AM Best has switched its outlooks on SCOR SE and its main operating subsidiaries to negative from stable.
The firm said that it had also affirmed the Financial Strength Ratings (FSR) and the Long-Term issuer credit ratings of A+ and aa-. It was from this that the firm revised the outlooks to stable.
It said that the ratings reflect SCOR’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, very favourable business profile, and very strong enterprise risk management.
It wrote in a statement: “The negative outlooks reflect pressure on SCOR’s operating performance assessment, following elevated losses in recent periods affecting the non-life and life books of business. The group is currently implementing remedial actions to improve underwriting performance, which AM Best will continue to monitor. Should the underlying performance not improve in the short-to-medium term, a further negative rating action is likely.”
It added: “The group reported a net loss of €239m for the first half of 2022, driven by exposure to a number of natural catastrophe and man-made events, as well as continued COVID-19 mortality losses, especially in the first quarter of the year. SCOR has a track record of strong operating performance over the business cycle, with a 10-year (2012-2021) weighted average return-on-equity ratio of 7.6% (as calculated by AM Best). Earnings diversification between non-life and life segments somewhat moderates volatility in overall technical results.”
“Non-life technical losses, recorded in each of the past five years, have been offset by profits from the life portfolio, despite elevated mortality driven by the COVID-19 pandemic. The life result was positively impacted in 2021 by the execution of SCOR’s retrocession contract with Covéa, which contributed €311m to the group’s net income of €456m for the year. Ongoing remedial actions undertaken by the group, including portfolio optimisation, active management of its in-force book and streamlining the organisation to improve operational efficiencies, will support an improvement in prospective technical profitability.”
According to AM Best, the FSR of A+ (Superior) and Long-Term ICRs of “aa-” (Superior) have been affirmed, with the outlooks revised to negative from stable, for SCOR SE and its following operating subsidiaries:
- SCOR UK Company Limited
- SCOR Reinsurance Asia-Pacific Pte Ltd
- SCOR Global Life USA Reinsurance Company
- SCOR Global Life Americas Reinsurance Company
- SCOR Global Life Reinsurance Company of Delaware
- SCOR Reinsurance Company
- SCOR Canada Reinsurance Company
- General Security National Insurance Company
- General Security Indemnity Company of Arizona
Despite the downgrades, AM Best said that SCOR continues to maintain its prominent position as one of the top five global reinsurers, with excellent product and geographic diversification. It pointed to the group’s internationally recognised franchise, long-standing client relationships, and technical expertise help SCOR manage local and global reinsurance market cycles.
