Insurance Risk
Compliance
and Regulatory Risks
Litigation Risk
and approximately 30% of Delhaize
Group's associates were covered by
defined benefit plans at the end of
2012.
If, at balance sheet date, the fair
value of the plan assets of a defined
benefit plan, is lower than the
defined benefit obligations (deter
mined based on actuarial assump
tions), the Group would bear a
theoretical "underfunding risk" at
that moment in time. At the end of
2012, Delhaize Group recognized a
net liability of €129 million (2011: €90
million; 2010: €79 million).
Details on pension plans at Delhaize
Group and its subsidiaries can be
found in Note 21.1 "Employee Benefit
Plans" to the Financial Statements.
The Group manages its insur-
able risk through a combination of
external insurance coverage and
self-insured retention programs. In
deciding whether to purchase exter
nal insurance or use self-insured
retention programs, the Group con
siders the frequency and severity of
losses, its experience in managing
risk through safety and other inter
nal programs, the cost and terms
of external insurance, and whether
external insurance coverage is man
datory.
External insurance is used when
available at reasonable cost and
terms. The amount and terms of
insurance purchased are deter
mined by an assessment of the
Group's risk exposure, by compari
son to 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' compensa
tion, general liability, automotive
accident, pharmacy claims, and
healthcare (including medical,
pharmacy, dental and short-term
disability). Delhaize Group also uses
captive insurance programs to pro
vide flexibility and optimize costs. In
the event of a substantial loss there
is a risk that external insurance cov
erage may not be sufficient to cover
the loss. It is possible that the finan
cial 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 reten
tions are based upon actuarial
estimates of claims reported and
claims incurred but not reported.
Delhaize Group believes these
estimates are reasonable, how
ever these estimates are subject
to a high degree of variability and
uncertainty caused by such factors
as future interest and inflation rates,
future economic conditions, litiga
tion and claims settlement trends,
legislative and regulatory changes,
changes in benefit levels and the
frequency and severity of incurred
but not reported claims. It is possi
ble that the final resolution of some
claims may require Delhaize Group
to make significant expenditures in
excess of existing reserves.
Self-insurance provisions of €142 mil
lion are included as liability on the
balance sheet as of December 31,
2012. More information on self-insur
ance 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 Statements.
If external insurance is not sufficient
to cover losses or is not collect
able, or if self-insurance expen
ditures exceed existing reserves,
the Group's financial condition
and results of operation may be
adversely affected.
From time to time, Delhaize Group
is involved in legal actions, includ
ing matters involving personnel and
employment issues, personal injury,
antitrust claims and other proceed
ings 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 obli
gation as a result of a past event, it
is probable that an outflow of eco
nomic resources will be required
to settle the obligation, and the
amount of obligation can be reli
ably estimated. As of December 31,
2012 the Group believes that it has
made adequate provisions for such
exposures. Any litigation, however,
involves risk and unexpected out
comes could result in an adverse
effect on the Group's financial state
ments. More information on pend
ing litigation can be found in Note
34 to the Financial Statements,
"Contingencies."
Regulatory Risk
Delhaize Group is subject to fed
eral, regional, state and local laws
and regulations in each country in
which it operates relating to, among
others, zoning, land use, antitrust
restrictions, work place safety, pub
lic health, environmental protection,
community right-to-know, infor
mation security and data protec
tion, alcoholic beverage sales and
pharmaceutical sales. A number of
jurisdictions regulate the licensing
of supermarkets, including retail
alcoholic beverage license grants.
Under certain regulations, Delhaize
Group is prohibited from selling
alcoholic beverages in some of its
DELHAIZE GROUP ANNUAL REPORT '12 63
