French reinsurer SCOR has reported a net loss of €301 million for the full year 2022, citing natural catastrophes such as Hurricane Ian and the hailstorms in France, as well as the war in Ukraine and ongoing macroeconomic pressures as key driving points.
This net loss reported by SCOR compares with a €456 million net income in 2021 and includes the impact of one of the worst droughts in Brazilian history, which accounted for claims worth €204 million.
The French reinsurer notes that the net loss is reduced somewhat compared to Q3 2022 thanks to its strong performance in Q4 2022, which saw a net income of €208 million.
The firm also observed the effects of strong inflationary pressures in Europe and the United States, which led central banks to raise interest rates.
This resulted in a sharp paradigm shift for investors and borrowers, says SCOR, which significantly impacted reinsurers’ earnings in 2022.
However, it also resulted in a combination of higher prices and higher investment returns, both of which are expected to strongly support reinsurers’ performance in 2023.
SCOR’s gross written premiums stand at €19,732 million in 2022, up 4.9% at constant exchange rates compared with 2021 (up 12.1% at current exchange rates).
Meanwhile, SCOR P&C (Property and Casualty) gross written premiums are up 13.5% at constant exchange rates compared with 2021 (up 21.7% at current exchange rates).
P&C net combined ratio stands at 113.2%, marked by several exceptional developments. It includes a Nat Cat ratio of 12.4%, claims relating to the impact of the drought in Brazil accounting for 2.6%, and the reserve increase announced in Q3 2022 to anticipate the impact of the social and economic inflation accounting for 6.2%.
SCOR notes that the market continues to harden and recorded a 9% rate increase at the January 1, 2023 renewals, which should lead to a significant improvement in expected profitability.
SCOR L&H (Life and Health) gross written premiums dropped by 2.7% at constant exchange rates compared with 2021 (up 3.7% at current exchange rates).
L&H delivered a technical margin of 14.5%, benefiting from a strong underlying performance, active in-force management and the release of excess reserve margins (corresponding to €460 million above an 8.3% normalised level of technical margin in the third quarter of 2022).
SCOR Investments delivered a return on invested assets of 2.1% for 2022 with a regular income yield of 2.4% (3.1% in Q4 2022), while the Group cost ratio stands at 4.5% of gross written premiums in 2022.
Operating cash flows stood at 500 million in 2022, which SCOR attributes to a positive operating cash flow of €1,232 million from SCOR P&C, while operating cash flow from SCOR L&H is negative at -€732 million.
In Q4 2022, both P&C and L&H generated positive operating cash flows.
SCOR’s Group solvency ratio is estimated at 213% on December 31, 2022, in the upper part of the optimal solvency range of 185% – 220% defined in its last strategic plan.
The firm states that this capital base takes into account an impact of -26 points related to (i) the increase in P&C reserves in Q3 2022, and (ii) further resilience built within L&H assumptions in advance of IFRS17.
Denis Kessler, Chairman of SCOR, commented, “The Group’s annual results are very disappointing despite a solid performance in the fourth quarter. A sustainable return to profitability is imperative. A new, highly experienced Chief Executive Officer, Mr Thierry Léger, will join the Group on May 1, 2023.
“He will present the broad outlines of his strategic plan at the Annual General Meeting on May 25, 2023, and will implement it without delay and with great determination after presenting it to the investors in September 2023.”
Kessler continued, “This will enable the Group to take full advantage of its global underwriting platform and technical expertise to seize the opportunities available in the L&H and P&C reinsurance markets, building on its status as a Tier 1 reinsurer.
“The Board of Directors is confident in the Group’s ability to return to growth, restore profitability, and reinforce its solvency. Consequently, it proposes a dividend of EUR 1.40 per share for 2022, which will be submitted for shareholders’ approval at the Annual General Meeting.”
François de Varenne, interim Chief Executive Officer of SCOR, added, “2022 has been a difficult year for SCOR, even if the fourth quarter was better than the previous quarters. With the normalization of the pandemic, the L&H reinsurance business performed very well in 2022.
“The release of L&H excess reserve margins enabled the Group to finance the increase in P&C technical reserves. Along with P&C reinsurance, L&H is generating significant diversification benefits, and IFRS 17 will reveal the full value of its portfolio.”
de Varenne concluded, “The P&C renewals at January 1, 2023, confirm the continued hardening of the market. Reinvestment rates are expected to remain high, increasing the financial contribution of the investment portfolio.
“The teams are fully mobilized to accelerate the execution of the one-year plan to restore the Group’s profitability and to ensure the transition to the new IFRS 17 standard. We are ready to support the new CEO in the preparation and execution of a new, ambitious strategic plan.”
