SCOR Hit By Late Claims, Estimates $223 Million Loss for 2001

January 16, 2002

France’s SCOR announced that a late surge in claims that emerged at the end of the year has led to a downward revision of its earnings estimate for 2001. The company stated that, “In view of the combined impact of these new factors, the Group has decided to revise its earnings forecast to a loss of EUR 250 million [$223.25 million].

SCOR cited a number of exceptional factors as being responsible for the losses. A number of “advices for large losses in the 4th quarter, exceeding in total the losses in this category for the first nine months of the year (ex-World Trade Centre).” It indicated, however that its estimates “of known major claims on SCOR’s accounts (including WTC) remains in line with estimates made within days of the occurrence of the events.”

SCOR also indicated that “Third quarter reinsurance accounts received from cedants from early December onwards have brought to light higher than expected claims experience and run-offs for recent underwriting years, leading to a reinforcement of reserves.” In addition it noted that “the financial markets failed to recover and the weakness of the euro at the end of the year have led the group to adjust its investment results.”

The adjustments weren’t unexpected. A.M. Best announced lowered ratings for SCOR (See IJ Website Jan. 15), and Standard & Poor’s lowered its long-term insurer financial strength and counterparty credit ratings on SCOR and its subsidiaries to single-‘A’-plus and its short-term counterparty credit and commercial paper rating to ‘A-1’, from double-‘A’-minus and ‘A-1’-plus respectively.

S&P added that the downgrade was based on the unexpected reported loss, “which puts into question the company’s control over some underwriting areas and has a negative impact on capital adequacy.”

SCOR remained confident that the problems weren’t recurrent, and indicated that it had already taken certain steps to insure continued, and hopefully increased profitability. It announced that it would “immediately withdraw from the ‘Program Business’ market in the United States which has generated heavy losses in recent years.” This decision, along with the previously announced exit from the U.S. health care market is expected to result in a 10 percent reduction of SCOR’s U.S. employees.

The group sees an “extremely favourable outlook for 2002,” with an improvement in market share due to “the contraction of the market produced by the disappearance of several players.” Premium income grew 25% at the end of September, and “Renewals with effect from January 1, 2002, particularly in Property & Casualty and the Business Solutions Division, already confirm an upturn in pricing that should produce an extremely significant improvement in the Group’s technical results.”

“Given the current rise in its underwriting capacity, the increase in market share and higher pricing for renewals, SCOR now has all the required means for benefiting fully from the new cyclical upturn and returning to a satisfactory level of profitability in 2002,” the announcement concluded.

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