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SCOR’s net income drops -21% in Q1, as typhoon loss creep bites

26th April 2019 - Author: Steve Evans

French global reinsurance player SCOR has reported net income of EUR 131 million for the first-quarter of 2019, which is 21% lower than the prior year thanks to a EUR 53 million dent made by loss creep from Japanese typhoons Jebi and Trami.

SCORLoss creep looks set to become one of the stories of the first-quarter 2019 results season, with SCOR now the second to reveal an income denting hit to profits thanks to these storms.

Yesterday we reported that AXIS Capital had revealed $30 million of loss creep from Jebi and Trami, while analysts are expecting significant loss creep hits to be reported by other major reinsurance firms and global insurance players such as AIG.

SCOR’s net income would actually have beaten its Q1 2018 figure of EUR 166 million, had it not been for the effects of these typhoons continuing to hit its balance-sheet around nine months after the storms struck Japan.

SCOR highlights its strong profitable growth, premiums written were up almost 6% across the business and up a massive 16% in the reinsurers P&C book in Q1 2019.

SCOR said this reflects the “very positive January renewals” with portfolio growth seen particularly in the United States, one of its target regions for expansion.

Life reinsurance premiums shrank slightly though, dropping 1.1% on constant currencies, but SCOR notes that certain financial solutions transactions drove fee income rather than premium this quarter.

Overall, SCOR delivered an annualised return on equity of 9% for Q1 2019, down 2.2 percent on the prior year’s 11.2%, again due to the loss creep impacts.

Excluding the typhoon loss creep net income would have been EUR 169 million, the company highlighted, so above the prior year result.

Another positive sign for SCOR is that its group cost ratio came in below the prior year, but if calculated on the same basis it would have been 4.7% for Q1 2019, compared to the 5% in the prior year quarter.

Denis Kessler, Chairman & Chief Executive Officer of SCOR, commented on the results, “The strong start to 2019 bears witness to the depth of SCOR’s franchise and the relevance of the Group’s strategy. The Group’s technical profitability is highly satisfactory, as demonstrated respectively by the P&C combined ratio and the Life technical margin. Both the solvency ratio and the ROE are in line with the targets of the plan. SCOR continues to create long-term value and provides its shareholders with attractive returns, raising the dividend per share to EUR 1.75 subject to approval by today’s Annual General Meeting.”

SCOR Global P&C, the property and casualty reinsurance unit, beat its target combined ratio, reporting 94.6% for Q1.

However, without the negative effects of the Japanese typhoon loss creep, SCOR’s results would have been much better, with a combined ratio closer to 90.7%, signalling a profitable current period that was dented by prior period catastrophes.

While the P&C book has grown considerably so far this year, after the over 16% growth in January and then a further 9.6% of premium growth was reported for the April renewals as well, SCOR says this is expected to normalise over the full year and result in book growth in the upper end of the target range of 5% and 8%.

Smaller natural events in the quarter also dented the P&C result by a further EUR 27 million, the company said.

SCOR Global Life, the life reinsurance focused unit, delivered strong technical profit and achieved premium expansion in Asia-Pacific Protection, US Financial Solutions and Longevity risk.

The net technical result came out at EUR 152 million, with a life technical margin of 7.2% that beat the prior year’s 6.8%.

Return on investments also increased to 2.3% at SCOR Global Investments, up from 2% in the prior year, while return on investable assets hit 2.8%, up from 2.3%.

All of this points to a very positive last quarter for SCOR, as the strong expansion of the premium base and profitability of that business looks sound, so far.

The denting of the results by the Japanese typhoons was always going to be a factor, something we expect to see across the sector as the results flood in from reinsurers in the weeks to come.

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