Global reinsurer SCOR has reported a net loss of €509 million for the first nine months of 2022, as natural catastrophe claims increased to €907 million while the firm took a number of meaningful actions on its balance sheet during the period, including strengthening its P&C reserves.
The 9M 2022 P&C nat cat total includes a cost of €279 million in Q3 related to Hurricane Ian, while the cost of convective storms and hailstorms in France in June rose to €166 million, which is €113 million on top of what the firm booked in Q2 2022. SCOR also notes that man-made claims activity has been on the rise in the third quarter.
At the same time, the carrier bolstered its P&C reserves by €485 million to take a prudent stance in a claims environment marked by high economic and social inflation.
Additionally, SCOR booked an additional €94 million charge in Q3 2022, resulting in a 9M 2022 charge of €139 million, for provision of non-recognition of deferred tax assets, as it looks to also take a prudent approach to tax assumptions on its balance sheet.
Somewhat offsetting the above, says SCOR, the carrier’s L&H division produced an impressive technical result in the period as it benefited from a release of excess of prudent margin in reserves.
Together, these developments resulted in the net loss of €509 million for the nine month period and a loss of €270 million in Q3 2022.
Within SCOR P&C, the net combined ratio stands at 111% for 9M 2022, including a 15.9% nat cat ratio, while the the boost in reserves is equivalent to 8.5% of net earned premium for the period, implying a total combined ratio of 119.5% for 9M 2022.
Gross written premiums at SCOR P&C increased by almost 16% at constant exchange rates. The company says that it’s adopting a more selective approach in treaty P&C lines of business and continues to grow its treaty global lines and its specialty insurance portfolios where it sees attractive market conditions.
In fact, throughout 2022, SCOR reduced its peak exposures, nat cat and US mortality, and tightened the overall P&C underwriting discipline and exposure. The firm notes that these actions are already starting to have a benefit. In the future, SCOR says that it will continue to strengthen its P&C business, making the most of the hardening market landscape.
At SCOR L&H, the technical result for 9M 2022 was strong at €863 million on the back of the aforementioned release of excess prudent margin in reserves. After the release of the excess margin, L&H reserves remain prudent, says the reinsurer.
L&H gross premiums written actually fell by 2% at constant exchange rates as SCOR rebalances the portfolio towards more health and longevity products. Going forward, SCOR explains the it will leverage further its US mortality leadership position, while continuing to diversify its portfolio.
In terms of investments, the French reinsurer has recorded a return on invested assets of 1.9% for 9M 2022 and investment income of €305 million.
Denis Kessler, Chairman of SCOR, commented on the firm’s results: “In light of the Group’s disappointing results, the Board of Directors asked the management team to accelerate the implementation of strong measures to strengthen SCOR’s technical profitability and improve its operational performance. The Board will ensure that these measures are implemented with determination. This will enable the Group to take full advantage of the positive development in the P&C reinsurance market in terms of rate increases and tightening of terms and conditions.”
Chief Executive Officer (CEO), Laurent Rousseau, said: “The quarter has been difficult, and the results are significantly below the Group’s expectations. Our short-term priority is the restoration of our financial performance. The Group has already taken meaningful actions to improve its performance, reduce its exposure to Natural Catastrophes, and prudently reserve the combined effects of social and economic inflation. But these Q3 results demonstrate the need to go further and continue taking strong actions to remediate the Group’s underwriting performance and restore its profitability.
“The hardening of the P&C market, the increasing demand for life reinsurance products and the increase in interest rates are drivers that should favor positive developments for reinsurers. I am confident that we are building from a sound base to navigate in the new environment and take advantage of market tailwinds.
“We will communicate in 2023 the KPIs under the upcoming IFRS 17 norm, which will reveal SCOR’s economic value.”
