Berenberg is forecasting that, in Q2, SCOR will experience a net loss of €43m, and is likely to continue to underperform peers in the shorter term.
This is driven primarily by inaccurate expert assessment of catastrophe events, as well as the ongoing impact of drought losses in Brazil.
This has led the company to reduce its FY22 net income forecast to €238m. This, they say, could prove too conservative, especially if the hurricane season is uneventful.
Berenberg believes catastrophe losses for Q222 were not insignificant and, as such, the combined ratio for P&C Re remains under pressure.
In contrast, its peers have been more relaxed about the events of the quarter with most viewing it as relatively uneventful.
Berenberg said: “We believe the Australian floods are feasibly one of the larger losses and this is where we could potentially see some additional downside, especially if SCOR needs to also increases its losses from Q1 where it reserved c€70m.”
“However, we would expect SCOR to report further progress on its aim to reduce its natural catastrophe probable maximum loss exposure by 15% by FY22. This should help reduce the volatility of earnings.”
SCOR incurred c€70m of losses from the drought in Brazil in Q1. However, the situation has continued to develop, with economic losses now reported to be in excess of $9bn. The bank estimates total insured losses to be equivalent to around $2bn-3bn and, since SCOR’s market share is c12-15%, its net loss could be c€200m-350m.
According to the most recent data from John Hopkins University, there were c30k excess deaths in the US in the Q2. This is in line with the commentary from the Q1 22 results, which highlighted the improvement in mortality in the region; however, it is still a challenge to earnings.
