French reinsurer SCOR has seen its net income drop in the first quarter of 2017 as the company had to accommodate the UK’s personal injury Ogden discount rate change.
The group net income dropped to €140 million in the first quarter from €170 million in the same period a year ago. Without the Ogden rate charge, net income would have increased to €197 million in the first quarter.
The UK’s Lord Chancellor and Justice Secretary Elizabeth Truss decided on February 27 to change the Ogden discount rate to -0.75 percent from 2.5 percent.
The so-called Ogden tables detail figures to be used to multiply the annual cost of a damage to be awarded and calculate compensation awards for serious personal injuries.
SCOR has taken a charge of €116 million pre-tax due to the Ogden rate change in the first quarter. The effect was mitigated by a low level of natural catastrophes in the first quarter and reserve releases of €45 million pre-tax.
The reinsurer recorded a 13.9 percent increase in gross written premiums in the first quarter to €3.74 billion. Growth was driven by both the life and property/casualty (P&C) businesses.
The P&C division grew gross written premiums by 12.3 percent at constant exchange rates.
The combined ratio in P&C improved to 94.5 percent from 89.7 percent in the first quarter of 2016. This was despite the negative impact of 8.9 points due to the change in the Ogden discount rate.
At the 1 April 2017 renewals, SCOR Global P&C grew gross written premiums by 3.3 percent at constant exchange rates to €509 million. Pricing was quasi-stable at -0.3 percent, with year-to-date pricing marginally down -0.5 percent, indicating a bottoming of rates, the company said.
Growth with selected clients in Japan and India, where SCOR recently obtained a reinsurance licence, offset one-off effects in the United States portfolio.
The life business grew 12 percent in the first quarter at constant exchange rates, particularly in the Americas and Asia Pacific. SCOR expanded its franchise in Asia Pacific with the opening of a branch in Tokyo. The company also registered growth from 2016 longevity premiums. Life technical margin was 7.2 percent in the first quarter of 2017 compared to 7.1 percent in the same period a year ago.
“In the first quarter of 2017, our teams have continued to implement successfully the strategic plan ‘Vision in Action’,” said Denis Kessler, chairman CEO. “SCOR’s core earnings level bears witness to the quality of the Group’s technical fundamentals. At the same time, the Group is gaining market shares in targeted territories and business lines, as demonstrated by the successful P&C January and April renewals and the strong expansion of the Life footprint.”
The group cost ratio declined slightly to 5.1 percent in the first quarter of 2017 from 5.3 percent a year earlier.
SCOR is creating an EMEA Hub (Europe, the Middle East and Africa), combining the existing Paris-London and Zurich-Cologne Hubs.
The new EMEA Hub aligns shared services with the organisational structure of the two reinsurance divisions, providing a simplified and integrated structure, the company said.
The newly created Hub will be run by Malcolm Newman as managing director, reporting to Romain Launay, group chief operating officer.
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SCOR, First quarter 2017 results, Denis Kessler, France, Europe