges connected with the mining activities which
underlie certain group products, the growing constraints on the elimination or processing of residues which remain
technically inevitable in certain activities, and with the constant increase in other environmental protection concerns.
The estimated amounts are discounted as a function of the probable date of disbursement. As well as being
updated annually, provisions are increased every year to refl ect the increasing proximity of such disbursement.
Provisions for litigation
Provisions for litigation stand at EUR 530 million. This rise of EUR 401 million consists mainly of allocations to
provisions for risks relating to our pharmaceuticals activity, more particularly in the fi eld of female hormone therapy,
and the estimated fi nancial consequences of ongoing US and European legal proceedings relating to the respecting
of competition rules in the peroxides area prior to 2001.
Other provisions
Other provisions, at EUR 323 million, are up EUR 124 million. The main upside factor here is a new EUR 100 million
provision for the payment – which is deemed probable – of an additional amount to the former shareholders of
Laboratoires Fournier, tied to the future development of the acquired activities and subject to the attainment of
specifi c milestones.
Group policy on insurance
A Group risk manager has been hired to introduce a group-wide risk management system with the objective of
making risk management within the Group systematic and more consistent and to facilitate assessment of the risks
assumed.
Solvay group policy is to use insurance to cover all catastrophe hazards, in all cases where insurance is mandatory
and also whenever insurance represents the best economic solution for allocating risk.
This year it has proved possible to renew international insurance programs with signifi cantly lower premiums and
related fees, with the exception of Civil Liability insurance, for which the market remains diffi cult.
Solvay was able to renew its Civil Liability program in a relatively acceptable manner given the general attitude of the
insurance market towards pharmaceutical companies with substantial US sales. The reduction in terms of coverage
and limits was minimal.
Solvay Global Annual Report 2005
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