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SCOR reports immaterial COVID-19 impact as net income rises in Q1

29th April 2020 - Author: Luke Gallin

Global insurer and reinsurer SCOR has reported a 23.7% rise in net income to €162 million for the first-quarter of 2020 and a P&C combined ratio of 94.5%, as the company reports a limited impact from the COVID-19 pandemic during the period.

SCORThe French reinsurer states that although its Q1 results were not materially affected by the pandemic and related economic and financial crisis, the event is ongoing and the firm warns that it might experience an increased level of claims on both its P&C and Life businesses, as well as higher levels of asset impairments moving forward.

Net income improved from the €131 million recorded in the same period last year, and overall, gross written premiums (GWP) increased by more than 4% to approximately €4.2 billion, against €3.9 billion in Q1 2019.

SCOR’s group cost ratio improved slightly in the quarter to 4.7%, while the annualised return on equity (ROE) also improved year-on-year, from 9% to 10.7%.

By segment, and SCOR has reported growth in both its P&C and Life businesses during the first-quarter of the year. In addition, the company says that despite the COVID-19 outbreak being declared a pandemic during the quarter, both the P&C and Life units received no material related claims for the period.

Liberty Mutual Reinsurance

Starting with SCOR Global P&C, and the firm has reported GWP of roughly €1.8 billion in Q1 2020, which is up almost 5% on the €1.72 billion reported in Q1 2019. The unit’s combined ratio improved slightly to 94.5%.

SCOR attributes this robust combined ratio to a limited natural catastrophe experience in the quarter. SCOR’s nat cat ratio hit 5.4% in the period, which is below the 7% nat cat budget, and which is mainly driven by tornadoes in the U.S. (€14mn net of retro and pre-tax), hailstorms in Australia (€13mn net of retro and pre-tax), and European windstorms Ciara and Sabine (€12mn net of retro and pre-tax).

In addition, SCOR experienced €4 million in adverse loss development from Typhoons Hagibis and Faxai in Q1 2020.

At 82.8%, the P&C segment’s net attritional loss and commission ratio increased slightly from the 81.1% posted in Q1 2019, driven by an increased level of man-made claims when compared with the prior year.

While COVID-19 related losses were limited for SCOR in Q1 2020, the reinsurer highlights the rapidly changing landscape and continues to keep a close eye on developments.

Within P&C, SCOR notes that many lines of business are simply not loss impacted or have minimal exposure. The reinsurer says that its P&C operation is either not involved or has “incidental and immaterial” exposure in many of the lines of business most affected by the pandemic, such as event cancellation or contingency business.

Regarding the potential for business interruption exposure, SCOR says that it is watching developments here closely, and warns of potential exposures within the trade credit, surety, and political risks portfolio, although this would be limited to ~7% of SCOR Global P&C premium base.

Dennis Kessler, Chairman and Chief Executive Officer (CEO) of SCOR, commented: “The Covid-19 pandemic is a shock of historic severity. It has become a multifaceted crisis which is profoundly impacting the lives of billions of people worldwide. In this context, SCOR has been proactive in taking immediate actions to help stop the spread of the pandemic and to contribute more generally to the wellbeing and resilience of society, for the benefit of all its stakeholders.

“Our top priority has been to actively protect the health and safety of our employees, to continue operating efficiently and supporting our clients through this disruptive period, to share our knowledge on the evolution of the pandemic and to emphasize the importance of preventative and protective actions to help contain the virus.

“The current crisis is an ordeal for all of us. The Group is fully mobilized to anticipate, measure and manage the impacts of this major shock, just as it has done for other disasters in the past. We wish each and every one of you the best of health and safety during this very difficult period.”

Turning to SCOR Global Life, and GWP increased by 4% year-on-year to approximately €2.4 billion. The life technical margin also increased in the quarter, to 7.4% versus 7.2% in the same period last year.

Overall, the Life segment’s net technical margin stands at €159 million in Q1 2020. This represents growth of 4.4% year-on-year and is driven by a solid technical performance from in-force business profitability, and a profitability of new business in line with SCOR’s ROE target.

Again, SCOR emphasises the fact that during Q1, the hit to its Life side from the pandemic was limited, adding that the current situation remains well-below the 1-in-200 year pandemic extreme scenario disclosed by the reinsurer.

SCOR notes that the key exposures relate to mortality business, most notably in the U.S., where the firm has a diversified portfolio predominantly exposed to younger age and higher socioeconomic groups. In addition, SCOR says there is limited exposure to business lines impacted by economic downturn, and warns of some potential positive offsetting impacts over time from its longevity and long-term care portfolios in France.

For insurers and reinsurers, so far, it appears that the underwriting experience form the pandemic has been limited, with more sizeable impacts being seen on investments as a result of COVID-19-induced financial market volatility and significant equity market declines.

SCOR notes that it entered the pandemic with a resilient and defensive investment portfolio, with limited appetite for asset risks.

Overall, SCOR Global Investments delivered a return on invested assets of 3.1% in the first-quarter of 2020. Total investments hit €28.4 billion, total invested assets reached €20.3 billion, and funds withheld amounted to €8.1 billion.

Looking forward, and despite the fact SCOR voluntarily de-risked its investment portfolio in 2019, the firm notes that it might well see reduced investment income through lower yields and experience higher asset impairments as a result of the COVID-19 pandemic.

“The resilience of SCOR’s operational capability, supported by high-performance IT systems and applications, means that the Group can continue to serve its clients in this period of crisis and immediately respond to their reinsurance needs.

“The coronavirus pandemic is being addressed by governments via lockdown policies and fiscal stimulus and by central banks via monetary policies to support financial markets and liquidity concerns. The outcome of these efforts, and notably the timetable at which the spread of the virus subsides, will become clearer over time,” says SCOR.

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