AM Best upgrades ratings for SCOR on operating strength
Ratings agency AM Best said on September 1 that it has upgraded the Financial Strength Ratings (FSR) to A+ (Superior) from A (Excellent) of SCOR and its main operating subsidiaries citing its operating strength as a driver for the move.
AM Best has also upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “aa-” from “a+” of the French reinsurer and its main operating subsidiaries. The outlook of all Credit Ratings (ratings) has been revised to stable from positive.
The rating upgrades reflect SCOR’s track record of strong and resilient operating profitability and its very strong risk-adjusted capitalisation, despite persisting challenging market conditions, AM Best said. SCOR’s business model and conservative risk appetite relative to reinsurance peers support low volatility in both earnings and capital adequacy. The ratings also reflect SCOR’s excellent business profile as a tier 1 reinsurer, its well-diversified portfolio of non-life and life reinsurance, and the group’s excellent enterprise risk management (ERM) framework.
SCOR’s operating performance has been strong and stable over the past five years (2012-2016), proving resilient to the prevailing competitive market conditions in the global reinsurance sector and the persisting low interest rate environment. This has been driven primarily by solid underwriting performance over the period, demonstrated by non-life combined ratios consistently below 95 percent and life technical margins continually above 7 percent. Overall earnings have been further bolstered by a robust five-year average net investment return (including unrealised/realised gains and losses) of 3.3 percent, despite the difficult market conditions and the group’s conservative investment strategy.
The group reported a net income of €292 million for the first six months of 2017, compared with €275 million for the same period in 2016. The improved result primarily reflects profitable growth from both life and non-life operations, partially offset by reserve strengthening in the first quarter of 2017 arising from the revision of the personal injury Ogden discount rate in the UK. Strong underwriting performance during the first six months of 2017 is demonstrated by a life technical margin of 7.1 percent and a combined ratio of 93.5 percent, according to AM Best. The annualised return on equity ratio of 9.1 percent for the first half of 2017 surpassed the group’s target as per its “Vision in Action” strategic plan and depicted improvement against the 8.9 percent ratio achieved for the same period in 2016.
SCOR’s risk-adjusted capitalisation has strengthened continually since 2013, reaching a very strong level in 2016. The group’s shareholders’ equity has grown by approximately 30 percent since year-end 2013, increasing from €4.9 billion to €6.4 billion at the end of June 2017.
SCOR has strengthened its competitive position within the global reinsurance market and increased its scale over recent years through a combination of organic growth from its non-life and life businesses, as well as by its acquisitions of US-based life reinsurance operations. The group has developed an internationally recognised franchise with leading positions in its key markets, offering a wide range of insurance and reinsurance solutions, AM Best said.
