Best Revises Outlook on SCOR to Positive; Affirms ‘A-‘ Ratings

September 4, 2009

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of French reinsurer SCOR S.E. and its rated subsidiaries. Best has also revised the outlook to positive from stable and affirmed the ratings on senior debt and subordinated debt either issued or guaranteed by SCOR.

Best said the revised outlook reflects its “expectation that SCOR will continue to demonstrate strong resilience to the impact of the financial crisis and global economic downturn, its sound enterprise risk management and anticipated improvement in risk-adjusted capitalization supported by profitable growth in its main lines of business.

“To date, SCOR’s risk-adjusted capitalization has remained relatively stable during the financial crisis due to its low risk investment strategy and continuing stability in underwriting performance. Funds withheld account for approximately 40 percent of the company’s total investments, and SCOR receives a fixed return from these funds. In addition, SCOR continues to maintain a significant cash element within its total investments.” In Best’s analysis, risk-adjusted capitalization is also expected to benefit from stability in SCOR’s reserves.

Best also noted that it “expects SCOR’s underwriting performance to be sufficient to maintain a good return in 2009 in the absence of a strong contribution from investment income due to continuing disruption in the financial markets. Despite the difficult environment, SCOR achieved a post-tax profit of €184 million [$263 million] in the first six months of 2009 (down from €242 million [$346 million] in the first six months of 2008).”

For the full year 2009 Best said it expects SCOR’s combined ratio to be marginally lower than the 99.5 percent achieved in 2008, due to some improvement in rates and based on the assumption that the company will return to normal catastrophe experience. “Overall 2009 earnings will also benefit from exceptional gains on deferred tax assets and the €47 million [67 million] profit on the subordinated debt buy back declared after six months,” said Best. The life business is also expected to continue to produce stable, good returns.

In Best’s view, SCOR has an excellent business profile in the European non-life and life reinsurance markets. During the January and July 2009 renewal seasons, the company was able to significantly strengthen its main book of business, specifically in specialty business such as engineering, energy and agriculture.

Best Also said it “believes that SCOR is benefiting from some improvement in rates and has taken the opportunity to further diversify its business profile, progressively decreasing exposure in its core markets (e.g., France) while increasing in areas where it has less exposure such as the U.S., Canada, Northern Europe and Asia.

“Best expects non- life gross premiums written to be up by over 5 percent in 2009 to above €3.25 billion [$4.65 billion], mainly due to successful renewals and better pricing in some parts of the account.

“In life reinsurance, the recent acquisition of Prevoyance Re has further enhanced SCOR’s leading position in the French life and health reinsurance market. In addition, development of the life business is being helped by strategic partnerships in Asia and the Middle East.”

Best said it expects SCOR’s life business to benefit from current demand for surplus relief contracts, whilst continuing to respect its cautious underwriting guidelines. Overall Best expects life premiums to increase by approximately 10 percent in 2009.

Best summarized the specific ratings as follows:
The outlook has been revised to positive from stable, and the FSR of ‘A-‘ (Excellent) and ICR of “a-” have been affirmed for SCOR S.E. and its following subsidiaries:
— SCOR Global P&C S.E.
— SCOR Canada Reinsurance Company
— SCOR Global Life U.S. Re Insurance Company
— SCOR Reinsurance Asia-Pacific Pte Ltd
— SCOR UK Company Ltd
— SCOR Global Life S.E.
— SCOR Reinsurance Company
— SCOR Global Life Re Insurance Company of Texas
— General Security National Insurance Company
— General Security Indemnity Company of Arizona
— SCOR Rueckversischerung (Deutschland) AG
— SCOR Insurance (UK) Limited
— SCOR Switzerland AG
— Investors Insurance Corporation

The outlook has been revised to positive from stable, and the senior and subordinated debt ratings have been affirmed for the following:
SCOR S.E. – “a- ” on EUR 200 million 4.125 percent senior unsecured convertible bonds, due 2010
— “bbb+” on EUR 100 million subordinated step-up notes, due 2020
— “bbb+” on USD 100 million subordinated step-up notes, due 2029
— “bbb” on EUR 350 million 6.154 percent undated deeply subordinated notes
— “bbb”on EUR 50 million subordinated step-up notes issued by Societe d’Etudes et de Placements Financiers and guaranteed by SCOR, due 2049

Source: A.M. Best –

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