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SCOR ‘absorbs’ COVID-19 shock but full-year net income falls to €234mn

24th February 2021 - Author: Luke Gallin

Global insurer and reinsurer SCOR has reported net income of €234 million for 2020, representing a decline of more than 44% from the previous year, as claims related to the ongoing COVID-19 pandemic reached €640 million.

SCORAs income for the year declined, SCOR actually recorded a 371% increase in net income for the fourth-quarter of 2020 to €99 million, against €21 million for the same period a year earlier.

In contrast, gross written premiums (GWP) increased slightly for the full-year to €16.4 billion, but declined by almost 5% in Q4, year-on-year, to just over €4 billion.

Within SCOR Global P&C, GWP increased by 2.4% although the segment fell to an underwriting loss as a result of pandemic losses and a series of natural catastrophes, posting a combined ratio of 100.2%.

Excluding COVID-19 losses, the SCOR Global P&C net combined ratio stands at 95.5%, which is in line with the firm’s “Quantum Leap” assumptions.

In SCOR Global Life, GWP increased by 1.4% and the re/insurer notes that its life operation was able to absorb the pandemic impact and maintains a robust performance, posting a technical margin of 5.8%.

Turning to the pandemic losses, and SCOR has reported that based on data currently available, information received from cedants to date and the results of the models used, the firm has recorded total COVID-19 claims costs across P&C, Life and Investments of €640 million for 2020.

On the P&C side of the business, SCOR estimates that pandemic claims will be manageable with an impact booked of €284 million in 2020, coming mostly from Credit, Surety & Political risks and from Property Business Interruption.

Within the €284 million, the actual COVID-19 related claims paid are limited, standing at a total of €30 million as at December 31st, 2020. The January 2021 renewals led to a clarification of terms and conditions, i.e. to exclude COVID-19 from the events insured, explains the reinsurer.

On the life side of the business, SCOR again expects the impact of the pandemic to be manageable, with an impact booked in 2020 of €314 million. Within this total, SCOR explains that the actual COVID-19 related claims paid as at the end of December 2020, stands at €196 million.

According to SCOR, the main exposure on the life side is in the U.S., where it estimates COVID-19 claims as at December 31st, 2020 reached €283 million. With an additional €31 million of pandemic related claims booked in other markets during the year.

On the investment side, SCOR benefited from the defensive nature and high quality of its investment portfolio when the pandemic arrive. The level of impairment charges is limited in 2020 at €42 million before tax, says SCOR. While the level of unrealized gains on invested assets increased by €179 million between December 31st, 2019, and December 31st, 2020, in spite of €197 million of realized gains in 2020.

Denis Kessler, Chairman and Chief Executive Officer (CEO) of SCOR, commented: “Covid-19 is a historic shock. Pandemic risk is obviously well known to reinsurers. Infectious diseases figure prominently in the risk maps SCOR draws up each year. The study and modeling of risk was an integral part of our risk management when Covid-19 struck. With hindsight, we underestimated the truly global reach of such a phenomenon, as well as the critical impact of the various – unmodelable – decisions taken by governments to contain the spread of the virus, which ultimately had a major impact on the (re)insurance industry’s exposure to this crisis.

The measures taken to contain Covid-19, particularly lockdowns, have affected all areas of economic and social life. This has become a multi-faceted crisis – health-related, social, economic, financial and even geopolitical. It has therefore impacted reinsurers, in terms of both assets and liabilities, on both the Life and P&C sides. The Group has successfully passed this real-life stress test by absorbing this major shock. SCOR ended 2020 profitably and solvently.

“The Group’s fundamentals remain very strong, as demonstrated by the excellent results we would have recorded in the absence of Covid-19 – which cost the Group EUR 640 million in 2020 – as well as by the level of solvency achieved at the end of December. This enables the Group to pursue its active shareholder remuneration policy, with a dividend of EUR 1.80 per share for 2020 to be proposed at the Annual General Assembly.

“SCOR is very well positioned to benefit from the general market hardening in P&C reinsurance, as demonstrated by the excellent renewals recorded at January 1, 2021. Similarly, the Group is pursuing its development in Life reinsurance, particularly in Asia. SCOR continues to implement its “Quantum Leap” strategic plan with determination. I would like to express my warmest thanks to the Group’s employees for having kept the company running and for delivering for all our clients during this very challenging time.”

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