French reinsurer SCOR has fallen to a net loss of €308 million for the second quarter of 2024 as a result of the previously announced Life & Health (L&H) assumption review, which more than offset a solid performance in its Property & Casualty (P&C) business.
SCOR warned in mid-July that the acceleration of its annual L&H reserving assumptions review would lead to a negative performance in Q2’24 within its L&H arm.
Today, the reinsurer has reported a negative L&H insurance service result of -€329 million, down significantly from the gain of €140 million seen in Q2 2023. For H1’24, the L&H insurance service result is also negative at -€257 million, compared with a positive result of €411 million in H1’23.
L&H insurance revenue fell by 0.3% year-on-year to €2.054 billion, and increased by 3.2% to €4.33 billion in H1’24, while the L&H new business CSM rose by over 50% in the quarter to €145 million, but came down by more than 10% to €257 million in H1’24.
Commenting on the 2024 L&H assumption review, which covers the US (including mortality and lapses assumptions and future management actions), Canada, South Korea, and Israel, SCOR notes that in light of the initial indications, it has requested an acceleration on the estimation of the overall impact at year-end 2024.
In an effort to restore the profitability of the L&H business in a sustainable way, SCOR has launched a 3-step plan aimed at improving margins and the mix of L&H products with a strong focus on diversification.
Additionally, SCOR has revealed that Frieder Knüpling, CEO of SCOR L&H since 2021, has decided to pursue new professional opportunities and will leave the company, with Thierry Léger, Group CEO, taking on the additional duties as CEO of L&H at SCOR.
SCOR says that its new L&H business strategy and the updated Forward 2026 targets and assumptions will be presented on December 12th, 2024.
While the firm’s L&H operation suffered, the P&C business performed well in the quarter, posting a service result of €201 million, up 8.2% on Q2’23’s €186 million. For H1’24, the P&C insurance service result fell by 2.6% to €383 million. SCOR attributes the quarterly service result within P&C to a CSM amortization of €267 million, a risk adjustment release of €36 million, a negative experience variance of -€95 million, and an impact of onerous contract of -€7 million.
P&C insurance revenue rose 8.7% in the quarter to €2.031 billion and by 5.7% in the first half of the year to €3.868 billion.
SCOR’s P&C combined ratio strengthened by 1.6 percentage points in the second quarter of 2024 to 86.9% from 88.5%, although for the half-year fell slightly to 87% but remains strong.
The combined ratio includes a natural catastrophe ratio of 9.9%, mainly impacted by the losses related to floodings in UAE/Oman, as well as in South Germany and Brazil. The CoR also includes an attritional loss and commission ratio of 77.6%, which the company says reflects a satisfactory underlying performance despite the cost associated with the civil unrest in New Caledonia, and continued reserving discipline.
P&C new business CSM came down from €271 million in Q2’23 to €240 million in Q2’24, but for H1’24 increased to €891 million from €706 million a year earlier.
Commenting on the June and July 2024 reinsurance renewals, SCOR says that it continues to grow in its preferred and diversifying lines, maintaining terms and conditions as well as the still elevated profitability level of its P&C reinsurance portfolio. Premiums up for renewals at the mid-year renewals represent around 13% of annual P&C reinsurance premiums, and estimated gross premium income rose 24% on the new business up for renewal, with strong growth of the alternative solutions book.
The reinsurer was also able to maintain the pricing trend observed in prior renewals, with a 2.2% price increase overall. In fact, since the start of the year, SCOR has achieved 15.5% gross premium growth for its renewed portfolio with an average 3% price increase and an expected improvement of the underwriting ratio of -1.4 points.
On the asset side of the balance sheet, SCOR has today reported a 4.5% rise in total invested assets to €22.7 billion in Q2’24, up 4.5% year-on-year, as the return on invested assets improved to 3.3% from 3% a year earlier. Total investment income on invested assets stands at €184 million in Q2’24.
Group-wide, SCOR has reported insurance revenue of €4.1 billion for Q2’24 compared with €3.9 billion in Q2’23, and growth of 4.4% for H1’24 to €8.2 billion from €7.9 billion.
Gross written premiums across the business increased by 5.1% to €5.1 billion in Q2’24 and increased by 4.7% to more than €10 billion in H1’24.
For the quarter, the insurance service result fell by a significant 139% to -€127 million from €326 million last year, although for H1’24 remained positive at €126 million, reflecting a steep decline from H1’23’s €804 million.
All in all, SCOR has reported a net loss of €308 million for the second quarter of 2024 and a net loss of €112 million for H1’24, compared with net income of €192 million and €502 million for the same periods, respectively, in 2023.
Léger, CEO of SCOR, commented: “I am disappointed by the L&H H1 results. In response, we have launched an ambitious 3-step plan resulting in a series of determined actions aiming at restoring the profitability of the L&H business in a sustainable way. The still ongoing 2024 L&H assumption review, which will be completed by year-end, has led to a significant negative impact on our results in Q2 2024. We will present full details of an updated L&H business strategy and Forward 2026 assumptions and targets on 12 December 2024.
“In P&C, with a combined ratio of 86.9%, we delivered very strong results while continuing our strategy of building reserve buffers. We are very satisfied with the latest round of renewals with a +24% premium growth at unchanged attractive margins in June and July, supported by diversified growth in our preferred lines, and market conditions which remain attractive. Investments continue to produce stable and elevated positive results, with a higher regular income yield in line with our longer-term targets.
“SCOR actively manages its solvency position and is confident that its solvency ratio will remain in the optimal range of 185%-220% at year-end 2024.
“Frieder Knüpling, CEO of SCOR L&H since 2021, has decided to pursue new professional opportunities and will leave the Group. Until further notice, I will take over the management of L&H. I would like to wish him every success in the next stage of his career.”
