Scor: Nine-Month Profit Up 39.5%; Sandy Impact Unknown

Nine-month net income rose 39.5% to 318 million euros (US$404.4 million). Total gross premiums written rose 33% to 7.21 billion euros. For nonlife reinsurance, gross premiums rose 18% to 3.52 billion euros. Life reinsurance premiums rose 8% on a pro forma basis to 3.7 billion euros.

Chairman and Chief Executive Denis Kessler said Scor managed to achieve strong nine-month numbers despite continuing unfavorable economic and financial conditions worldwide. He noted in a conference call that debt de-leveraging in the United States "has ground to a halt in recent months," while unemployment levels remain high "in many parts of the world."

"In the eurozone, the outlook is still deteriorating" with five successive quarters of negative numbers for private investment, along with rising unemployment, he said. Kessler added that emerging markets are a bright spot as they "appear to be attaining growth rates at pre-crisis levels."

Scor Global P&C improved its nine-month combined ratio to 93.7 from 106.6 a year earlier as natural catastrophe losses this year came in below the budgeted amount. The nonlife segment also had strong renewal seasons in January, April and July. Favorable exchange rates accounted for 6.5 points of the 18% premium growth.

Victor Peignet, CEO of Scor Global P&C, said the impact of Sandy will not be known until the reinsurer can gather information from its affected clients. "It is likely that a couple of weeks more will be needed before the first reliable estimates of gross reinsurance losses can be concluded," he said in the conference call.

Peignet said two categories of losses related to Sandy have differing levels of difficulty when capturing loss data. Wind and flood-damaged individual and commercial properties, what he called "mass risk," can be captured by existing models, while "peak risks" including construction projects, infrastructure and transportation losses are more difficult to estimate and can "run into the hundreds of millions or billions of dollars."

"As for the industry loss figures that have been circulating, our view is that the $20 billion to $25 billion range is directionally correct," he said. Given what Scor knows about its possible exposures, Peignet said the group projects a "normal" catastrophe experience overall for the fourth quarter, with a combined ratio of 96 or 97.

For life reinsurance, lower premiums in the Middle East were by "significant increases" in emerging markets including Latin America, Asia/Australia, Central and Eastern Europe, and in Canada and the United Kingdom/Ireland. There was also double-digit growth in the life financing, critical illness, disability and longevity lines, said Scor.

Kessler said Scor did well with its invested assets despite deteriorating market conditions. Following a "defensive strategy," Scor achieved a 2.8% return on invested assets, or 3.4% excluding equity impairments.

In its financial statement, Scor said its investment "rollover" strategy maintains a relatively short duration for the fixed-income portfolio and generation of recurring financial cash flows.

"Having identified the risk of sovereign debt as early as 2008," Scor Global Investments has no exposure to the sovereign debt of Greece, Ireland, Italy, Portugal or Spain. Through the third quarter the equity portfolio was further reduced by 116 million euros, or 1% of the total. Over the same period, the invested assets portfolio has been mainly reinvested in covered bonds and agency mortgage-backed securities.

In October, A.M. Best Europe – Rating Services Ltd. assigned a debt rating of “a-” to the 315 million Swiss franc perpetual subordinated notes issued by Scor (Best's News Service, Oct. 19, 2012). The assigned outlook is stable. The debt bears interest on the principal amount at a fixed rate of 5.25% for the first six years. Scor’s financial ratios remain within tolerance for its rating, according to A.M. Best.