French headquartered global reinsurance firm SCOR has reported another set of results which are largely in-line with or beat analyst expectations, while also showing that the firm continues to expand its footprint globally.
At a time when many in the reinsurance market have been pulling-back, or contracting their reinsurance underwriting while expanding primary insurance activities, SCOR remains focused on growing its reinsurance book.
Sitting at number four in the list of global reinsurance firms, with its written premiums significantly below the top two players, SCOR is perhaps in an enviable position of being able to grow its portfolio organically, as ceding companies look for greater diversification among their reinsurer panels.
This means the company sits at a size in the market where it can benefit from growth opportunities, it has the scale to take advantage of these (unlike some of the mid-sized players) but is not so big yet that counterparties fear becoming too reliant on it.
Hence profitable, global expansion and growth in a steady and controlled manner seems to be the strategy of late.
Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented on today’s results announcement; “SCOR delivers strong results in the first six months of 2017, outperforming both its profitability and solvency targets from the “Vision in Action” plan.
“At the same time, the Group continues to expand its footprint in targeted territories and business lines. In addition, by launching this share buy-back program, the Group reaffirms its confidence in the strength of its underlying fundamentals, excellent ratings and optimal debt leverage.”
Gross premiums underwritten across the group at SCOR rose by almost 10% for the second-quarter of 2017 to EUR 3.784 billion, while for the first-half of 2017 gross premiums have increased by almost 12% to over $7.5 billion.
Premium growth is seen across the reinsurance business, with Life up +9.7% at constant exchange rates across all product lines, particularly in the Americas and Asia-Pacific, and P&C up +10.6% thanks to successful January, April and June renewals, SCOR said.
At the same time costs are down and return on equity up compared to 2016, resulting in higher net profit and shareholders equity as well.
Net income for Q2 2017 came in at EUR 153 million, up 45.7% on Q2 2016. For the first-half net income is only up by 6.2% at EUR 292 million due to the impact of the Ogden Rate change and reserve releases.
But excluding the impact of Ogden and those reserves net income for the first-half of 2017 would have been an impressive EUR 350 million, which is up over 27% on H1 of 2016.
SCOR has also shown that it is not a story of growth at any cost, explaining that the reinsurer has not increased its U.S. P&C book in the second quarter, instead seeing it as flat and also having reduced risk with some Florida mono-line carriers as well.
In life reinsurance SCOR saw “robust new business flow” across the product line, with strong expansion in Asia-Pacific and longevity growth in the UK.
Low levels of catastrophe losses are a big help to reinsurers in the current reporting period, with large catastrophe events noticeably absent once again. Attrition has hit some companies, largely due to U.S. severe weather, but SCOR reports the storm & fire in South Africa (EUR 15 million), tropical cyclone Debbie (EUR 20 million) and an earthquake in Australia (EUR 9 million) as the main loss events of the quarter for its P&C book. SCOR also reports that its attritional losses are roughly flat.
So another expansive quarter for SCOR with growth of its underwriting book helping to drive higher income, and the low catastrophe and large loss environment helping to strengthen its profitability.
SCOR has also announced a new round of share buy-backs today, with EUR 200 million of shares set to be bought back over the coming two years.
Denis Kessler explained; “This share buy-back program reflects the Group’s confidence in the strength of its underlying fundamentals, excellent ratings and optimal debt leverage. This is another example of SCOR’s value proposition for shareholder remuneration.”
It’s interesting to see the differing strategies that can be employed by reinsurers depending on where in the pecking order they sit. SCOR is in a position where expansion remains possible, despite the challenging market environment and without having to shift over to the primary side.
