Best Affirms SCOR’s ‘B++’ Ratings

April 5, 2004

A.M. Best Co. announced that it has affirmed the financial strength rating of “B++” (Very Good) of French reinsurer SCOR and its core subsidiaries as well as the ratings on debt instruments issued or guaranteed by SCOR.

This effectively removes them from the under review status where they were placed last September. All the ratings have been assigned a stable outlook.

“The rating reflects SCOR’s very good prospective capitalisation, improving trends in underlying performance, actions taken to mitigate the risks associated with Commercial Risks Partners Limited (CRP) (Bermuda) and the company’s credit derivatives portfolio, as well as strong support from its core clients in continental European markets,” said Best.

“Offsetting factors are recent volatility in reserves and the impact that the company’s recent performance has had on its profile in certain markets,” it continued.

Best said it “expects SCOR to maintain risk-adjusted capitalisation at a very good level in 2004, following completion of its 750 million euro ($ 949 million) rights issue in January 2004. Stability in the company’s risk-adjusted capitalisation will be further supported by an anticipated reduction in net premiums written of approximately 20 percent to less than 2.75 billion euros ($ 3.384 billion) in 2004.”

The rating agency also noted SCOR’s fundamental recovery, indicating that it has “reestablished profitability in its main non-life lines (excluding the impact of discontinued and non-core lines) and has maintained the profitability of its life reinsurance business.” Best also said that the reserve deterioration of 297 million euros ($344 million) the company suffered in the third quarter of 2003 “resulted from SCOR’s steps to re-establish reserves at the best estimate level advised by external actuarial consultants. With the impact of these legacy issues likely to reduce in 2004, A.M. Best believes SCOR’s performance is likely to improve.”

Best also noted that “SCOR has taken effective action to address certain key areas of risk to the company. A reduction in CRP’s reserves of approximately 60 percent was recorded at year-end 2003 relative to the position a year earlier, incorporating commutations with two major clients in the course of the year. To address risk from the company’s credit derivatives portfolio, the company has entered into an agreement that hedges its credit exposure.”

Best said it “believes that SCOR continues to have a very good profile in its core markets in continental Europe and Asia. Poor performance in 2002 and 2003 has had some impact on its prospects in certain markets, particularly the United States and the United Kingdom.”

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