S&P Notes SCOR Ratings Remain on CreditWatch

October 10, 2003

Standard & Poor’s Ratings Services has issued a bulletin noting that its long-term ratings on French reinsurer SCOR and its subsidiaries—”including the ‘BBB+’ counterparty credit and insurer financial strength ratings–remain on CreditWatch with developing implications.”

S&P placed them on CreditWatch with negative implications last June, and revised the implications to “developing” in July. “The CreditWatch revision reflected the possibility of a material improvement in SCOR’s balance sheet before year-end 2003,” said S&P. It “expects to resolve the CreditWatch placement by the end of November 2003.”

“SCOR is due to present its third-quarter 2003 results on Nov. 6, 2003. They will be carefully considered on an absolute and relative basis. In addition, clear evidence of material balance sheet improvement should be evident at this time,” stated S&P credit analyst Marcus Rivaldi.

S&P’s bulletin said: “This could flow from at least four areas.
First, net premium volumes are expected to reduce in 2003 and should further reduce in 2004, which would lead to an improved level of underwriting exposure relative to capital.

Second, any reserve strengthening aside, the group’s near-term earnings prospects are positive.

Third, SCOR has announced that it is actively looking to commute business portfolios at its CRP subgroup (comprising Commercial Risk Reinsurance Co. Ltd. and Commercial Risk Re-Insurance Co.). If beneficially achieved, this will materially reduce the level and potential volatility of reserves held on the group’s balance sheet.

Finally, SCOR is pursuing the creation of a life reinsurance subsidiary, with a view to potentially opening its shareholding to outside investors.” S&P also noted that “SCOR has recently permitted several third parties to proceed with fuller due diligence, prior to the end of October 2003 deadline for the presentation of final bids relating to the life reinsurance subsidiary. If successfully executed, this transaction has the potential to be significantly positive from a capital perspective. However, deal specifics will need to be examined for adverse business position and prospective earnings implications.”

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