Best Affirms SCOR’s ‘A-‘ Ratings

November 17, 2008

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of SCOR S.E. (France) and its rated subsidiaries. Best also affirmed the senior debt and subordinated debt either issued or guaranteed by SCOR. The outlook remains stable for all of the ratings.

Best said the rating actions reflect its “expectation that the company will maintain a consolidated risk-adjusted capitalization that supports the current ratings. The ratings also reflect SCOR’s excellent business profile in the European markets and its strong operating performance.”

In Best’s opinion, “SCOR’s consolidated risk-adjusted capitalization is supportive of the current ratings. The rating agency also said it expects SCOR’s capitalization to “further improve through retained earnings in 2008 and 2009.”

According to Best, “SCOR has an excellent business profile in the European non-life market and life reinsurance markets. During the January and July 2008 renewal seasons, the company was able to retain most of the former Converium book of business, although SCOR voluntarily reduced its share in the Medical Defense Union (MDU) and the aviation pool, GAUM.”

Best said it “believes that SCOR has successfully integrated Converium into the group, and the acquisition has enhanced SCOR’s business position, particularly in specialty lines where Converium had a strong presence, such as marine, energy and aviation.”

Best expects “non- life gross premiums written to decrease by approximately 4 percent to 6 percent in 2008 to €3.1 billion [$3.93 billion], mainly due to foreign exchange variations, rate declines and the reduced participation in MDU and GAUM. In life reinsurance, the recent acquisition of Prevoyance Re will further enhance SCOR’s leading position in the French life and health reinsurance market. In addition, due to newly established strategic partnerships in Asia, SCOR is likely to build up a stronger presence in these markets.”

Best added that “despite the difficult financial markets and higher catastrophe losses, SCOR achieved a post-tax profit of €280 million [$355 million] in the first nine months of 2008 (from €300 million [$380.5 million] in the first nine months of 2007).

“The company’s non-life combined ratio stood at 99.2 percent (from 96.4 percent in the previous period) due to higher than expected natural catastrophe claims (7.8 percentage points versus 6 percent budgeted), which was partly mitigated by a slightly positive reserve development during the first quarter of 2008 (negative reserve development in 2007).

“Overall earnings also benefited from the €64 million ($97 million – at the time, [currently app. $81 million]) exceptional gains on deferred tax assets and a profit contribution of €114 million ($173 million – at the time [currently app. $144 million]) of life operating profit, resulting in an annualized return on equity of 10.7 percent.”

Best concluded that it “expects SCOR to benefit from a stabilized pricing environment during the 2009 renewals and to maintain its underwriting standards. As a result of the acquisition of Converium, the combined entity has a higher, albeit more diversified, exposure to natural catastrophes in 2008, which has been partly mitigated by a three-year catastrophic bond. SCOR also reduced its exposure to a potential mortality catastrophic loss owing to its mortality swap transaction.

For a complete listing of SCOR’s FSRs, ICRs and debt ratings, go to:

Source: A.M. –

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