Food Lion 2013 Annual Report Download - page 68

industry standards and by assessment of financial capacity in the
insurance markets.
The main risks covered by Delhaize Group’s insurance programs are
property, liability and health-care. The U.S. operations of Delhaize Group
use self-insured retention programs for workers’ compensation, general
liability, automotive accident, pharmacy claims, and healthcare (including
medical, pharmacy, dental and short-term disability). Delhaize Group also
uses captive insurance programs to provide flexibility and optimize costs.
In the event of a substantial loss there is a risk that external insurance
coverage may not be sufficient to cover the loss. It is possible that the
financial condition of an external insurer may deteriorate over time in
which case the insurer may be unable to meet the obligation to pay a
loss. It is possible that due to changes in financial or insurance markets
that Delhaize Group will be unable to continue to purchase certain insur-
ance coverage on commercially reasonable terms.
Reserves for self-insured retentions are based upon actuarial estimates
of claims reported and claims incurred but not reported. Delhaize
Group believes these estimates are reasonable, however these esti-
mates are subject to a high degree of variability and uncertainty caused
by such factors as future interest and inflation rates, future economic
conditions, litigation and claims settlement trends, legislative and regu-
latory changes, changes in benefit levels and the frequency and severity
of incurred but not reported claims. It is possible that the final resolu-
tion of some claims may require Delhaize Group to make significant
expenditures in excess of existing reserves.
Self-insurance provisions of €133 million are included as a liability
on the balance sheet as of December 31, 2013. More information on
self-insurance can be found in Note 20.2 “Self Insurance Provisions”
and related investments held to cover the self-insurance exposure are
included in Note 11 ”Investments in Securities” to the Financial State-
ments.
If external insurance is not sufficient to cover losses or is not collectable,
or if self-insurance expenditures exceed existing reserves, the Group’s
financial condition and results of operation may be adversely affected.
Compliance and Regulatory Risks
Litigation Risk
From time to time, Delhaize Group is involved in legal actions, including
matters involving personnel and employment issues, personal injury,
antitrust claims, product liability claims, environment liability claims and
other proceedings arising in the ordinary course of business. The Group
regularly reviews its exposure to the claims and litigation arising in the
normal course of operations. It recognizes a provision when it has a
present obligation as a result of a past event, it is probable that an out-
flow of economic resources will be required to settle the obligation, and
the amount of obligation can be reliably estimated. As of December
31, 2013 the Group believes that it has made adequate provisions for
such exposures. Any litigation, however, involves risk and unexpected
outcomes could result in an adverse effect on the Group’s financial
statements. More information on pending litigation can be found in
Note 34 “Contingencies” in the Financial Statements.
Regulatory Risk
Delhaize Group is subject to federal, regional, state and local laws and
regulations in each country in which it operates relating to, among
66 DELHAIZE GROUP ANNUAL REPORT 2013 RISK FACTORS
DECEMBER 31, 2013
Currency Reference Interest Rate Shift Impact on Net Financial
Expenses Impact on Equity
Euro 0.29% Increase/Decrease by 9 basis points Decrease/Increase by €0.11 million -
U.S. dollar 0.25% Increase/Decrease by 3 basis points Decrease/Increase by €0.08 million Decrease/Increase by €0.2 million
Total Decrease/Increase by €0.19 million Decrease/Increase by €0.2 million
DECEMBER 31, 2012
Currency Reference Interest Rate Shift Impact on Net Financial
Expenses Impact on Equity
Euro 0.19% Increase/Decrease by 7 basis points Decrease/Increase by €0.09 million -
U.S. dollar 0.31% Increase/Decrease by 4 basis points Decrease/Increase by €0.17 million Decrease/Increase by €0.2 million
Total Decrease/Increase by €0.26 million Decrease/Increase by €0.2 million
DECEMBER 31, 2011
Currency Reference Interest Rate Shift Impact on Net Financial
Expenses Impact on Equity
Euro 1.36% Increase/Decrease by 29 basis points Increase/Decrease by €0.1 million -
U.S. dollar 0.58% Increase/Decrease by 11 basis points Decrease/Increase by €0.5 million Decrease/Increase by €0.6 million
Total Decrease/Increase by €0.4 million Decrease/Increase by €0.6 million