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SCOR on target despite higher than expected Q3 cat losses

24th October 2018 - Author: Steve Evans

French headquartered global reinsurance firm SCOR remains on track to achieve its Vision in Action plan targets after the first nine months of the year, despite a lower than expected third-quarter net income due to the impact of recent catastrophes.

SCOR logoSCOR, like many other reinsurance firms, was always expected to take a hit from the recent global catastrophe activity and this morning after reporting its results for the quarter and first nine months of the year, analysts confirmed this was the case.

SCOR delivered net income of EUR 342 million for the first nine months of 2018, reporting a return on equity (ROE) of 7.6%.

Normalised, so without the impact of U.S. tax laws, net income reached EUR 405 million and ROE was 8.9%, both higher than SCOR’s targets set out in its “Vision in Action” plan.

The company said that 2018 so far has demonstrated “the relevance of SCOR’s strategy and the resilience of its business model” as it achieved premium growth in targeted regions and lines of business.

The firm cited “excellent technical results” across its Life and P&C reinsurance divisions, both in Treaty and Specialty business, as well as a continued improvement in investment returns and a stable cost ratio, helping it to maintain a strong solvency ratio.

SCOR achieved written premiums of EUR 11,336 million in the first nine months of 2018, an increase of 7.4% at constant foreign exchange rates compared to the prior year.

Life reinsurance saw premiums written increase by 9.2% while property and casualty business grew by 9.2%, both at constant FX.

Over the year to-date SCOR’s P&C combined ratio came out at 93.6%, despite the higher level of catastrophes in the third-quarter.

Commenting on the results, Denis Kessler, Chairman & Chief Executive Officer of SCOR, said, “SCOR records a very solid performance in the first nine months of 2018. Excluding the impact of the U.S. tax reform, the Group has exceeded the targets set out in the plan “Vision in Action”, despite the numerous natural catastrophes that took place across various regions in the third quarter. This performance bears witness to the relevance of our strategy, which is based on a controlled risk appetite, a disciplined underwriting policy and an effective capital shield. The Group is in very good shape and well on track to meet the targets of “Vision in Action”.”

While for the third-quarter of 2018 SCOR delivered EUR 80 million of net income, up considerably on the prior year’s EUR -267 million, this was still below where equity analysts had estimated it would be, a consensus estimate of around EUR 105 million.

The reason for this was catastrophe losses and SCOR was hit by the events that have dented most companies quarterly results, hurricane Florence, typhoon Jebi and other catastrophe or weather activity in Asia and Japan.

SCOR’s P&C combined ratio for Q3 2018 was 98%, driven by these major catastrophe events.

For the quarter, the reinsurers largest losses were Typhoon Jebi at EUR 105 million, Hurricane Florence at EUR 50 million, Typhoon Mangkhut at EUR 22 million.

The catastrophe impacts were offset by some EUR 60 million of reserve releases from some longer tailed lines of business.

With 16.5% of catastrophe impacts and based on net earned premiums, that works out to be roughly EUR 210 million according to analysts, which was well above their forecast expectations.

But this only leads to an accident year catastrophe ratio of 7%, so year-to-date impacts are still in line with expectations.

The SCOR Global P&C business underwrote 4.3% more premiums in the quarter, reaching EUR 1.567 billion.

SCOR cited the disciplined growth a solid technical result over the year so far, despite the heavier than expected third-quarter catastrophe losses.

The Global Life business at SCOR reported premium growth of 6.4%, reaching EUR 2.232 billion for Q3 2018, which the company said was notably driven by franchise expansion in Asia-Pacific, and new Financial Solutions deals, thanks to robust demand in the U.S. and Asia-Pacific markets (particularly Japan and China).

Overall the SCOR results reflect the market-wide expectation that Q3 losses are likely to be a little higher than expected at most major reinsurers, but show a company that continues to drive profitable growth in a challenging market and that remains on track to meet its long-term targets.

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