Industry giant SCOR remains well placed to handle the current economic uncertainty, according to CEO Laurent Rousseau.
Rousseau’s remarks came from the firm’s H1 2022 earnings call. Last week, the firm reported a net loss of €239m for the first half of 2022, driven by claims related to the drought in Brazil, flooding in Australia, and other weather events, the war in Ukraine, and further losses related to the COVID-19 pandemic.
That compared to net income of €380m in H1 2021, and includes an impact of €193m from the worst drought in Brazil in 91 years. In response, SCOR says that it has been reviewing its agriculture portfolio with a 50% reduction in PML targeted for 2023.
SCOR also experienced losses related to the COVID-19 pandemic of €254m in H1 2022. Within its life and health (L&H) business, SCOR says that it is actively managing the portfolio and is diversifying away from pandemic risk to focus its growth on transactional lines of business such as longevity and financial solutions.
On the earnings call, Rousseau referred to the firm’s cancellation of Investor Day earlier this year.
He said: “Firstly, on the complexity of the environment that led to the postponement of the Investor Day, the uncertainties have only increased in the past 5 months. With hindsight, I do believe that it was the right decision to postpone our IR Day initially planned from the end of March. Since then, some of the structural uncertainties have not clarified or got any simpler. Our planning was prepared before the outbreak of the war in Ukraine, making all the references used for inflation, interest rates, economic growth and market cycles, susceptible to higher volatility.”
Rousseau also referred to the IFRS 17 standard.
He said: “In 2022, we are transitioning to new risk regimes, while making good use of this extra time to build a robust strategic plan framework suited to a highly uncertain environment. Our financial trajectory will account for the new macroeconomic environment, the refragmentation of the world and the changes in the reinsurance supply and demand dynamics. We are building this plan in a new accounting framework. IFRS 17 should better value — should better capture the economic value of SCOR and will more closely align the accounting framework and the other internal economic framework used by SCOR to drive performance. Our plan will focus on creating economic value over the long term.”
Rousseau also said that the firm was pivoting away from markets and segments where he felt it ha not been adequately rewarded. This, he said, has led to a reduction in growth ambition from the firm towards markets where capital has been locked in locally.
He said: “It will lead to a reduction of our footprint where we — where our setup is too large compared to the size and the potential of the market, and it will lead to a confirmation of our ongoing portfolio management actions and business plans when appropriate.”
The firm’s underwriting strategy was also mentioned. Rousseau said that it would take time to be implemented and its effects on financials would emerge over the course of the next strategic plan.
He said: “This will be an ongoing process to drive the business performance and the capital allocation of the group. From an organizational perspective, we are moving forward, and we have defined a new operating model that will accelerate the transformation and the simplification of the organisation.”
