Global French insurer and reinsurer SCOR saw its net income decline in the first-quarter as it took a €116 million (US$126.4mn) pre-tax hit as a result of the Ogden rate cut in the UK, although this was somewhat offset by reserve releases and lower-than-expected catastrophe losses in the quarter.
The cut to the Ogden discount rate in the UK earlier in 2017 saw SCOR’s net income for the first-quarter total €140 million (US$153mn), compared with €170 million (US$185mn) a year earlier. Absent the Ogden rate change and reserve release impacts the firm’s net income would have reached €197 million (US$215mn), which is roughly 16% above Q1 2016.
The change in the Ogden rate in the UK from 2.5% to -0.75% resulted in a pre-tax charge of €116 million for SCOR in the first-quarter, with roughly 72%, or €83 million (US$90mn) relating to reinforced UK Non-Proportional Motor reserves, says SCOR.
Somewhat offsetting the Ogden charge SCOR experienced a low level of catastrophe losses in the first-quarter, of just €13 million (US$14.1mn), of which the majority came from Cyclone Debbie, and pre-tax reserve releases of €45 million (US$49mn).
SCOR’s Q1 earnings release shows that the Ogden rate change impacted its combined ratio by 8.9 percentage points, catastrophe losses amounted to 1.0 point of net combined ratio, and 3.5 points of reserve releases.
As a result SCOR Global P&C recorded a combined ratio of 94.5% in Q1 2017, compared with 89.7% a year earlier. Return on equity (RoE) for the first-quarter hit 8.6%, which, excluding the Ogden change and reserve release impacts would have reached 12.2%, says SCOR.
Analysts at RBC Capital Markets commented on the Ogden impact, stating that it’s larger than it had anticipated. Deutsche Bank analysts underlined that while the Cyclone Debbie impact was “tame,” SCOR’s Q1 was determined by the €116 million Ogden charge.
Commenting on the company’s results, Denis Kessler, Chairman and Chief Executive Officer (CEO), SCOR, said; “In the first quarter of 2017, our teams have continued to implement successfully the strategic plan “Vision in Action”. 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.”